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Conquering The Caribbean

Puerto Rico could receive 11 million tourists and $6.6 billion in visitor expenditures in 2020. Or the crowds could head to the Dominican Republic, Cuba, and Cancun. It’s Puerto Rico’s choice.


October 17, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Winning the war for tourists: Tourism’s battle plan—if implemented—could more than double the size of Puerto Rico’s tourism industry by 2020 and give the island a 20% market share of visitors to the Caribbean.

The global tourism situation may look bleak right now, but industry experts predict it will get back on track and grow—barring any further economic and political deterioration. Puerto Rico, currently the leader in overnight visitors to the Caribbean, must act decisively and immediately if it’s to defend its title.

Vancouver-based InterVISTAS Consulting Inc., which specializes in travel & tourism, has come up with a detailed five-year plan, at a cost of $340,000 to the Puerto Rico Tourism Co., to help the island stave off the competition by doubling the size of Puerto Rico’s tourism industry.

The 200-plus-page document, obtained exclusively by CARIBBEAN BUSINESS, identifies 14 major strategies and over 120 call-to-action initiatives that promise to give Puerto Rico a 20% market share of international visitors to the Caribbean.

Success would mean 11 million total annual visitors—including 8.6 million international overnight visitors and 2.4 million cruise ship passengers—25.1 million in airport traffic, and $6.6 billion in visitor expenditures by 2020. Achieving these goals, however, would require 30,000 hotel rooms, almost three times the actual base (assuming current occupancy rates and a 4.5% annual growth rate).

By comparison, in 2000 Puerto Rico received 4.9 million visitors (3.5 million overnight and 1.4 million cruise passengers), who spent $2.7 billion in the local economy.

According to the World Tourism Organization (WTO), global international tourist arrivals are expected to number more than 1.56 billion by 2020, with an average annual growth rate of 4.1%. The Caribbean is supposed to fare even better, with total overnight visitors jumping from 20 million today to 46 million by 2020, for an annual rate of growth of 4.3%.

Puerto Rico currently has the largest market share in the region, with 17% of the total overnight visitors, but it is followed closely by the Dominican Republic, Cancun, Cuba, the Bahamas, and Jamaica. Collectively, these six destinations account for two-thirds of the total visitors to the Caribbean.

The Dominican Republic and Cuba, in particular, are hot on Puerto Rico’s heels, with annual growth forecasts of 5% and 9.2%, respectively, through 2020.

Puerto Rico’s strategic plan

Industry experts say Puerto Rico, as a tourism destination, has the opportunity to improve its market position in the Caribbean with the new convention center in Isla Grande, scheduled to open by 2005, which will attract business travelers.

"Clearly, the convention center will rank among our most important assets, as it will ensure that San Juan gains its rightful place as the economic & social capital of the Caribbean," said Raul Bustamante, chairman of the Puerto Rico Convention Bureau.

Other possible ways to attract visitors are to develop new attractions, to construct all-inclusive resorts (popular in rival destinations Cuba and the Dominican Republic), and to promote San Juan as a secondary hub for airlines other than American Airlines.

Before undertaking any initiative, though, several critical issues must be addressed, according to InterVISTAS. These include a negative perception in the marketplace, chronic tourism & transportation infrastructure deficiencies; sub-par customer service, and regulatory hurdles.

"What’s important here is that we have identified key issues and problems. Puerto Rico has a lot of strengths on which it can build, but the island also has weaknesses in customer image and customer service, both critical components," said InterVISTAS President Gerry Bruno. "Without customer service satisfaction, Puerto Rico isn’t going to get repeat business."

The Tourism Co. contracted InterVISTAS in March after a Stakeholders Workshop with local industry leaders. The idea to hire the firm came from the Puerto Rico Hotel & Tourism Association (PRHTA). In April the PRHTA & the Tourism Co. co-hosted a Tourism & Transportation Forum to gain input from industry leaders, including Gov. Calderon and CEOs from select national and international companies in the airline, cruise line, hotel, entertainment, tourism, travel wholesale, and convention management sectors.

"The PRHTA chose InterVISTAS because Vancouver had dealt with similar issues with which Puerto Rico is now dealing, in terms of losing market share, poor customer satisfaction, and fragmentation in the political environment. Vancouver pulled together and developed a vision of where they wanted to go," said PRHTA President Rick Newman.

InterVISTAS, which the Tourism Co. has contracted to assist a steering committee in implementing a number of air-access strategies, has developed similar strategic and marketing plans for other tourism groups in Canada and Bermuda. The firm has also done work throughout the Caribbean, particularly in the area of air service.

"InterVISTAS’ strategic plan has clearly defined what we should and must consider for tourism," said Milton Segarra, executive director of the Tourism Co. "I feel comfortable and confident that this strategy, even though tourism is a cyclical industry, is what we need to step up and plan where we want to go."

It represents a valuable opportunity to increase tourism’s contribution to the local economy. Historically, tourism has accounted for just 6% of Puerto Rico’s gross domestic product (GDP), which is relatively low by international standards and especially in comparison with other Caribbean destinations. For example, tourism accounts for 14.7% of the Dominican Republic’s GDP and for 33% of the Bahamas’.

"Is the strategic plan good for Puerto Rico, and can we do it?" asked Newman. "The fact is that we can’t afford to do nothing. We have to move forward and look at the competition, at the opportunities that we haven’t been able to take advantage of, and at things we are doing right and wrong. Most important, we need to find out what it takes to move everything in the same direction."

