Tourism industry has mixed opinions of Nicaragua’s Grand Canal project
With the backing of China and Russia, the Nicaraguan government is expected to begin construction of the US$40 billion Nicaragua Canal in late 2014. The 286 kilometre canal will connect the Caribbean and Pacific coasts of Nicaragua, traversing Lake Nicaragua along the way, and will directly compete with the Panama Canal in shipping. The canal is expected to bring overall economic growth to the country, but many fear that it will negatively affect the tourism industry. For example, visitors may be deterred by the large-scale construction of the project, which will create an unattractive landscape, noise and traffic. After the canal is completed, the presence of large ships in Lake Nicaragua, where the popular tourist spot, Isla de Ometepe, is located, may deter visitors. Furthermore, the canal may pollute and damage delicate ecosystems in Lake Nicaragua and protected rainforests, preventing development of eco-tourism. However, some argue that the canal may be a significant tourist attraction similar to the Panama Canal, where its main visitor centre in Miraflores, receives almost 800,000 visitors annually.
Lack of bilingual workforce inhibits Nicaragua tourism growth
The US is Nicaragua’s second leading source country after Honduras, accounting for 21% of visitors in 2013. According to the Instituto Nicaragüense de Turismo, (INTUR), the US, Canada and Europe combined accounted for 30% share of arrivals to the country in 2013. Furthermore, many visitors from European countries do not expect employees to speak their language and therefore default to using English. For this reason, demand for bilingual travel retail employees and accommodation and foodservice staff is high. However, the Asociación de Turoperadoras Turísticas de Nicaragua estimates that less than 25% of total tour guides are proficient in English, while the Asociacion de Pequeños Hoteles de Nicaragua (HOPEN) notes that less than half of those who apply for jobs in hotels or foodservice can confidently speak English. Not only are some potential visitors hesitant to visit the country due to the lack of bilingual services but businesses also face higher costs due to the scarcity of bilingual employees, who charge premium for their services. As a result, some industry stakeholders argue that those who attend university tourism or hospitality programs require basic proficiency in English to graduate.
Nicaragua seeks greater tourism expenditure via high-end visitors
Nicaragua is considered to be one of the “cheapest” destinations for travel in Central America, which is a key draw for visitors. Tourism expenditure is the lowest in the region at US$41 per day, less than half of daily spend in neighbouring Costa Rica according to the Tourism Secretary of the Central American Integrations System (SICA). While the government seeks to attract more visitors in terms of volume, it is also wants to attract visitors with higher spending habits. However, the tourism industry currently lacks a wide range of high-end offerings that would attract greater spending. Only 100 of the 750 registered hotels are ranked three to five stars and the accommodation industry just added its first five-star hotel with construction of the Mukul luxury resort in 2013. Furthermore, the country lacks direct air connections, which further limits development of high-end tourism. The government and other stakeholders began to increase investment to attract high-end visitors over the review period, but further development in accommodation and air transportation will be necessary for success.
Incentives key to tourism industry development
In order to bolster tourism in the Nicaragua, the government and INTUR annually reward monetary incentives and tax breaks to small and medium businesses via the Law 306, which was passed in 1999. Aspects of the law, which has been named one of the most investor-friendly tourism laws in Latin America, include: investors do not need to pay real estate taxes for up to 10 years, 80%-100% income tax exemption on rental property, sales tax exemption for products purchased for tourism projects and an exemption on the 1% transfer tax levied on real estate attractions. In 2013, US$51 million in incentives were approved for 34 projects including 8 hotels, 10 investment plans and 5 for foodservice and cultural tourism sites. Five projects also include road infrastructure building and repair.
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