Broadening the appeal: Diversifying options for tourists and visitors

Proximity with the US, particularly California, has made Baja California (BC) an historical access point for tourists seeking everything from beaches to extreme sports to retirement tranquillity. Every year BC’s border sees around 30m inbound crosses from the US. That influx does not include those coming through its airport and seaports, and the state receives more than 16m visitors from abroad each year. The final ingredient of the total is another 11m from within Mexico, according to the Ministry of Tourism (Secretaría de Turismo, SECTUR).

Tourism accounts for about 12% of the state’s GDP, according to the ministry, and the domestic investment agency, ProMéxico, indicates that this translates into a value of MXN51bn ($3.96bn), making tourism an important source of income for the state. In the years before 2007, a boom in investment for tourism saw much construction activity on condos, hotels and retirement homes, however, the economic crisis brought many of these projects to a halt. Notwithstanding, the sector has been recovering and has been among the top growers since 2010.

VARIED OPTIONS: BC’s tourist offer is diverse. With access to both the Pacific Ocean and the Sea of Cortez, its geography also includes mountain ranges, valleys, deserts and national parks. BC is home to the second-most-visited touristic port in the entire country, Ensenada, attracting approximately 800,000 visitors a year, according to the tourism ministry. The state’s waters also have a rich variety of species for sports fishing. Some 38% of the state’s area is dedicated as a national reserve, with parks such as Parque Nacional Sierra de San Pedro Mártir, Parque Nacional Constitución de 1857 and Valle de los Cirios.

BC hosts more than 90% of all the wine produced in Mexico, mostly in the Valle de Guadalupe region, and other lesser known ones like San Vicente and Santo Tomas, which in recent years have become important agro-tourism destinations, with wine tasting, boutique hotels and festivals. In addition to wine, the region’s gastronomy is aided by several productive agricultural valleys, such as Valle de Mexicali and the San Quintin region.

INVESTMENT OPPORTUNITIES: Having the US as a neighbour, more specifically California, BC not only has geographical proximity to an extremely vast market, but it also has proximity to tough competition. Prime destinations, including San Diego, Los Angeles, Disneyland, Palm Springs and Hollywood, are just a few hours’ drive north. This fact brings an enormous need for infrastructure in the area to be able to compete with the attractions to the north.

Oscar Escobedo, BC’s minister of tourism, told OBG, “The state’s activity is a very dynamic one… and we are pushing multiple projects in the tourism sector, always with a focus on sustainability.” Included in the many tourist industry projects under way in the area are two marinas, one on the Pacific side and the second 30 km from the tip of the Sea of Cortez. These projects try to exploit the fact that California and Arizona are two of the US states with the highest numbers of registered boats.

Other examples include the construction of the Tijuana Airport-US bridge, the expansion of the Otay border crossing and the Coastal Railway System (see analysis). In addition to those projects, the construction of the Ensenada/Ojos Negros Airport, as well as the addition of several smaller runways – such as Catavina – are trying to attract private airplane owners to explore the more remote southern regions of the state, such as Bahía de los Angeles.

MICE: As an organised segment, meetings, incentives, conferences and exhibitions (MICE) existed more in theory than in practice until 2013. Other than investments made for conference facilities within privately owned hotels, few specific efforts were made from the public sector to encourage the growth of MICE. This changed in 2013 with the opening of the Baja California Centre. The centre was built on 10 ha of a 200-ha land plot, with an overall MXN600m ($46.62m) investment for the first phase. The remaining area will be developed according to a master plan that is being prepared by the Urban Land Institute, a non-profit organisation responsible for many sustainable urban development projects.

The entire development will create investment opportunities that include hotels, a golf course and further real state and infrastructure. The conference centre hosted more than 150,000 visitors in its first year and is looking to top the 200,000 figure in 2014. Appropriately, the MICE sector 2013 annual nationwide congress, was hosted in the centre. This congress, organised by SECTUR, aims to promote specialised tourism products for the sector, develop value chains and promote networking.

HEALTH TOURISM: The health tourism sector in BC has been active since the 1940s, although the term was not yet in use then and the sector was not properly organised. It was not until the formalisation of the segment began during the beginning of President Enrique Peña Nieto’s administration in 2012 that the term has been widely applied in BC. The local sector originated with dental care, which covered more than half of the entire health tourism market. The main centre is the town of Algodones, considered by some as the town with more dentists per capita than any other in Mexico. In recent years, dentistry’s market share has decreased and it now comprises slightly over 30% of the total.

The total number of tourists who visit BC for health treatments of some kind is difficult to pin down. Each study seems to have a different figure, a phenomenon noted by the health tourism cluster. However, BC’s Ministry of Tourism figures show that more than 500,000 patients visited the state in 2013, accompanied by a further 600,000 people. The sector had seen a sharp decrease in the early 2000s for various reasons, including the economic crisis, the swine flu pandemic and security concerns. Recent conditions have improved, showing annual growth of 4-15%, depending on the source. According to the local Ministry of Tourism, the sector’s economic benefit was estimated at over $100m in 2013, with some 800,000 visitors forecast for 2014. Tijuana typically keeps a market share of more than 80%. The profile of visitors has also changed: before the early 2000s most patients were Anglo-Saxon, while in the later years the market has seen mainly Hispanic visitors.

Cluster leaders, in collaboration with SECTUR and the Mexican Consulate in Los Angeles, have been visiting the main Mexican and Latino associations to promote the sector. These and other efforts have resulted in the approval of various companies that sell US-approved medical insurance to Latino workers, for whom medical treatment is then offered in BC. In addition to these, companies such as Blue Shield and MetLife provide products in which it is stipulated the client can opt for a payment for treatment that can be applied in either Mexico or in the US, without discrimination.

Karim Chalita, the health cluster president, told OBG, “The most required services include: plastic surgery, bariatric treatment, ophthalmology, oncology and of course dentistry.”

INNOVATION & CHALLENGES: The sector has seen its fair share of innovation in recent years. One of the main examples that BC (and Mexico for that matter) has to offer is stem cell therapy. Such treatment is not commercially available in the US and Canada, making Mexico and particularly BC the closest destination for patients in North America.

The sector has encountered a barrier due to the novelty of the niche, however, this drawback has been attenuated by the creation of the Heath Tourism Directorate under SECTUR, charged with promoting it. Another development barrier has been the border crossing times, which can be inconveniently long for patients. To avoid them a “medical line” has been created, which caters specifically for patients getting treatment in BC and works as a fast-pass that can be issued by the physician to expedite the patient’s return home. Finally, as has been seen with the MICE sector, one of the main challenges to health tourism has to do with overcoming the market loss resulting from the 2008 economic and social crisis, in which patient numbers dropped from more than 1m to less than 500,000 in a couple of years.

The tourism sector has always been one of BC’s strengths. If the state manages its affairs well and continues to fight the problem of external perception, the sector’s growth will continue. However, in the short term, tourism is expected to be affected by the federal government’s tax policy change. This raised the level of value-added tax from 11% to 16% at the beginning of 2014 for cities within 20 km of the US border, and the policy will surely be a deterrent for some travellers, particularly day-trippers who cross into BC in pursuit of inexpensive food, pharmaceuticals and alcohol. If this bump in the road is smoothed, the sector could be poised for growth, especially in the MICE and health tourism niches.