Significant institutional support aims to promote the sector at the national level

As international media headlines on guerrilla conflict gradually disappear, a picture is slowly emerging of an exciting and open economy and a diverse country. The vast strides that have been made towards resolving the conflict that has plagued Colombia for decades promise to be a game changer for the tourism sector and enable the country to focus its efforts on marketing its diverse attractions – from Caribbean beach appeal to charming colonial architecture.

Efforts to promote Colombia as a tourist destination seem to be paying off. Visitor numbers have grown steadily over the past few years, as Colombia closes in on its target of 4m tourists by the end of 2014.

The Andean country appears to be embracing this new era with great optimism, rolling out a number of infrastructure projects and providing the sector with additional institutional support in preparation for the post-conflict influx of tourists. While the sector still faces a number of challenges, in particular a lack of foreign language skills, its recent performance points to continued growth and great potential.

Sector Performance

According to the World Travel and Tourism Council (WTTC), in 2013 travel and tourism’s direct and indirect contribution to Colombia’s GDP reached 5.4% and represented 5.6% of total employment, including jobs indirectly supported by the industry. The sector has grown at an average annual rate of 5.5% in the past three years, according to the Ministry of Commerce, Industry and Tourism (Ministerio de Comercio, Industria y Turismo, MCIT).

The overall figures for tourist arrivals were up 12% in the first quarter of 2014, reaching some 589,000 visitors. In 2013 tourist arrivals increased by 7.34% from almost 3.5m in 2012 to more than 3.7m visitors, exceeding the global growth average of 4.3% for the same year, according to WTTC figures. Of the total number of visitor arrivals in 2013, 1.7m were international tourists who arrived by air, sea and land border control points, and 1.15m were travellers who arrived from the border integration zones within the Andean community.

Colombian citizens residing outside of the country accounted for 561,703 of the total number of arrivals, and international cruises contributed 306,694 visitors, a 20.6% increase from 254,403 arrivals in 2012. Cruise visitors have been rising steadily in the past few years, with the exception of 2011, as Colombia’s three main ports of Cartagena, Santa Marta and San Andrés become increasingly popular destinations on the cruise ship circuit in the Caribbean.

Revenues from the increased number of tourists rose from nearly $3.2bn in 2012 to more than $3.6bn in 2013, making tourism the third-most-important source of foreign currency, behind oil and coal, and ahead of traditional products such as coffee and flowers, according to the MCIT. The sector’s recent performance bodes well for achieving the target set by President Juan Manuel Santos of reaching 4m visitors and $4bn in tourist revenue by the end of 2014.

Bogotá remains the most popular destination, accounting for 51.5% of arrivals in 2013, followed by Cartagena, Medellín and Calí. According to Bogotá’s District Tourism Institute (Instituto Distrital de Turismo, IDT), the number of international tourists surpassed 1m in 2013, increasing 19% from the previous year.

Markets

The largest source market for foreign visitors remains the US, accounting for 20% of international arrivals, or 343,891 tourists in 2013, followed by the EU with 15.3% (263,323). Spain accounted for more than half of international arrivals from the EU, with 89,535 tourists, followed by Germany with 39,521 and France with 34,385. Venezuela accounted for an additional 14%, with 239,284 tourists, while Mercosur countries contributed 13% (223,488). The largest increase in arrivals was recorded by the Netherlands, with 31% more travellers in 2013 than the previous year. Chile followed with a 19.8% increase, Argentina with 16.8%, Peru with 16.5% and Mexico also with 16.5%.

Proexport, the country’s tourism, investment and exports promotion agency, continues to focus on priority markets, namely the US and regional markets such as Argentina, Chile, Brazil, Peru and Ecuador, while exploring other markets such as Canada and the EU.

According to Luis Fernando Rosas Londoño, former director-general of IDT, authorities will particularly work on attracting tourists from Europe in 2014, especially Following the establishment of direct flights from London by Avianca and Lisbon by TAP in June and July of 2014, respectively, Colombia now has direct flights to a total of five European countries: Spain, Germany, France, Portugal and the UK. The increase in connectivity comes after the country’s biggest airport, Bogotá’s El Dorado, underwent significant expansion in 2012 to cope with increasing air traffic.

