Decolar (Brazil)

Decolar, the largest online travel agency in Latin America founded in 1999, provides services to more than 21 countries. As the others Online Travel Agencies (OTA), Decolar provides customer to plan vacations, make cruise, airline and hotel reservations and purchase travel packages and attraction tickets. The company recorded around US$4 billion in gross bookings, half of which come from its hotel product (Mitra, 2016). Expedia invested US$270 million in Decolar, this investment will give Expedia a minority stake of about 20% minority stake and will provide Expedia access to its hotel supply in Latin America. By 2016, Latin America total travel spends will approach US$100 billion (May, 2015).

Chapter 5 Analysis of Nicaragua’s Tourism Industry

It is forecasted that Nicaragua will continue having a good economic growth performance over the next years, during the first semester of 2016 Nicaragua’s economy grew up to 4.6 percent, one of the best economic growth above 4 percent in Latin America, behind of Dominic Republic and Panama, according to the World Bank. While in 2015, Nicaragua’s Gross Domestic Product grew by 4.9 percent with an inflation of only 3 percent (World Bank, 2016a). According to Geovani Rodríguez, professor of finance at the National Autonomous University of Nicaragua (UNAN), he is one of those who consider that the current situation of that nation is favorable. “The economic boom is because the economy has been benefited by the commodity market, but also by sectors such as tourism” (Pierre-Marc, 2014).

The Government of Nicaragua has developed two projects in recent years with clear goals to boost the country’s economic growth and maintain macroeconomic stability through creating new jobs and reducing poverty and inequality, as well as encouraging fields of study as science, technology, innovation and entrepreneurship to reduce the technological gap and create more employment opportunities, these projects are: Economic and Financial Programme (PEF) 2007–

2010 and the policy framework of the PNDH 2008–2012 and 2012–2016. These projects highlight the main policy objectives of Nicaragua such as cutting irrelevant expenditures, increase investment in social sectors and rural infrastructure, reducing inequality by increasing the fight against poverty, improving the efficiency of the productive system and diversifying exports, strengthen the country as a tourist destination through promoting its tourism products in national and international markets.

This chapter is aimed to discuss briefly the development of tourism industry in Nicaragua since 1980 until now.

5.1 Tourism in Nicaragua 1980-1990

Before the 80s, Nicaragua lived under a dictatorship for over 40 years, which was overthrown by the left-leaning Frente Sandinista de Liberación Nacional (FSLN) in 1979. After the overthrow, the country entered into a civil war for the presidency that almost lasted a decade between the FSLN and the US-backed Contra rebels, this civil war took the lives of 30,865 Nicaraguans, over 350,000 Nicaraguans were internally displaced and over US$9 billion worth of economic damage (Horton, 1998). Those years tourism was not a sector of such importance for the country, nevertheless during the Sandinista regime the Nicaraguan Tourism Institute (INTURISMO) was created in 1979, whose tourist target was aimed at activities for the Revolution. Hollander (1986) called this kind of policy as “political hospitality”, which “consists of highly organized and purposeful efforts on the part of governments to display their political system and its various institutions in the most favorable light to foreign visitors; it is but one expression of the determination to persuade outsiders, and especially the elite groups of various countries, of the

superior virtues of their society”. Thus, the Sandinista government proposed through its “political hospitality” to reduce prejudices that tourists had about the Sandinista revolution before arriving to the country, giving them a hospitable and comfortable welcome, showing visitors what the government wanted them to see and not what was really happening, creating a favorable image of their regime and to persuade American public opinion and policymaker to cease all support for the Contras.

The travelers that visited Nicaragua in the 80s were known as “Sandalistas” (Babb, 2004), mostly attracted by the achievements of the Sandinista Revolution came to the country to watch closely how the new socialist government was running the country, tourists as politicians, artists and writers, sympathetic to the Sandinistas, and curious professionals of many backgrounds, most of them came to see and have interviews with Sandinista officials, union leaders, opposition politicians, newspaper editors, while others stay longer in order to contribute and support the Sandinistas against U.S-backed contra rebels. For example, some of them were foreign volunteers that joined into social projects organized by the government and the National Network in Solidarity, these projects included helping in the harvest of rice, coffee beans and in various advisory capacities as an act of revolutionary solidarity, after finishing the projects these “Sandalistas” were so grateful for the solidary treatment and such generous hospitality received from the government officials that were in love with the country, as a New York cab driver after returning from his volunteering in Nicaragua said: “I was deeply moved by the commitment of the Nicaraguan people, I learned very quickly that the Nicaraguans love their North American neighbors, but with good reason they despise the American Government” (Bonner, 1984).

