Attracting 20 million visitors to a constantly growing tourist destination, such as the Dominican Republicis a task that will require great investments to keep the industry’s offering varied, develop new hubs and, above all, build new hotel complexes and upgrade existing ones.
The sector has achieved the internal dynamism and international positioning that would allow it to capture that goal of visitors in the future, but to do so, it needs to maintain the tax exemptions Within the current scenario of reforms, in the opinion of the Association of Hotels and Tourism of the Dominican Republic (Asonahores).
The entity estimates that if the Tourism Development Council (Confotur), the body responsible for managing investment projects that apply to Law 158-01 on the Promotion of Tourism Development, the foreign investment Direct investment in the sector could fall by up to 50%. This would mean $7 billion less in foreign exchange earnings from the tourism.
“We agree on the need for the Government to develop the goods, services and infrastructure for which it needs the reform, but we understand that, by eliminating the law of competitiveness of the sector, we subtract from the State’s income,” said the president of AsonahoresDavid Llibre, during a visit to Free Newspaper.
780
Amount, in millions of dollars, that the State would stop collecting in tax revenues without exemptions, according to estimates by Asonahores.
A drop in foreign hotel investment would translate into a decline in the room offer so that the tourists overnight in the country, which could reduce passenger arrivals by up to 30%.
Also, if the foreign capital If the tax rate stops flowing, about $780 million in state revenues would be compromised and, in the long term, the Gross domestic product (Nominal GDP) of the sector at $4 billion.
The example of Puerto Plata
For his part, Simon Suarez, former president of the union, recalled that Puerto Plata is an example of how the development of a tourist pole can be paralyzed by the lack of incentives. He said that this province received up to 34% of the total tourists foreigners in 1996, and fell to just 5% in 2023.
“The dismantling of the positioning of Puerto Plata “It was so fast downwards that it has not been possible to reverse it yet,” he said, indicating that the province is already included among the destinations to which the incentive law applies, but that it will cost a lot to return to regain its prominence as tourist pole.
Hotel executives understand that, at one time, this province was considered a “mature” destinationwhich is why his exemptions were removed.
This, instead of maintaining he development of the sector in the demarcationslowed it down compared to other destinations in the country, which did turn out to be more attractive due to the tax exemptions that I was counting on.
The tourism sector is usually referred to as amature economic activitywhich can continue its growth without help from tax benefitsHowever, Suarez understands that this concept applies to industries or agriculture, but not to tourismdue to the nature of this productive segment.
“Let me explain: A mining activity matures when the mine ends. The agricultural sector matures when there is no more land to sow. Tourism has none of these limits, the concept of maturity does not exist, because we have the entire country to develop.”Past president of Asonahores.
To this, Llibre added that it is estimated that for every two million tourists additional that the country wants to add, would require around 5.6 billion more foreign investmenta capital that would be “much more difficult” to attract without the tax exemptions to new projects.
Currently, the cost of entry to the Dominican market, the cost of construction and the fare of an air flight are taller than in other countries Competitorsthe executives noted.
Panorama of uncertainty
The structural reforms in progress have already generated uncertainty in the investors.
“There are projects that are already being stopped, or that have not made a decision on whether they are going to invest or not,” stressed the vice president of AsonahoresAguie Lendor, who assured that a new hotel project can take up to four years from its submission until it begins operations.
The reputational crisis faced in the sector in 2019 and the Covid-19 pandemic in 2020 have slowed the growth of new hotel projects In the last five years, losing competitiveness compared to destinations such as Quintana Roo, in Mexico, which has maintained an annual growth of 5%.
Hoteliers are insisting on a land use plan that guarantees the regulated growth of hotels in the country, to prevent infrastructure development without taking into account the impact it would have on the communities and natural resources of the area in which they are located.
This plan would regulate aspects such as the height that a hotel should have depending on the density of the area, as well as the management of water, electricity, garbage collection, transportation, security of the area, among other factors.
Law 368-22 on Territorial Planning was approved in 2022, and establishes the use of coastal-marine land for tourism purposes, as well as the types of land and their uses.