In the medium term, Colombia will also be targeting the large Asian market, in particular China, which is expected to provide 100m tourists by 2020, according to the WTTC. To this end, Colombia participated in the World Travel Fair in Shanghai in early 2014, the country’s first appearance at such an event in Asia.

According to Londoño, Colombia, led by its capital Bogotá, is adopting a regional strategy to attract additional Asian tourists and make the long-haul flights more attractive. “Traditionally, Peru has received the most Asian tourists in the region. Our strategy has been to propose to the largest tour agencies in Japan and China multi-destination packages, which include Bogotá, Lima and Quito,” Londoño told OBG. The strategy is aimed primarily at attracting retirees looking to take advantage of the cultural, gastronomic and architectural offerings in each of the three destinations.

Domestic Market

The domestic market has also been making an important contribution to the sector’s stable growth. According to the WTTC, domestic travel spending in 2013 reached COP18.71trn ($9.36bn) and is expected to increase by 5.3% in 2014 to COP19.70trn ($9.85bn). The arrival of passengers by air on domestic flights also increased by 19.6% in 2013, reaching 18.9m. Smaller cities near larger cities are also benefitting from domestic tourists seeking short getaways. Growth in the domestic market has been fuelled primarily by reduced airfares and increased travel security. In addition, the National Tourism Fund (Fondo Nacional de Turismo, FONTUR) has played a key role in funding the promotion of local destinations.

Growth Drivers

The sector’s growth is primarily a result of a change in the international perception of security in Colombia, as well as concerted efforts by national institutions to promote Colombia domestically and abroad. Given its growing socio-economic impact, the tourism sector has become a priority for the government. As a result, the sector has received significant institutional support in recent years. While tourism remains part of the MCIT, a sector-specific vice-ministry was created in 2006. In 2012 the High Council of Tourism was established to improve public policies and tourist safety. The council comprises 13 other state entities, including the Ministry of Transportation, Civil Aviation and the National Learning Service.

Also overseen by the council is FONTUR, which has played a significant role in promoting tourism at the national level. Funded by a parafiscal tax imposed on companies in the sector, FONTUR manages the resources for projects on three fronts: competitiveness, infrastructure and promotion. Regions can apply for funds for tourism-related projects in each of the three categories. The projects are then reviewed and approved by a committee. FONTUR’s Heritage Towns Network Programme (Red Turística de Pueblos Patrimonio) advances sustainable development projects in a number of towns across Colombia that possess great historical and touristic value. Besides the infrastructure projects, FONTUR has supported a number of training programmes aimed at increasing bilingualism among hospitality staff and taxi drivers at airports.

At the international level, the sector has benefitted from the efforts of Proexport. The agency’s latest campaign, entitled “Magical Realism”, showcases one of Colombia’s greatest tourism assets – its diversity. The imagery alludes to the many offerings the country boasts, such as agro-tourism, adventure, ecology, religion, gastronomy and archaeology.

The added institutional support for the tourism sector comes as it gains economic and social importance. According to Londoño, the tourism industry will play an important role in the country’s post-conflict development. “With the resolution of the conflict, we are hopeful that tourism will become one of the pillars of the Colombian economy and, in turn, allow us to use its contribution to further post-conflict social and economic development,” Londoño told OBG.

Besides institutional support, the sector has benefitted from a tax incentive. To enhance competitiveness, the government introduced Decree 2646 in 2013, which exempts all non-residents from paying taxes on tourism-related services, including hotels.

Investment

Given the sector’s new-found importance for the government, investment surpassed $16.4bn in the past four years, according to figures from MCIT. At the start of the presidential term, the Santos administration earmarked a total of COP623bn ($311.5m) for tourism promotion and infrastructure improvement, more than double the previous administration’s sector budget.