The battle plan

InterVISTAS identified a number of major weaknesses in Puerto Rico, among them few attractions and other tourist products, a weak customer image, high costs, poor customer service, inadequate infrastructure, limited competition among airlines and insufficient airlift, inadequate ground transportation services, cleanliness issues, few cruise ship benefits, unhealthy reliance on the U.S. market, ineffective wholesale distribution system, cumbersome regulatory/bureaucratic processes, and lack of tourism data and market intelligence.

The firm’s proposed solutions for these problems include developing a theme park and other attractions such as an aquarium, providing lower-priced lodging, developing all-inclusive resorts, providing incentives to banks for lending to the hotel sector, amending tourism laws to make entertainment projects eligible for incentives, revitalizing Old San Juan, enforcing antilittering regulations, establishing an advisory committee of airport and cruise port tenants to address customer service complaints and operational deficiencies, implementing an aggressive maintenance program at Luis Muñoz Marin (LMM) International Airport and the San Juan cruise line piers, and better maintaining the roads.

InterVISTAS also recommended developing projects to support the new convention center; transferring oversight of the island’s taxi and water transportation to the Tourism Co.; providing public transportation service to the convention center district; extending the Urban Train link between the LMM airport, the convention center district, and major hotel areas; developing a national customer service satisfaction campaign; creating a tourism education and training strategy; changing the law so that issued permits and regulatory approvals can’t be revoked; defining a strong and consistent brand identity; working with American Airlines and American Eagle to strengthen their hub; enticing low-cost carriers to boost air service; promoting the development of three- or four-day cruises; restructuring cruise incentive programs, and developing a reliable tracking system to monitor inbound visitors.

The InterVISTAS report also highlighted some of the biggest threats to Puerto Rico’s economy, such as the increasing popularity of Cuba among tourists, neighboring governments that have stepped up spending to promote their own destinations, the generally weak economies in the U.S. and elsewhere, and the threat of new terrorist attacks and of a U.S. war with Iraq.

Puerto Rico’s competitive position

Puerto Rico is facing some stiff competition from Caribbean neighbors that receive more than a million international visitors each year, namely the Bahamas, Cancun, Cuba, the Dominican Republic, and Jamaica. Of those, the Dominican Republic, Cancun, and Cuba are likely to be Puerto Rico’s most formidable competition for overall market share in the next five years, according to WTO forecasts.

The number of visitors to the Caribbean has increased by 6% since 1996, but Cuba experienced a 15% average annual growth rate between 1995 and 2000. Cuba has been able to secure almost 10% of overall visitor traffic to the region in recent years, despite the U.S. travel embargo. If the embargo were lifted, even a small percentage increase in the number of U.S. visitors to Cuba could allow it to overtake both Puerto Rico and the Dominican Republic, in terms of annual visitor volume, within five years, according to InterVISTAS.

The higher visitor growth rates for Cuba are fueled by a concentration on a lower-priced but high-volume all-inclusive model for tourism, just as they are in the Dominican Republic, which recorded impressive growth of 11% from 1995 to 2000 and is quickly gaining ground on market leader Puerto Rico.

According to InterVISTAS, the success that Cuba and the Dominican Republic have enjoyed in the European market is largely due to their competitively priced all-inclusive resorts.

Puerto Rico is disadvantaged because it has higher labor & development costs and has invested in higher-priced air/hotel and all-inclusive packages. It must instead follow the lead of Cuba and the Dominican Republic, especially if it hopes to attract European visitors, not only by developing the all-inclusive model but also by ensuring that the packages are competitively priced.

Although Puerto Rico has the greatest share of overnight visitors in the Caribbean, with 3.3 million visitors and $2.4 billion in total visitor expenditures in 2000, nearly half of the visitors don’t stay in hotels but with relatives, placing Puerto Rico second to the Dominican Republic in total visitor expenditures. The Dominican Republic generated three million overnight visitors and $2.9 billion in total visitor expenditures in 2000.

Puerto Rico has the smallest hotel inventory among its regional competitors, with 11,900 rooms in 2000. Accordingly, it generated the fewest room nights: 2.6 million. The Dominican Republic, by comparison, had 52,000 hotel rooms and generated 13.3 million room nights in 2000, followed by Cancun, with 25,400 rooms and 6.9 million room nights. By year’s end, Puerto Rico’s room inventory is expected to jump to 13,000—still well below the others’ inventories.

Based on actual 1994-95 to 2000-01 performance, Puerto Rico’s international overnight visitor volumes are increasing at a rate of 2.1% per year, according to the InterVISTAS study. Yet the WTO forecasts that international overnight visitor traffic to the Caribbean will increase at annual rate of 4.3% through 2020.

That means Puerto Rico’s tourism rivals are growing twice as fast. The threat is immediate. Unless Puerto Rico acts quickly and decisively to attract more visitors, its title as the leader in Caribbean tourism will be stripped, costing the economy millions, if not billions, of dollars. It would be difficult for Puerto Rico to catch up once left behind by the Dominican Republic and Cuba.

"Obviously there has to be a drive from the industry on this issue," Bruno said. "Tourism is an industry for the whole island and it affects the whole economy. Though the government does have a significant role to play, especially through the Tourism Co., it is important that the industry is aware of what must be done and that cooperation between the private sector and different tourism organizations is critical for success."

This Caribbean Business article appears courtesy of Casiano Communications.
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