Peru's hotel industry
Killing the tourism goose

Feb 14th 2008 - From The Economist print edition

Between nimbyism and price-gouging

LIMA- INCA ruins, splendours from even-older cultures, Spanish colonial towns, pristine jungles and good food: Peru has much to offer the tourists who are flocking there in ever-greater numbers. But if it is not careful, its tourist industry risks becoming its own worst enemy.

Having doubled so far this decade to 1.8m last year, tourist arrivals were up a further fifth in January compared with the same month in 2007. Adding to hopes of a bumper year of visitors, two big summits--one involving European and Latin American leaders, and the other of APEC, a group of Asian and Pacific economies--are to be held in Lima.

Not surprisingly, the government wants to stimulate hotel building and other tourist infrastructure. But not everyone is happy with the way it is doing so. Local authorities in Cusco, the former Inca capital, shut down their city on February 7th in protest at a new law that would allow private investment near cultural heritage sites. Trains to Machu Picchu, the spectacular Inca site which attracts more than 800,000 visitors a year, were halted.

Hugo Gonzales, who heads the regional government, claims that the law would permit the privatisation of archaeological sites, including Machu Picchu. That seems unlikely. But others fret at frenzied building that might disfigure the very places the tourists come to see.

Congress voted to repeal the law on the eve of the protest. Officials insist that the law contained safeguards against irresponsible development, and worry that its repeal will hinder efforts to attract tourists to less-visited regions and so ease the pressure on Machu Picchu.

What is not in doubt is that Peru needs more hotels. Salivating at the trade generated by preparations for the summit meetings, some less-than-luxurious establishments in Lima have raised their rates up to tenfold (to $800 a night), prompting the government to file a complaint to the competition watchdog. Carry on like that and the tourists will soon go elsewhere.