Foreign direct investment (FDI) has also risen significantly in recent years, particularly in the hotel industry. This increase was mostly driven by a 30-year tax exemption on new hotel developments or hotels undergoing substantial remodelling. The measure, introduced in 2002, applies to projects between 2003 and the end of 2017, and has led to a substantial increase in the hotel room stock. Between 2005 and 2012, 17,000 new rooms were built and another 2631 rooms were added in 2013, according to Colombia’s Hotel and Tourism Association (COTELCO).

Colombia’s hotel room total now surpasses 130,000 and is primarily concentrated in the four cities of Bogotá, Cartagena, Santa Marta and Medellín. According to COTELCO, another 6900 rooms will be added from projects currently in development. Seventeen new hotels are planned for Cartagena, 10 for Bogotá, eight for Barranquilla and seven for Medellín.

The 30-year tax exemption attracted a number of international chains, such as JW Marriott, Hilton and Wyndham. Since 2003, FDI in the hotel industry has surpassed $1bn, according to COTELCO.

The capital has seen the fastest growth in recent years and maintains a little more than half of the national hotel room total. However, with the offer growing faster than demand, occupancy rates and revenues are beginning to reflect the growing saturation of the market, particularly in the capital, Bogotá.

According to MCIT, the average national occupancy rate fell by 1.1 percentage points from 53.6% in 2012 to 52.5% in 2013, following drops in some of the largest urban centres, including Bogotá and Cartagena. Growing competition has also led to a decrease in the national room rate average, which dropped to $132 from $138 in 2012, according to Hotel Price Index. As investors grow cautious about a temporary oversupply of hotel rooms in the capital, intermediate cities and niche markets are becoming more attractive.

“Exemptions on property taxes and construction licenses, together with other incentives within Law 768 of 2002, make Cartagena and its surroundings a highly competitive destination for investors,” Edgar Botero, president of Millennium Development, a domestic development firm in charge of the Hispania resort, told OBG. The Hispania project – which will include hotels, a marina, residential communities, a golf course and several retail and entertainment facilities – is set to cover 860 ha and cost approximately $2.6bn.

MICE

Supporting the hotel industry in a significant way is the meetings, incentives, conventions and events (MICE) segment, which has registered stable growth over the past few years. Colombia’s geographic location in the middle of the Americas, as well as its infrastructure capacity and prices make it an increasingly attractive destination in the region for the segment.

Since 2010, Colombia climbed six spots in the International Congress and Convention Association’s world ranking, from 34th to 28th (out of 109 countries) in 2012, with 138 events. Within Latin America, Colombia ranks fourth, after Mexico, Brazil and Argentina.

According to the MCIT, in 2013 Colombia welcomed 165,122 foreign visitors who attended congresses or conventions. That is 30% more than the 126,984 who registered for such events in 2012. The MICE segment generated an estimated $16m in 2013, according to the Bogotá Convention Bureau. At 3.8 days, Colombia enjoys one of the longest average durations for events in the MICE sector throughout Latin America.

Colombia’s MICE segment experienced a particularly significant year in 2013, marking its entrance into the large-scale world events market with first-time applications to host events of a scale that the country had not previously engaged in.

Alexandra Torres Asch, executive director at the Bogotá Convention Bureau, told OBG, “In 2013 we entered an important phase of maturity. We have managed to consolidate the Latin American and Iberian-American markets, and are now attempting to enter the global market, trying to attract legacy events with potential to bring global exposure to Colombia.” Indeed, in 2013, Colombia applied to become the host of the United Cities and Local Governments’ 2014 event, competing against heavyweights such as Istanbul. Bogotá was selected to host the 2016 event.

In March 2013, Colombia was host to the UN Economic Commission for Latin America and the Caribbean regional implementation meeting, and in 2014 it hosted the International Society for the Performing Arts Congress. A number of other world events are scheduled for 2014, including a Global Association of the Exhibition Industry meeting in October.

Infrastructure

A notable accomplishment can also be seen in the support offered by local governments to the segment, realising the direct and indirect benefits it can bring to cities. A number of cities across the country have been focusing on increasing their competitiveness by initiating new infrastructure projects. As a result, national capacity has been increasing steadily. Even so, the three main urban centres, Bogotá, Cartagena and Medellín, remain in the lead.

