The tourism industry is attracting foreign investors as well as holidaymakers.

Tourism is the Dominican Republic’s ace-in-the-hole. The country is a major tourist attraction in the Caribbean, with its highly competitive hotel prices against a background of security (at least in the resort areas) and political stability.

The tourism industry expansion took off as early as the 1970s, when the government in power at the time declared it a sector of national interest. As the industry developed, private sector participation began flowing in the 1980s, when sources of financing became available under the Lomé Convention. Today, tourism receipts account for nearly 70% of exports of goods and services, excluding the country’s free zones. The private sector now owns and operates more than 45% of the country’s tourism industry, with the government’s blessing.

President Leonel Fernández, in his first term of office, designed an investor road map in 1999. Tourism, along with agriculture and infrastructure, was one of the three pillars of growth of this development programme.

Achilles’ heel

Tourism’s Achilles’ heel is global political and economic stability. The country is not immune from these factors: in 2001 the sector took a big hit from external factors, chiefly the deceleration of the world economy, a sharp depreciation of the euro and the terrorist attacks on the US. As a result, tourism earnings declined by 4% that year, with a 6.8% fall in the number of visitors. Hotel occupancy rates declined by 3.9%.

Despite being battered by hurricanes, soaring crude oil prices and the massive dollar depreciation against the euro, the republic has maintained its position as the Caribbean’s most visited country.

The lion’s share of the private sector is in the hands of Spanish tourism companies Barceló and Sol Meliá, which have taken advantage of their clients’ linguistic and cultural affinities with the Dominican Republic to invest heavily in the country. Barceló was the first international group to begin operating in the Dominican market, when it set up its Bávaro beach resort complex in Punta Cana, on the island’s eastern tip.

“This was the first Bávaro hotel outside of Spain and we have been diligently following the country’s tourism trends since that time,” says José Fernando Gómez, assistant manager of Barceló Hotels & Resorts in the Dominican Republic.

Mr Gómez says the tourism sector is not without its problems. His concerns are largely the same as those voiced across the industry: electricity costs and outages, and ongoing government bureaucracy. “They must get to grips with the electricity question,” he says. “The rates are very expensive and have a serious impact on profit margins for large resort complexes like ours. At present, local rates are 15% higher than in other Caribbean countries.”

A top-heavy state bureaucracy is slowing down key infrastructure projects, such as road improvements. “They need to speed up construction projects and show a bit more agility in their paperwork, such as in the granting of permits,” says Mr Gómez.

Fight for share

Competition is fierce in the hotel industry, he says. Most of the large Spanish groups are fighting for market share, from Meliá and Piñeiro, to Occidental Hotels and NH. US operators Four Seasons and Best Western are also competing in the Dominican market.

Barceló is setting its sights on the higher end of tourism, although Mr Gómez says the strategy calls for a balanced mix of clients.

Spanish competitor Sol Meliá is going for residential as well as hotel tourism in the Bávaro area. “Our competitive advantage is that we operate in several segments,” says Manfred Schoebel, Meliá director of development in the Dominican Republic. “We have built up a new image with Palma Real Villas, a $150m development with 900 homes already built. We will have more than 2000 once the project is completed.”

Sol Meliá is offering financing to potential buyers. The complex consists of luxury villas, flats and a 27-hole golf course. There is a 500-room hotel aimed at the higher end of the market, with rooms going for up to $500 a night.

Like other projects, Palma Real faces serious shortcomings on the power front – an issue that Mr Schoebel says should be tackled by the government with greater vigour.

Innovative projects

The government is also competing in the market with innovative projects designed to put some of the country’s less developed regions on the map. One such initiative is the $757m Barahona spa complex, which includes a 1000-room, five-star hotel and conference centre. “This project will turn the south-east province of Barahona into the country’s fourth largest holiday region,” says tourism secretary Félix Jiménez. The Tourism Department has leased the project to local developer Roberto Chetoni, who expects to have the complex up and running by 2014.

One of the most innovative initiatives comes from finance minister Vicente Bengoa, who wants to set up an agency to offer discounted low-season holidays in the Dominican Republic to Venezuelans. The plan is to offset the government’s $23m debt to Venezuela arising from the Petrocaribe agreement, under which the Dominican Republic imports oil at subsidised prices from Venezuela.


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