5.2 Creation of the Law of Incentives for the Tourism Industry

After Nicaragua’s presidential elections in 1990, the new government created the Ministry of Tourism (MITUR) in 1993, amongst its assignations were:

1. Develop and promote tourism development policy in the country, with an emphasis on eco-tourism area to maximize the nature of Nicaragua and its historical and geographical richness,

2. To encourage and stimulate investment from Nicaraguan capital or from foreign tourist service companies,

3. Disseminate touristic interest information, both within and outside the country, in order to promote domestic and inbound tourism,

4. Propose to the Presidency of the Republic relevant legislative and fiscal reforms, and ensuring compliance with laws, regulations and other provisions pertaining to tourism, exercising the actions that are incumbent upon it.

In 1996, it took place the XVIII Central American Presidential Summit in Montelimar, Nicaragua, in which the main theme was Tourism and Sustainable Development, this summit aims

to develop plans that can make Central America a more attractive tourist destination, increase tourism’s role in the economy of the countries in the region, and with the help of the private sector to implement strategies for promoting the image of Central America, these countries agreed to:

“We are committed to facilitate conditions for tourism development by improving infrastructure; the establishment of a modern and appropriate legal framework; and the training of human resources for the conservation and sustainable management of our natural and cultural heritage and improving environmental quality. Similarly, we reaffirm our commitments made at the various meetings we have held, aimed at strengthening and adapting policies and necessary legal instruments of migratory nature to facilitate the free movement of people, key element for tourism development.”

This summit marked an important starting point in the development of regional tourism, where the Presidents declared for the first time that tourism is one of the strategic aim and priorities for the regional economy. In 1997, the Nicaraguan Tourism Institute (INTUR) was created, a State Autonomous Body, being successor of the Ministry of Tourism (MITUR) and it is in charge of the tourism policy in Nicaragua until today.

Tourism perceived as a key industry to economic development, social welfare and an engine to reduce poverty in LDCs. Therefore, Nicaragua declared tourism as an industry of national interest and established the Law 306 (1999), entitled Law of Incentives for the Tourism Industry, this law provides incentives to individuals or corporations, national or foreign, invest directly and engage in tourism services and activities authorized by INTUR. This law provides incentives such as:

exemption from duties and taxes on imports, Value Added Tax (VAT), Income Tax (IT), Land Value Tax (LVT), among other incentives all this to promote investment in the tourism sector (República de Nicaragua, 1999).

As a result of these policies, investment in the country began to increase. Between 2000 and 2010, the hotel tourist offer increased 353% going from 135 to 611 hotels and establishments across the country, as well as an increase in the number of rooms going from 3,320 to 8,880. During this period, international tourist arrivals to Nicaragua increased from 485,909 to 1,011,251 tourists and revenues generated from tourism increased from US$111.3 million to US$308.5 million. During the period between the passing of this law (in 1999) and until 2014, 676 projects were approved (related to new hotels, art events and transportation) representing an amount equivalent to US$1,017.56 million.

5.3 Nicaragua’s Main Export Products

During the period 1990-1997, 18.1 million tourists traveled to Central America distributed as follows: 29.6% traveled to Costa Rica, Guatemala 23.8%, Panama 13.8%, Honduras 11.6%, El

Source: INTUR

Salvador 11.4% and Nicaragua 9.8%, generating an income of US$9,638,100 for the region, which 44.7% were for Costa Rica, Panama 21.7%, Guatemala 21.3%, Honduras 5.8%, El Salvador 3.4%

and 3.1% for Nicaragua (Barrera Pérez, 1998). From 1990 to 1997 Nicaragua received 1,796,852 international visitors, which means an average of 256,693 annual arrivals, of which 61% were Central Americans, 21% were North American and 11% European, being the three major tourism markets of Nicaragua until today. However, Nicaragua still was not seen as a tourist destination country for international tourists, most tourists came to Nicaragua for business rather than pleasure, 60.6% came for business, while 30.6% came for pleasure in 1997, this trend has changed over time.

In 2000, the 581,706 international visitors who visited Nicaragua, 49% were for business purposes and 39.5% for pleasure.

Despite nearly 10 years of war, it did not prevent tourism in Nicaragua from growing. In 1990, Nicaragua received US$12 million in tourist revenue. In 1995, this amount increased to US$50 million. In 2000, tourism revenue had more than doubled to US$111.3 million, which represented an increase of 827.5% in just 10 years. After the Contra War in Nicaragua, tourism has increased meaningfully, overtaking traditional product exports, as meat, seafood, golden, sugar and others, becoming one of the main products that generate more foreign exchange to the country in just a decade (Table 8).