Attracting more than half of all tourists, Bogotá remains the most popular destination, with business and events among the most important reasons for foreigners to visit the capital city. Comprising roughly 58% of the business sector and about half of the hotel offering, the capital is a natural leader in the segment.

Bogotá is also home to the biggest events venue in the country, the Corferias International Business and Exhibition Centre, which hosts between 110 and 120 events annually in its 44,430 sq metres of indoor space and 15,000-sq-metre outdoor space. The centre attracts about 70% of trade fairs and events taking place in the capital, according to Mario Cajiao Pedraza, vice-president of planning and corporate affairs at Corferias.

Bogotá’s infrastructure capacity is set to receive a significant boost with a project to build the biggest convention centre yet, the Ágora International Convention Centre of Bogotá. The 63,000-sq-metre complex is being constructed in Corferias, in the Salitre district near El Dorado Airport. Following green building principles, the venue will boast a multipurpose main area with a capacity of about 4000 people, multiple rooms with capacities ranging from 150 to 2000 people and a parking lot with more than 1100 parking spaces.

The Ágora International Convention Centre of Bogotá is the result of a partnership between the national government, local governments, Bogotá’s Chamber of Commerce and Corferias, and will represent an investment of more than COP340bn ($170m) from public and private sources, according to Corferias. The project is a stepping stone in Bogotá’s larger urban revitalisation project, which will allow for the consolidation of an events and convention tourism district. Corferias is also developing a hotel project next to the Ágora convention centre. Construction has already begun and according to Cajiao, Corferias is in the process of selecting an international operator to manage the hotel.

To boost the incentives market, in 2013, the Greater Bogotá Convention Bureau was also established. The expanded bureau will work with the regions surrounding the capital to increase the offerings in adventure, ecotourism and rural tourism.

Cartagena, the second most popular destination in the MICE segment, benefits from its cultural charm and appeal. In April 2014 it hosted the International Council of Shopping Centres Awards, which attracted more than 1000 local and international attendees.

Medellín has also benefitted from strong efforts by local governments to increase the city’s competitiveness. The endeavours appear to be paying off. In early 2014 Medellín hosted the World Urban Forum. With 25,000 attendees and an investment of about $5m, the event was one of the biggest the city has hosted.

Despite consistent growth, the segment still faces challenges. According to Cajiao, the cohesion and communication between the public and private sectors needs to be strengthened with longer-term strategies and a well-defined framework for partnerships, which can transcend political terms.

Medical Tourism

Another industry registering stable growth in Colombia is medical tourism. The country seems to be laying the groundwork to attract more medical tourists, as the industry expands globally. According to the Productive Transformation Programme’s (Programa de Transformación Productiva, PTP) annual report, the industry posted growth rates of 64% and 61% in 2012 and 2013, respectively, while revenues from direct sales reached $215m in 2013, a substantial increase from $130m in 2012. Attracting more than 50,000 medical tourists in 2013, Colombia has become one of the top medical tourism destinations in the region (see Health chapter).

Colombia’s proximity to the US and its more affordable procedures – approximately 60-70% less expensive than North America, according to Proexport – are both significant advantages for the segment. Moreover, a ranking of the best clinics and hospitals in Latin America in 2013 by América Economía, a Latin American business publication, placed 16 of Colombia’s clinics among the 45 best medical facilities in the region.

For the past few years Colombia has been working to have its hospitals and clinics meet international operating standards. As of early 2014, three hospitals had already been certified by the Joint Commission International (JCI), and a number of other establishments were under review. According to Proexport, the JCI is in the process of planning alliances between players in the health and tourism sector to create travel packages that will combine medical treatment, lodging, food, transfers and tours, suited to the complexity of each type of medical treatment.

Strategies

To promote growth in the industry, the PTP established a strategic plan in 2009 aimed at raising international competitiveness. In the same year, the stamp “Colombia is health, exporter of health and wellness services” was created as part of a partnership between the Health Chamber of the National Association of Entrepreneurs of Colombia, the PTP and Proexport, with the support of Marca País, the redesigned country brand. The endorsement serves as a certification that establishments meet the established quality requirements to serve medical tourists.

