CHAPTER 7: TOURISM BUSINESS IN BELIZE 7.1 Introduction Direct government investments are commonly undertaken to lead the private sector in a certain direction. In some instances the government opts not to become financially involved in an industry, but rather give companies additional investment incentives. Sometimes these reductions are higher for pioneer or peripheral areas where the government would like to see more tourism development occurring and lower for investments in the major urban and economic centers. (Opperman and Chon, 1997) The Government of Belize is fully committed to implementing the necessary economic programmes and policies that will create an atmosphere conducive for local and foreign investment in the Tourism Industry. Special investment incentives and concessions have been streamlined to facilitate the enhancement of the tourism sector. These incentives have already produced significant economic growth and many positive indicators arising out of these initiatives over the past years. The Government is also keen on developing new partnerships and alliances with both local and foreign investors. This commitment, accompanied by other effective initiatives, makes Belize a place with golden investment opportunities. 7.2 Why invest in Belize s Tourism Sector In 2004 consultants from Jamaica did an analysis report on the important industries in Belize. The Consultants analysis identified tourism as the number one industry in terms of growth potential and for attracting additional investments. Growth in the tourism industry would also drive growth in other industries/business sectors such as agriculture, craft making, and services that support or complement tourism. (Jamaica Consultants, 2004) In terms of priority products/industry for investment the consultants determined that potential of investment in the tourism sector remains high. There are many reasons why investors 74
should choose Belize as their investment location over other possible competitors in the Caribbean or Central America. Below are the major reasons why Belize remains an attractive place for doing investment in the tourism sector: Relatively large land mass relative to population which means that land is generally available for production/development. Long history of political stability which minimizes country risks to investors who would not want their investments to be adversely affected by political instability Blossoming offshore industry Ideal geographic location to access major international markets Investment climate ripe with potential Bilingual (English and Spanish) Strong and stable dollar Sub-tropical climate all year round 100% ownership of business Freedom of repatriation of capital (profits, dividends, etc.) Attractive fiscal incentives Modern communications systems Modern banking system Easy access to land for development Competitive wage rates Relatively safe social environment Rich ethnic mix (harmonious) Excellent tourism opportunities o Largest barrier reef in the hemisphere o Numerous Cayes with white sand beaches and pristine waters o Mayan cultural sites o Tropical Rainforests 75
7.3 Investment Environment for Tourism Business Operations According to Hall (2000), governments can stimulate tourism in three ways, which would stimulate business operation in the industry. These three ways are: 1. provide financial incentives, 2. sponsor research and 3. engage in marketing and promotion. In Belize, it is better to build the economy, that is, invest in small businesses which in turn builds employment and develops the economy better and faster. When governments ventures in too large investments, the money tends to only trickle down to the lower class of the economy. Thus by developing small businesses, more local people get the chance to be in trade, market value etc. (Opperman and Chon, 1997) With this in mind, the government has instituted several investment programmes offering incentives for doing business in Belize. The incentive programmes described below are those which investors can utilize for business in the tourism sector. 7.3.1 Fiscal Incentive Programmes A Fiscal Incentives Act addresses the needs of Small and Medium Enterprises (SMEs) by offering investors tax holidays, duty exemptions, and cost effective qualification and application requirements. Statistics revealed that between 1998 and 2005, tourism-related businesses benefiting from this SME incentive programme provided some 2,478 job opportunities and some US$175 million in investment. (Beltraide, February 2006) Other examples f such programmes are the Export Processing Zone Programmes, the Gaming Programme which is relatively new in Belize, but is becoming a main tourist attraction in the country. Presently there are 3 functional casinos within the country with one more on the verge of becoming operational. These fiscal incentives are an advantage to investors because tax and duty exemptions can provide a major cost advantage relative to the investor s domestic market or other competing destinations. In addition, the qualification and application requirements are clearly laid out so that potential investors have a good idea of what they will have to deal with before investing in Belize. 76
