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PRHTA researching effects of hikes in utility, gasoline costs on P.R. tourism

Local tourism also is feeling strong competition from the D.R. for the more upscale U.S. market

By Mariella Perez Serrano of Caribbean Business

August 25, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

In response to recent cost-of-living increases on the island, the Puerto Rico Hotel & Tourism Association (PRHTA) is conducting research on the effects of increased rates for water and electricity and the repercussions for the local hotel development industry, PRHTA President Wilhelm Sack said.

Sack explained that before the increase in the cost of water, electricity, and gasoline, Puerto Rico’s tourism industry already was facing difficulties obtaining the required government-issued operating permits. "The slow permit process has been making it more difficult for any hotel development project to begin construction on the island. Now, it is simply getting more difficult, with new legislation, increasing prices for gasoline, and the electricity and water rates," Sack said.

"As is, the cost of operating hotels in Puerto Rico is higher than in most [Caribbean] islands, and the development process takes more time because we have to abide by local and federal rules and environmental regulations," said Puerto Rico Tourism Co. (PRTC) Executive Director Terestella González Denton.

Sack added, "Not only is it harder than on other islands, where costs are lower, but also here in Puerto Rico, the population isn’t very tourism-oriented. They don’t seem to understand the importance of tourism for the economy."

Jorge A. Rodríguez, executive director of the Puerto Rico Aqueduct & Sewer Authority (Prasa), met with PRTHA members in mid-June and explained the reason behind the imminent increase in water rates. The utility no longer will receive a $400 million subsidy from the local central government, forcing Prasa to raise its rates.

"We are hoping those who are interested in either visiting Puerto Rico or investing locally aren’t discouraged by the situation, but investors always look at the overall operational cost and the destination’s economic situation," said Clarissa Jiménez, PRTHA executive director.

Jiménez added there are other situations negatively affecting the island’s tourism industry. She pointed to Caribbean destinations such as the Dominican Republic (D.R.), now competing against Puerto Rico for the first time for the more upscale market. "The D.R. used to be a mass-market destination, but now it is moving toward becoming an upscale destination, with resorts such as the Ritz-Carlton and Cap Cana in Punta Cana. The upscale market used to be Puerto Rico’s. Not only are we competing against more hotel rooms on other islands, but also similar hotels with lower prices," she noted.

Tourism consultant Carlos A. Diago, who is also a tourism professor at Universidad del Sagrado Corazón, said the effects of the island’s temporary increases in water and energy costs will be transferred to consumers. Despite predicted increases in utility costs to hotel owners and local and foreign visitors, Diago believes Puerto Rico’s diversified tourism market will keep tourism activity alive.

"There exist other factors that make Puerto Rico an attractive tourism destination. This island, as opposed to the rest, has much more to offer than just sun, beaches, and water," said Diago, who also pointed out local tourism will be most affected by the rise in operational costs. "But, I also believe foreign tourists will absorb the cost with no real impact on the island’s overall tourism industry," Diago maintained.

This Caribbean Business article appears courtesy of Casiano Communications.
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