Ecuadorian Tourism – Full of Opportunities

November 15, 2016

Imagine waking up in a tropical rainforest and taking your breakfast surrounded by the majestic flora and fauna of the Amazon. Then you hop in your car and drive to one of the world’s highest mountains, where you have lunch on a snowy plateau. Back in your car you head west and make it to the coast just in time to watch the famous Pacific sunset as you eat your dinner. It might sound unrealistic but it is doable – although only in Ecuador. So many diverse landscapes are crammed into this tiny country and we haven’t even mentioned the Galapagos Islands yet.

Admittedly fitting all those landscapes into one day would involve too much driving for most people’s taste. But for time-pressed tourists on the classic two-week holiday, Ecuador’s compact nature allows them to see much more than in Latin America’s larger countries. Size isn’t the only factor. It also helps that Ecuador has excellent transport infrastructure. In the recent World Bank Competitiveness Index, Ecuador ranked first place in Latin America for road quality, airports and marine infrastructure.

The investment case

In short Ecuador has the essential ingredients to become a top tourist destination. However, the government, which has made tourism a strategic industry because of the positive development impact it can have for remote communities, wants to encourage private-sector investment in tourist infrastructure such as resorts and hotels. As a result it has unveiled a package of incentives to stimulate investment in the sector.

The first is tax stability. Investors in a new tourism project receive have a guarantee that no additional taxes will be levied directly on their business for the next 30 years. There is also a streamlined online system that allows international investors to create a company in just seven days. Finally there are lots of general advantages that suit a tourist business. Electricity costs of 6 cents (US) per kilowatt hour are among the lowest in the region, while water, which is another big cost for hotels, is also cheap. Meanwhile a minimum wage of $366 – plus pension contributions and Christmas bonus – means the workforce is competitive.

Of course a tourism project doesn’t just depend on conditions inside the country…

Of course a tourism project doesn’t just depend on conditions inside the country. Investors also need to judge the external appetite. Here the situation seems favourable. Latin American tourism in generally is regional. According to the UN World Tourism Organisation (UNWTO), around 80% of the tourist journeys made in Latin America begin and end in within the region. So the most important factor in the tourism boom is increased local wealth. Over the last ten years, Latin Americans have grown richer and richer, with 80 million being lifted out of poverty. Indeed the UNWTO says that, over the next decade, Latin American international arrivals will grow by 4.4% a year – twice the rate of developed economies.

The UNWTO’s analysis is certainly being borne out in Ecuador. Over the last four years the revenue earned by tourism in Ecuador has increased by 60% – the industry is booming. Looking forward the future looks bright too. Half of Ecuador’s visitors come from just three markets; Colombia, the US and Peru. All three economies are projected to perform strongly next year, meaning that visitor numbers will remain strong.

Lifestyle tourism

Ecuador’s tourism opportunities aren’t just connected to the country’s amazing landscapes – its way of life also attracts visitors. This is most noticeable in the retirement market. Ecuador’s low cost of living, friendly people, exquisite gastronomy and picturesque settings have led to it frequently being voted the top destination for retirees in the world by readers of specialist magazine, International Living. The fact that Ecuador’s economy is dollarized makes it particularly attractive for retirees that have fixed pension payments and want to avoid the extreme currency fluctuations associated with other Latin American currencies.

At the younger end of lifestyle tourism has been the big growth in sports visitors. Ecuador’s beaches have some of the best surf in Latin America, so it frequently hosts international events. In recent years that has been supplemented by a growing trend for extreme endurance events, such as Iron Man, that look to test participants in Ecuadorian conditions. Baños, a mountain city that is known as the ‘gateway to the Amazon’, is the hub of extreme sports in Ecuador.

Ultimately investors looking at Ecuador’s tourist sector are as spoilt for choice as the tourists themselves. Every project has to be evaluated on its individual merits but it is clear that the general trend for Ecuadorian tourism is positive. Of course investors will want to scope out the country and the sector for themselves before committing cash. That said, experiencing Ecuadorian tourism as part of your research will probably be the most enjoyable week’s work that you have done all year.