In addition to the fiscal incentive programmes that aid investors, the Minister of Tourism, Godfrey Smith, announced earlier this year(2007) that the BTB received US$833,000 for Industry Development. This money was provided by the Multilateral Investment Fund as they signed on to a project commitment with the BTB and the BTIA for capacity building for micro and small businesses in the tourism industry. Mr. Smith stated that it is money earmarked for the small vendors and operators who want to get in the tourism industry, particularly the cruise tourism industry. It is projected that this scheme will benefit 500 micro and small businesses and community based organizations in improving their services and product quality. It is important to note that such initiative aims in combating the problem of low rating for cruise shipping business in terms of investment, as it is believed that the industry is controlled on the supply-side by the large international cruise enterprises. As cruise tourism continues to escalate the demand for increased transportation for such passengers to and from land only highlights a sufficiently lucrative opportunity for local investors to respond to and satisfy the demand. 7.4 Tourism Business Opportunities Today Despite the economic attractiveness and the general factors influencing FDI, it is important that Belize implements promotional initiatives to attract investors, especially in the priority industries/sectors. This is necessary to provide Belize with an edge or even place or keep the country in the minds and hearts of potential investors. This is particularly important when one considers the increased global competition that is taking place between countries, states or cities to attract the limited quantum of FDI. In a nutshell, good marketing is critical. Recently the government of Belize has been calling for investment in a luxury hotel. There are about 557 hotels in operation in Belize (BTB, 2005), with the majority being small scale hotels, lacking luxury of international standards. With the increase in tourist arrivals to the country, the country is in need of a hotel that will be able to accommodate large groups of tourists coming in. This would eliminate the need for such tourist types to split accommodation among different hotels scattered in the city. 77
With respect to tours and tour guide services, additional investments in ground transportation, attractions, restaurants, new rest area facilities as well as upgrading of existing facilities will be required to meet the growing demand. However, the Jamaican Consultants recommend that first preference be granted to existing providers to improve their service rather than expose them to more competition in a market that is not yet sufficiently large to profitably sustain numerous service providers. Wide-scale investment attraction initiatives are therefore not considered necessary at this stage, however as the industry develops technical assistance and investment in training will prepare the existing service providers for the advent of new investors. Tourism does not produce a singular product. Rather it involves a tremendous diversity of products. Tourism products - satisfactory visitor experiences - are quite in contrast to goods and services produced by industries. Tourism products and their foundations are far more perishable than are manufactured products. For example if a large capital investment is made in resort hotels, marinas and theme parks and the travel market decides to go somewhere else, it is costly if not impossible to move the physical plant. Thus tourist businesses at the planning stage are obligated to consider not only potential profits but also the many implications of their decisions - on the environment, on competition, the relevance of other businesses, and on the infrastructure and social values of a community. (Clare Gun, 2002) 7.5 Possible barriers to the development of business in the tourism industry Belize remains a relatively stable growing economy with many advantages that provide the country with a competitive edge for doing business. However, there are some issues that may render certain industries uncompetitive to investors. These include the small population size, hence unattractiveness as a market or supplier of labor; the similarity of natural resources and general economic activities to those of neighboring countries, which indicate that Belize will need to be more aggressive in its efforts to attract FDI in tourism and to find new export markets for its tourism product. 78
7.6 Conclusion Belize is a politically stable country, which is a distinct advantage compared to some of its neighbors. When considering the question of welcoming foreign investment, transparency and predictability are two important factors that must be considered. The experiences of existing investors in Belize as well as those who may have attempted investing are as important as the promotional impressions of BELTRAIDE and other government agencies. The tourism market is not only very large but is projected to grow substantially over the next decade. This augurs well for Belize, which has great potential and natural advantages in providing these services. The fact that Belize is relatively close to the dominant U.S. market is also a major advantage. From a demand perspective, Belize is well located and has the product mix to significantly grow its tourism industry. This industry is clearly well suited to being promoted for investment and is naturally export- oriented. In this regard, businesses must be adventurous and grab the opportunity to start operations in the tourism sector. In the end, someone has to cater to the needs of the tourists and, as discussed in this chapter, Belize provides a good opportunity for such, and the time to get involved is now. 79