Table 8: Tourism and Main Export Products 1990-2000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Coffee Cotton Coffee Meat Coffee Coffee Coffee Coffee Coffee Coffee Coffee Meat Meat Meat Coffee Meat Seafood Seafood Seafood Tourism Tourism Seafood Sugar Coffee Cotton Tourism Seafood Meat Tourism Tourism Seafood Seafood Tourism

Cotton Sugar Sugar Seafood Tourism Tourism Meat Sugar Meat Meat Meat

Banana Banana Tourism Gold Sugar Sugar Sugar Meat Sugar Sugar Gold

Gold Tourism Seafood Sugar Sesame Banana Banana Banana Gold Gold Sugar Tourism Seafood Banana Sesame Banana Sesame Gold Sesame Banana Banana Banana Seafood Gold Molasses Banana Cotton Gold Sesame Gold Sesame Sesame Sesame

Nicaragua is a country rich in resources and natural attractions, has 7% of global biodiversity, manifested in the diversity of ecosystems, species, genes and indigenous peoples that are part of the biodiversity of the country. Nicaragua has 68 ecosystems, this represents 60% of the 114 ecosystems existing in Central America, it has 71 protected areas (this represents 17% of the national territory) and 53 private wildlife reserves (MARENA, 2010). The country also has two monuments declared by UNESCO as a World Cultural Heritage, which are: Ruins of León Viejo (2000) and Leon Cathedral (2011), as Intangible Cultural Heritage are Language, Dance and Music of the Garifuna (2008) and the literary work El Güegüense (2005). It also has the largest forest

reserve in Central America and the third largest globally declared by UNESCO as Biosphere Reserve in 1997, Bosawas Biosphere Reserve, also known as “The Lung of Central America”, experts recommend that in this area could be developed sustainable tourism in a responsible way, where tourists who love nature could make tourist activities such as bird watching, kayaking, hiking, fishing and other environment related activities, through the income generated could benefit local communities for the conservation of resources.

Nicaragua has jumped as a new tourist destination gaining ground among international tourists who love adventure and ecology. International tourists’ behavior related to reason of travel had changed dramatically: in 2000, 49% came for business purposes and/or work and 39.5% came for holidays, compared to 2015, only 18% did it for business and/or work, while 45.7% did it for vacation. As well as a total of 4,241,763 domestic and foreign guests demand accommodation services between 2005 and 2013, 64.3% of these were foreigners and 35.7% were national tourists.

The latter is due to a low purchasing power in the population, where GDP per capita is among the lowest in Latin America of just US$2,027 in 2015, 29.5 percent of households live and poverty and 8.3 percent in extreme poverty on less than USD$1.25 a day (World Food Programme, 2016), this generates low accommodation demand and low revenue for the tourism sector. Besides, the government gives priority to international tourism because of the exchange earnings the industry generates for the host country, but domestic tourism can also lead to a wider redistribution of national income, it could also raise the level of culture and tourism education providing an impetus for the preservation of cultures, landscapes and ancient monuments.

Table 9: Total National and Foreign Guests Requesting Accommodation 2005-2013

Year Overall Guest Foreign Guest National Guest

2005 338,269 220,500 117,769

2006 372,675 230,364 142,311

2007 404,653 276,967 127,686

2008 459,686 309,449 150,237

2009 410,021 266,164 143,857

2010 464,017 284,752 179,265

2011 547,793 357,269 190,524

2012 615,602 387,732 227,870

2013 629,047 395,740 233,307

Total 4,241,763 2,728,937 1,512,826

Source: INTUR, taken from the Statistical bulletin for 2005 and 2013

The achievement of tourism growth was due to policies imposed by the Government of Nicaragua to encourage tourism investment, promote the country’s image in international markets to attract more tourists, this with the help of all Central American countries through the Central

American Tourism Council (CCT) as a single objective to establish strategies for sustainable tourism development in Central America, implementing strategic actions to widely project the promotional image of Central America as a tourist multi-destination in the source markets, especially Europe. Thus, the Central American Presidents during the XXII Summit of Heads of State and Government of Central America held in San Jose, Costa Rica on December 13th, 2002, they instructed the CCT in coordination with the Federation of Tourism Chambers of Central America (FEDECATUR) to establish the Tourism Promotion Agency of Central America (known as CATA), whose primary purpose is to plan, coordinate, assist and encourage the tourist promotion of Central America (SITCA).

According to this plan, the Central American Tourism Integration Secretariat (SITCA) was funded by the German Government through the FODESTUR Program, the Central American brand

“Centroamérica…tan pequeña, tan grande” was created in order to promote the region, which aims to strengthen a brand image for sustainable tourism that represents a tourist area of tropical nature, which has landscapes of indescribable beauty, with a fauna and flora of great variety. Despite already being supported by the Central American brand, in 2004 as a need to identify the country's own image and differentiate it from other Central American countries, Nicaragua, like the other countries in the region, created its own country brand “Nicaragua, a country with heart”, this as a result of a survey made by asking international visitors about the image they had of the country, the colonial historical memory, the volcanoes on the Cordillera del Pacifico, lakes and cathedrals excelled in this result (López, 2004).

