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The cost of terrorism. Experts also concede that ecotourism, like other leisure activities, is a quixotic business. Give a tourist a good reason not to go on vacation—such as an economic downturn or the fear of airline terrorism—and he will stay home. Tourism dropped 10 percent in the wake of the Sept. 11 terrorist attacks in the United States, estimates Scott Wayne, of the World Travel and Tourism Council. “We’re in a new environment,” he told participants at a Washington, D.C., seminar. “We see clearly the perishability of leisure travel. A traveler is perfectly willing not to take the product off the shelves, especially if the product happens to be travel to developing countries.” He said that the industry is scrambling to deal with what he calls a “New World order” by putting safety and security at the top of the priority list.

But the effects are hard to predict. Costa Rica saw tourism drop 11 percent in the wake of the Sept. 11 attacks, reported Finance Minister Alberto Dent at a recent meeting at the IDB. He said his country was eager to participate in a new program financed by the IDB’s Multilateral Investment Fund to improve airport security. On the other hand, reports indicate that Brazil experienced an increase in tourism, in the wake of the terrorist attacks, both of nationals for whom foreign travel has become too costly, and of foreigners, who believe Brazil is less likely to be a terrorism target than other countries.

Can you get rich on ecotourism? Another set of problems arises when an entrepreneur needs funds to start a project. “Financing is clearly a tremendous concern,” said Ed Sanders, director of Eco Tourism International, a U.S.–based consortium that works with governments and private groups, at a recent visit to the IDB. The major problem is that ecotourism is inherently a small-scale business. The sector is dominated by tiny businesses that hawk their jungle and river tours on hand-painted signs along the street or next to remote landing strips.

Even if they are financially successful, ecolodges cannot be large enterprises, because then they would no longer be offering ecotourism. “It’s become an ecotourism mantra that lodges can’t have more than 15 rooms,” Donald Harrison, tourism professor at George Washington University told participants in a recent seminar in Washington, D.C. “Well, that’s fine if you can charge $800 a day.”

For all these reasons, many experts believe that ecotourism can never be a big moneymaker. Only about 30 percent of all ecotourism enterprises are believed to be in a break-even range, and only 17 percent make a 20 percent return on their investment, according to Sanders. Half of all such enterprises have less than 30 percent occupancy in the off season.

For investors with an idealistic mission, such problems are troublesome but only add to the challenge. Brooks Browne, president of Environmental Enterprises Assistance Fund, a nonprofit group, wryly observes that only one out of three ecotourism investments his organization has made is moderately successful, and two are “barely breathing.” Yet he remains a staunch ecotourism supporter.

These are not things that potential investors want to hear, even those who believe in the field and want to give it their support. One of these is the Inter-American Investment Corporation (IIC), the private sector arm of the IDB Group. IIC Finance Division Chief Jorge Roldán, who is also a TIES board member, has been looking for ecotourism investment opportunities for years.

“It’s been frustrating,” he said during one of the ecotourism workshops he and the IDB’s Juan Luna-Kelser have organized in the last few years in Washington, D.C. “For the IIC to approach ecotourism as an investment opportunity, we can’t be talking about grants,” Roldán said. “The ecotourism firm must operate as a real business. Just like any other tourism enterprise, the bottom line means achieving acceptable occupancy rates.”

Conceding that the IIC will not be taking an equity position in an ecotourism enterprise anytime soon, Roldán is now looking for ways his institution can provide support through loans. But there are problems here as well. Typically small and fragile, ecotourism enterprises generally cannot offer guarantees beyond perhaps their title to some land or a government concession. Moreover, the administrative cost of managing a small loan is comparable to that of a large loan, reducing its attractiveness still further. Nevertheless, Roldán hopes that an IIC lending program will overcome these obstacles, although he admits that normal market-based criteria might have to be adjusted to accommodate the sector’s realities.

On the subject of financial success, ecotourism advocates must be realists as well as idealists. “For real green ecotourism, expectations of high rates of return don’t apply,” says Epler Wood. Many ecotourism enterprises will need financial safety nets consisting of low-interest loans and grants for community projects, particularly for the training that will ensure that the local people can continue on after the outside experts and funding are gone. It may not be pure private sector, but there is ample precedent in the support symphony orchestras and art museums receive from governments and private foundations.

Luna-Kelser agrees on the need for realism, adding that the most important thing investors need to know is what are the rules of the game. The IDB’s job, he said, is to help local people and governments to develop standards in such areas as capacity of lodges, environmental protection, and relationship with the community, and to make these standards known to potential investors.

Ecotourism will never grow to be a major economic sector, says Luna-Kelser. If it did, it wouldn’t be ecotourism. But as a niche industry, it has potential to provide a promising future for communities, natural areas, and individual entrepreneurs who possess the spirit and determination to make their mark on tourism’s green frontier.

Date posted: January 2002

Lifeguard on patrol...

Ecotourism dreams...