Strong dollar hurts tourism but poor planning, lack of promotion also contribute; Cuenca is a case in point

Aug 10, 2017 | 49 comments

Why is Ecuador’s tourism industry languishing while neighboring Peru and Colombia attract growing numbers of local and international travelers?

Government tourism promotion is lacking, some say.

The Quito-based Provincial Chambers of Tourism (Fenacaptur) has released the results of a study that place much of the blame on the exceptionally strong U.S. dollar but also show that tour agencies, hotels and restaurants charge too much. The study also faults the government for failing to promote the country at international tourism fairs.

Among specific findings is that 5-Star hotels in Quito charge almost double those in Bogota, Colombia; that tours organized by registered travel agencies cost 60% more in Ecuador than in Colombia and 25% more than in Costa Rica; and that the price of a meal in a good restaurant is 40% higher in Ecuador than in Peru. In fact, the average price of a tour in Ecuador ranks second only to one in Chile in all of Latin America, and the average cost of a meal in Quito ranks third, only behind Buenos Aires and Lima.

Poor planning has hurt tourism in Cuenca.

Holbach Muñeton, president of Fenacaptur, also blames the government is doing a poor job promoting Ecuador. “In 2015, it spent almost $4 million to promote the country at the U.S. Super Bowl football game but it only attended eight international tourism fairs. Last year was even worse and it only attended three. We should be attending at least 50 a year, like Costa Rica and Peru do.”

The study found that in-country air travel was much more expensive in Ecuador than in other Latin American countries. “We are not competitive in this market either,” Muñeton says, blaming the 2014 elimination of the jet fuel subsidy.

According to some tourism experts, however, Ecuador businesses that depend on tourist dollars mostly have themselves to blame for the slump.

“You can only blame the strong dollar to a certain extent,” says Fidel Fajardo, a tourism professor at the University of Guayaquil. “Yes, the dollar has gained 25% and 12% against the Colombian and Peruvian currencies since 2013 but this does not justify the price differentials we are seeing on such services as lodging, food and travel. Tourism businesses need to get realistic and make adjustments to their pricing if they want to get back in the game.”

Fajardo says that poor planning and research by tourist-related businesses is also a major factor for poor growth. “The industry needs to become more sophisticated and more saavy,” he says. He points to Cuenca as a case in point.

“International tourism boomed in Cuenca from 2005 to 2013,” he says. “It was growing 20% year but by 2012 and 2013, the strong dollar was beginning to take a toll and the smart tour agencies and hotel owners realized that the rate of expansion was not sustainable. The problem was that many investors were not so smart and were not watching the trends.”

According to Fajardo, there was a building frenzy of new hotels and restaurants from 2011 to 2014 and the resulting over-capacity is now hurting the city’s entire tourism sector.

“Today in Cuenca, you have a 30% occupancy rate in the hotels and hostals because of poor planning and you have dozens of empty restaurants,” he says. “The local hotel organization is begging the city government for help, blaming Airbnb owners for their problems instead of bad decisions made by its members.”

Fajardo agrees with Fenacaptur that the federal government should do more to promote Ecuador at international fairs. “The national tourism ministry has fallen down on the job, although much of the reduction in promotion is because of budget cuts.”

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