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Cablegate: Nicaragua: Slower Growth in Tourism Sector in 2007

VZCZCXYZ0003
PP RUEHWEB

DE RUEHMU #0122/01 0311647
ZNR UUUUU ZZH
P 311647Z JAN 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 2022
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 000122

SIPDIS

SENSITIVE
SIPDIS

USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: ECON EINV NU
SUBJECT: NICARAGUA: SLOWER GROWTH IN TOURISM SECTOR IN 2007

REF: A) 07 MANAGUA 2551, B) 07 MANAGUA 1789, C) 07 MANAGUA 452, D)

07 MANAGUA 341, E) 07 MANAGUA 2376

SUMMARY
-------

1. (SBU) The Nicaraguan Tourism Institute (INTUR) reported that the
tourism industry grew 6% in 2007, down from 2006's 8.6% and did not
fulfill industry's expectations. Some industry experts question the
veracity of INTUR's data, noting that sales for many tourism
entrepreneurs have dropped by an average of 30-40%. The reasons for
the sector's slowdown include unreliable electricity and water
supplies, policymaking paralysis at INTUR, and unhelpful political
rhetoric by senior Government of Nicaraguan (GON) officials that
have scared off foreign tourists and investors alike. Granada, a
bellwether for the industry, has been particularly hit hard and many
businesses have either closed or laid off workers. Entrepreneurs
are cautiously optimistic that the tourists will come back in 2008.


TOURISM SECTOR GROWS -- BUT BELOW EXPECTATIONS
--------------------------------------------- -

2. (SBU) On December 27, Mario Salinas, Executive President of the
Nicaraguan Tourism Institute (INTUR), reported that Nicaragua's
tourism income grew by 6% in 2007, versus an 8.6% hike in 2006. The
government counted 819,801 foreign visitors to Nicaragua in 2007
(including family visits, business travel, and leisure travel) who
spent $244.8 million. In 2006, 773,398 foreigners visited Nicaragua
and spent $231 million. Salinas conceded that INTUR and industry
had hoped for 12% to 16% growth in 2007 -- and reported that INTUR's
goal for the tourism sector in 2008 was 10% to 11% growth.

SOME INDUSTRY EXPERTS SKEPTICAL OF INTUR'S DATA
--------------------------------------------- --

3. (SBU) Raul Calvet, president of a tourism and real estate
services firm, noted that INTUR data is poorly prepared and does not
distinguish between family visits, business travel, and leisure
travel (tourism). According to Calvet, failure to disaggregate
these types of visitors makes it difficult to identify industry
trends. For example, experts suggest that business travel was
strong in 2007; the managers of three major hotels in Managua report
that hotel occupancy rates across the city were very high during the
year.

4. (SBU) Leisure travel, on the other hand, appears to have
declined. Alfredo Gutierrez, President of the Nicaraguan
Association of Receptive Tourism (ANTUR), and Ivan Bugna, President
of the Nicaraguan Chamber of Small and Medium Tourism Companies
(CANTUR), both were publicly skeptical of INTUR's claim that the
tourism sector achieved even 6% growth. Gutierrez reported that his
contacts in the tourism industry have complained that their sales
were down by an average of 30-40%.

REASONS FOR THE SLACK IN TOURISM
---------------------------------

5. (SBU) Lucy Valenti, President of the National Chamber of Tourism
(CANATUR), identified the primary reasons for slowing tourism growth
in 2007 were unreliable electricity and water supplies, unhelpful
political rhetoric from senior Government of Nicaragua (GON)
officials that scared off foreign tourists and investors, and
policymaking paralysis at INTUR. This paralysis has affected the
active promotion of Nicaragua's tourism sector, the approval of
projects in a timely manner, the compilation of statistical data,
and the formation of a strategic vision for the industry (Ref A).
Valenti and Calvet added that property claims disputes in areas such
as Tola (Ref E) had a negative impact, particularly on U.S.
investors interested in the tourism sector. Communities that rely
on leisure travel, such as Granada and San Juan del Sur, were
especially hard hit.

GRANADA HIT HARD
----------------

6. (SBU) Granada, a colonial city located 20 miles south of Managua,
is Nicaragua's leading leisure tourist destination and a bellwether
for the sector. According to INTUR, 80% of all foreign tourists who
come to Nicaragua visit Granada during their stay. The town is also
a popular weekend destination for Nicaraguans. However, the lack of
reliable electricity and water supplies, coupled with political
uncertainty, took their toll on Granada in 2007. Granada tourism
experts and entrepreneurs told us that sales dropped by an average
of 30%, and that more than 230 small businesses closed their shops
last year. Businesses that remain open have reduced their
inventory, especially for perishable goods, and some have had to cut
staff.

7. (SBU) Several hotels in Granada that normally operate at full
occupancy in November and December -- the beginning of the high
season for tourists in Nicaragua -- experienced higher vacancy rates
than anticipated. The manager of Hotel Alhambra estimated that his
sales were down 20% because of unreliable utilities, noting that
many foreign tourists visited only for the day. The manager of
Hotel Casa de Alto reported that his sales dropped 60% because of
unreliable power and international visitor perceptions that the
Ortega administration is hostile to foreigners. The manager of
Roadhouse Bar and Grill, one of the most popular restaurants in
Granada, said his sales were down between 40% and 50% because of
unreliable electricity and water supplies. Blanca Coronel Kautz,
INTUR's local representative in Granada, dismissed these concerns,
claiming that tourism for 2007 was normal -- and that the businesses
had closed their operations because of bad management.

COMMENT
-------

8. (SBU) Business owners are cautiously optimistic about prospects
in 2008. They believe that tourists will return to Nicaragua after
they realize that the Ortega administration's "bark is worse than
its bite." However, they doubt that the GON fully understands or
can take the necessary steps to resolve the sector's problems -- the
importance of maintaining a welcoming international image, improving
electricity and water supplies, and the crucial need for building
better roads. If Granada is any indication about the trajectory of
the sector, the outlook is indeed bleak. End Comment.

TRIVELLI

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