Ongoing efforts in Peru's MICE segment pay off

In recent years, Peru has established itself as a unique tourism destination, with the majority of the sector’s growth relying on its internationally recognised historical sites, such as Machu Picchu, and its natural geological features, including the Andean mountain range and the country’s extensive coastline.

One of the most promising areas of the Peruvian tourism market is the MICE segment, slated to become a driver for the sector, not only for the increasing number of travellers, but their higher spending capacity.

International Destination

In 2017 inbound and domestic leisure travel spending generated PEN42bn ($12.9bn), or 82% of direct travel and tourism GDP, compared to PEN9bn ($2.8bn) for business travel spending, or 18% of direct tourism GDP. The value of business tourism is expected to grow by 5.6% in 2018 to PEN9.5bn ($2.9bn), and rise by 4% per year to PEN14bn ($4.3bn) in 2028, according to the recent “Travel & Tourism Economic Impact Report 2018” by the World Travel & Tourism Council.

Although it is not yet on a par with leisure tourism, the MICE segment has seen a growing yet moderate trend of higher returns, posting a 5% increase between 2012 and 2017. There are direct and indirect benefits to this increase in MICE, as business-oriented travellers spend between four or five times more than leisure travellers. Furthermore, according to the World Tourism Organisation, 40% of business travellers return with friends or family for leisure.

This increase runs parallel to Peru’s recent ranking in the International Congress and Convention Association’s Americas classification, where it surged from 14th place in 2012 to first and second place in 2015 and 2016, respectively. A consistent source of spend in the Peruvian MICE segment is the US, which is the result of outreach programmes conducted by commercial offices throughout Peru and the Commission for the Promotion of Peruvian Exports and Tourism (Comisión de Promoción del Perú para la Exportación y el Turismo, PROMPERÚ). For 2017-18 alone an estimated $1.3m injection into the business tourism segment originated from the US, with more contracts under way and a projected $13m expected between 2018 and 2022.

Convention Capacity

The recent steady growth of the MICE segment also indicates a similarly increasing demand for meeting and event spaces. Inaugurated in October 2015, Lima’s Convention Centre (LCC) was a game changer in Peruvian MICE tourism and the capital city’s ability to host large-scale events. Prior to its opening, Lima was limited to holding events at existing hotel convention centres with a maximum capacity of 2500 people, whereas the LCC can host up to 10,500 people, with its largest room capable of accommodating a maximum capacity of 5000.

Since the LCC opened its doors, it has attracted numerous high-profile events including the Annual Meetings of the World Bank and the IMF in its opening year, the Asia-Pacific Economic Cooperation Forum in November 2016, the 130th International Olympic Committee Session in September 2017 and the Summit of the Americas in April 2018.

Despite these successes, a challenge to maximise the use of the LCC remains. Since its inauguration in 2015, the LCC has not had a formal managing entity and has been managed by the state due to pending arbitration with the developer, Peru-based Constructora OAS. Only by the end of 2018 will the request for bidding will commence, with the hand-off to a formal managing operator scheduled to happen in 2019.

Like Attracts Like

The recent success of Lima’s meeting calendar demonstrates its continued ability to attract events. In 2017, for example, the 130th International Olympic Committee Assembly met in Lima to announce the host country for the 2024 Olympic Games, attracting approximately 2500 international tourists with an estimated economic impact of $8m. Shortly after, in April 2018, Lima hosted the Summit of the Americas, welcoming delegates and staff from 33 countries. Given the scope of this singular event, the majority (90%) of the demand for hotels was for three, four, or five-star hotels. With a total of around 5000 visitors, an estimated $80m in revenue was generated. In July and August of 2019 the Pan American Games – the third-largest sporting event after the Olympic Games and the FIFA World Cup – will take centre stage in Lima.

Welcoming the World

Out of all of the recent events and meetings to be hosted in Peru, the Pan American Games will have the largest impact in terms of event length, number of visitors and global outreach, which is projected to result in a higher injection of revenue into the tourism sector. Events like these bring an immediate impact to Peru’s economy and tourism sector and offer visibility for future tourism.

Outside of these recent large-scale mainstream events, Lima has also held notable international tourism promotional events to boost tourism and to serve as a professional development opportunity for those in the sector. In November 2017 the Global Business Travel Association (GBTA) organised its third annual conference on corporate travel in Lima.

In November 2018 the GBTA will again return to Lima. In 2018 a similar conference was held in Lima by Peru Travel Mart. With a focus on leisure travel, it brought together 260 tour operators from around the world, with 85 out of the 125 foreign companies attending as newcomers to the event. The event’s focus on direct meetings and speed network resulted in a high yield of meetings, with the 2017 edition recording more than 7000 direct business appointments over the course three days.

Another growing event type commonly held in Lima is international fairs or expos and can range in focus, from fashion to food to transportation. Furthermore, these fairs can bring more than 15,000 foreign participants a year to Peru, according to the CVB.

New Developments

According to Peru’s Society of Hotels (SHP), investments in hotels across the country are projected to double by 2021, reaching a total investment value of $1.14bn. This is 90% more than what was recorded between 2012 and 2017. In 2018 alone, six four-star and five-star hotels are set to open, each with meeting or event spaces. The majority of hotel investments target Lima, however, Cusco, Arequipa, and the northern part of the country continue to be attractive locations for the hotel construction segment. If the projects under way are concluded, an estimated 6000 bedrooms will be added to Lima’s inventory. However, investment planning and execution may look different in practice. “Between 2013 and 2017, 120 hotels were expected to open in Peru, however, due to bureaucratic slowdowns and lack of airport connectivity, only about 20 have opened. Several investors have since pulled out from these investments,” Tibisay Monsalve, general manager at SHP, told local press. Considering the accommodations required for events scheduled in 2019, a lower rate of hotel inauguration would impact hotel availability, and therefore not meet the demand of travellers.

MICE is a growing segment in the Peruvian economy as the country has established itself as a desirable location for high-profile events. Growth can also be attributed to the increase in corporate travel due to political stability and continued business interest in the country. Lima’s event agenda for the short to mid-term will serve as an indicator to measure the segment’s growth as well as the type of market it is attracting. Peru’s primary MICE challenge is the capability of its infrastructure to keep up with demand. As the segment continues to grow, policies to facilitate project solicitation, construction, and management must take place to ensure maintaining the reputation built thus far. The diversification of Lima as Peru’s MICE hub will need to be addressed along with infrastructure for the expansion and sustainability of the sector.