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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

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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

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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.

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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.

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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.

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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.