So far, 20 clinics and hospitals have been endorsed with the stamp, and the goal is to expand the number of institutions working under the initiative. Also part of the PTP plan is a new evaluation tool for the hotel industry, which was introduced in early 2013. The tool consists of an online survey designed to help facilities determine whether they meet quality standards to attend to medical tourists, and in the process, help identify weaknesses and establish strategies to improve the role of hotels in the industry.

Four cities – Bogotá, Medellín, Bucaramanga and Barranquilla – have been particularly dynamic in the industry, having seen an increase in the number of clinics specifically focusing on medical tourists. Bogotá has become a main destination, given its advantage in transport connectivity. According to Londoño, medical tourism now represents 7.2% of total visits to the city.

Colombia is increasingly becoming known for aesthetic procedures. According to Patients Without Borders, it has become the preferred regional destination for chin and breast implants. An estimated 240,000 plastic surgery procedures are carried out in the country every year. Medical tourists coming to Colombia are also looking for services such as liposuction, rhinoplasty and orthodontics, as well as more mainstream medical procedures like cardiology, according to Proexport.

The majority of patients come from the US, followed by Spain. A significant portion of these are Colombians or relatives and friends of Colombians who reside abroad and choose to travel for their procedures.

Ecotourism

Another segment with demonstrated potential is ecotourism, given Colombia’s immense biological diversity. The country’s 56 national parks that are managed by the National Natural Park System ( Parques Nacionales Naturales, PNN) span a total of 12.6m ha, 12% of national territory. Featuring diverse scenery from Amazonian rainforests to Andes Mountains and Pacific Ocean and Caribbean Sea coastlines, Colombia’s network of parks suits a range of tourist profiles. In recognition of its potential, Colombia was selected as the best ecotourism destination at the World Travel Fair in May 2014 in Shanghai. Visitor numbers to national parks have been increasing consistently, demonstrating the growing interest in the ecotourism segment. According to MICT, visitor numbers reached 878,748 in 2013, up from 678,510 in 2010.

To promote the development of ecotourism, the PNN began implementing the ecotourism Strengthening Programme in 2004. A part of this consisted of conducting a series of concessions to partially tender lands to private national operators and hotel chains. Under this scheme, the PNN is entitled to 10% of the operator’s income and retains control over the area, ensuring the sustainability of activities. Following the concession period, the largest operator in the country, Aviatur, established operations in a number of national parks, including Amayaco, Gorgona and Tayrona. But the projects have faced a series of challenges.

Aviatur’s Tayrona concession on the Caribbean coast saw its contract terminated early in 2013 after a judicial proceeding determined that the operator had not sufficiently consulted the indigenous communities living in the park. Thai luxury hotel chain Six Senses also began construction of one eco-hotel in Tayrona, but had its licence revoked in early 2013 for the same reason. The hotel chain is now set to open a hotel in Cartagena in 2016. Three of Aviatur’s other concessions also experienced difficulties that were linked to operational challenges and adverse weather conditions in the area.

Despite the potential in the ecotourism segment, the lack of clear legislation governing concessions has resulted in significant setbacks for operators, making it increasingly clear that future growth will depend on the government’s ability to establish a clear framework that protects operators, indigenous communities and natural assets to an equal extent.

Outlook

After years of social and political instability, Colombia seems ready to turn over a new leaf and embrace a post-conflict era, one in which the tourism sector plays an important economic role. Recent advances in the overall security situation, along with added institutional support, point to continued growth. The WTTC estimates that the sector will grow 6.2% in 2014, on the back of overall stable economic growth and the social importance the sector is gaining. Major investments in a range of segments will allow the country to capitalise on the improving conditions.

If indeed peace is negotiated, a possibility enhanced by the re-election of President Santos in June 2014, Colombia will have one more asset to add to its list of tourist attractions – the appeal of a nation recovering from a violent past and on a mission to turn the page.