5.4 Nicaragua’s Main Tourist Market

In 2001, two major events affecting the two main export products of Nicaragua occurred: the first was the fall in coffee prices and the second were the attacks of 11 September in the United States, the first caused a decrease of US$61 million in coffee export earnings to the country’s economy in 2001, the second led to a decline in the growth of tourism revenues, despite this latter was no reason to prevent tourism from positioning itself as the main foreign exchange generator in Nicaragua, surpassing commodities revenues such as coffee, seafood, beef, gold and peanuts which are the 5 main items exported by the country. Coffee is Nicaragua’s agricultural sector most important export product, coffee production represented 7.2% of national GDP in 2000, compare with its neighboring country Costa Rica this activity contributed only 1.3% of the national gross domestic product and 2.5% in El Salvador. Due to the global overproduction of coffee caused a collapse in prices on the international market; this had major repercussions on the economy of the country, especially in rural areas of the country that are most dependent on coffee exports. As a result, many farmers could not pay their debts to the bank, so the bank came to repossess their properties, many owners of coffee plantations were forced to reduce their activities and fired many workers, the result of such unemployment caused coffee workers moved to urban areas looking for work and even to hold protests seeking help from the Government to find a solution to the crisis

(Flores, Bratescu, Martínez, Oviedo, & Acosta, 2002; O’Connor, 2005). In order to provide a solution to the coffee crisis, the Government proposed the tourism as a substitute for agricultural products and established tourist routes as the coffee route, where tourists visit a farm and participate in the coffee harvest, fermentation and washing of the grain.

In 2007 tourism generated US$255.1 million, an increase of 10.6% compared to the previous year (US$230.6 million), that year arrived in the country 799,996 international visitors, an increase of 6.8% compared to the previous year which was 749,184. The tourist’s profile who visited Nicaragua remained the same, the main flow of tourists corresponds to Central American countries 64.3%, followed by North Americans and Europeans with 25.1% and 6.4% respectively, finally South America with barely 2.3% and other countries (The Antilles, Asia, Africa and Oceania) 4.2%.

In relation to mode of transport used was 57.8% by land, 40.4% by air and 1.8% by sea (Figure 5).

Figure 2: Arrivals of International Tourists by Mode of Transport and Main Tourist Markets of Nicaragua 2007

This demand for travel to Nicaragua in Central American countries, is due not only to they are neighboring countries with the same language, great cultural and demographic similarities, but also for the convenience among them to move from one country to another, by simply showing the citizen identification card. To facilitate entry and free movement of foreigners among the Republics of Guatemala, El Salvador, Honduras and Nicaragua, the Agreement for the establishment of a common Central American visa was signed in Tegucigalpa, Republic of Honduras in August 2005, this agreement establishes a common visa for aliens arriving into countries that make up the group known as CA-4, this would eliminate disadvantages to the visitor and investor who wants to move from one country to another, benefiting greatly their trip through Central America.

N. 

5.5 Development of Community-Based Tourism in Nicaragua

In order to promote the diversification of agricultural exports and reduce dependence of rural areas on these products, thus the government planned a policy focused on ecotourism named as Community-based Agro-tourism, where the owners could convert their coffee farms to tourist destinations. Thus, national and international eco-tourists could participate in the coffee harvest and experience the rural life with local communities, as a result emerged the “Coffee Route” announced by INTUR in 2002, which aims to help local economic development and bring complementary income to the poor local farmers. Through this tourism programme the locals have the opportunity to learn new skills and know more about the benefits of tourism; some of them could work as guide tours, offer their homes for accommodation to the tourists, and even rent their horses for a ride. For example, the communities of San Ramon in Northern Nicaragua, where tourism had brought some extra income to the families and had allowed them to make improvement to their houses, such as improve the conditions of the rooms and buying new equipment as mattresses, water filters,

In order to promote the diversification of agricultural exports and reduce dependence of rural areas on these products, thus the government planned a policy focused on ecotourism named as Community-based Agro-tourism, where the owners could convert their coffee farms to tourist destinations. Thus, national and international eco-tourists could participate in the coffee harvest and experience the rural life with local communities, as a result emerged the “Coffee Route” announced by INTUR in 2002, which aims to help local economic development and bring complementary income to the poor local farmers. Through this tourism programme the locals have the opportunity to learn new skills and know more about the benefits of tourism; some of them could work as guide tours, offer their homes for accommodation to the tourists, and even rent their horses for a ride. For example, the communities of San Ramon in Northern Nicaragua, where tourism had brought some extra income to the families and had allowed them to make improvement to their houses, such as improve the conditions of the rooms and buying new equipment as mattresses, water filters,