Costa Rica Hotels React to New Exchange Rate
Costa Rica hotels are set to suffer from the new dollar-colon exchange rate in an industry where the majority of gains are in dollars and expenses in colones. Prices for hotel stays for 2008 were set back in the first quarter of 2007, and would be difficult to change considering all of the promotional material that has already been printed and distributed.
To combat the loss of finances, several hotels have still decided to up their prices for any bookings made after the exchange rate was altered. The Grupo Marta, for example, has upped prices 10% starting Nov. 27 for their hotels which include Best Western Irazú, Best Western Jacó Beach, Best Western Downtown, Hampton Inn & Suites and Garden Court & Casino.
It is expected that other hotels will follow in their footsteps if the exchange rate holds steady, making vacations for North Americans more expensive. In situations where the per-night rate cannot be raised, travelers may see increases in the price for hotel services and products such as food and room service. However, others have said that they are dedicated to not letting the change affect their customers.
Hotel reservations that were made before the change in the exchange rate will not be affected by any changes in the pricing policy made by hotels.
The exchange rate was changed by the Central Bank of Costa Rica on Nov. 21. The average sale of colones went from 516 to the dollar to 496. A full hotel with 50 rooms, for $100 each, would be taking in about 100,000 colones ($200) less per day with the new rate, which equals monthly losses of $6,000. These loses will likely be much higher for more expensive or larger hotels.
| Written by Claire Saylor |  |
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Filed under: Costa Rica News on December 4th, 2007
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It is too bad that Grupo Marta is taking advantage of the change in exchange rates to raise their prices by 10% WHEN THE ACTUAL LOSS DUE TO EXHCHANGE RATE CHANGES WAS ONLY 4%.
Our company hosts property tours for Americans wishing to purchase second homes, rental properties, vacation homes and retirement homes in Costa Rica and this move will only increase the costs to our clients, resulting in a decrease in demand. In a country where the number one source of income is tourism, this is a risky move. This move will fuel inflation as others in the hotel industry move to match the rate and then others providing tourism related products and services follow suit. Tourism is an elastic product, meaning an increase in price brings a decrease in demand. People will simply go elsewhere as Costa Rica becomes more expensive, much as we have seen in the states as we are now seeing a huge increase in European tourists visiting to take advantage of the change in the value of the dollar. Costa Rica relies on tourism for the largest part of their national income, this will cause an inflationary spiral upward and will ultimately hurt the nation as a whole. Hotels in Costa Rica are already overpriced for the quality since demand has increased rapidly as tourism has taken off. Add to the price increase the hotel IVA tax per room and the increase will actually total nearly 12%. Costa Rica needs a tourist development council to advise them on moves like this, the US is their main source of tourism and the effects of a soft housing market are already hurting tourism outside the country. Be aware that moves like this can have major effects on an economy based on tourism. Furthermore to make changes shortly after the change in value of the dollar, will only result in a price increase even if the dollar exchange rate improves in the future. When was the last time you saw a hotelier lower the price when the exchange rate changed favorably for them?