The tourist industry in the Dominacan Republic (DR) is the largest in the Caribbean region. With over 4.3 million tourists visiting the country in 2011, generating around US$111 in income, tourism has evolved into one of the main pillars of the Dominican economy. The Government of the DR, newly elected in mid 2012, announced its intention to increase the number of tourist to 10 million over the next decade. The sector is dominated by large, well funded hotel and resort chains, providing large-scale, all-inclusive packaged vacations. Their projected expansion and refurbishment plans, along with the growing number of high-end boutique hotels and private villa resorts, provide enhanced opportunities for U.S. exporters of hotel and restaurant equipment, who also benefit significantly from the preferencial tariff regime which has resulted from the DR’s membership in the Central American and DR Free Trade Agreement (CAFTA-DR) with the United States. Almost all of the DR’s US$35 million market for hotel and resaurant equipment is imported from overseas, half of which is from U.S. sources.
General Economic Outlook
Following the global financial crisis of 2008-2009, economic activity in the DR and the Caribbean experienced a remarkable recovery in 2010, growing by 6.1 percent. However, economic growth slowed to a rate of 4.3% in 2011. During 2012, the Dominican economy is expected to experience a 4.4% growth in GDP, which the World Bank projects will be sustained at the rates of 4.6% in 2013 and 4.8% in 2014. Despite the global crisis, the DR’s economy continues to expand, due to a higher demand from both the public and private sectors. The newly elected President, who took office in August 2012, has promised to impose enhanced fiscal discipline and implement economic reforms to boost growth and stimulate inward investment.
The Economic Report published by the Central Bank of the Dominican Republic highlighted tourism as one of the most active sectors during 2012. Tourism has evolved into one of the pillars of Dominican economy, generating over RD$4.20 billion in 2010 and RD$4.35 billion in 2011. (US$1 = RD$39.3)
Activities at hotels, bars and restaurants in the Dominican Republic registered an increase of 1.3% percent in 2011 over 2010. This performance reflects the 2.8% increase on tourism income due to the arrivals of more than 3.7 million foreign tourists in 2011.
In the same period, the number of available hotel rooms increased by 2 percent to 66,790 - the equivalent of more than one thousand new hotel rooms. In addition, the overall hotel occupancy rate improved (from 66.6% in March 2010 to 69.3% in March 2011). In the most popular tourist areas in the east of the island, such as Romana/Bayahibe and Punta Cana/Bavaro, occupancy rates averaged 90.2% and 87% respectively.
An industry survey performed by the U.S. Commercial Service reported an increase in equipment sales, especially kitchen equipment and supplies for hotels. This demonstrates a favorable environment in the sector presenting opportunities for the entry of new competitors in the market. The demand for equipment has also increased due to the large hotel/resort projects being developed in the eastern part of the country; plus a greater receptivity to higherpriced, state-of-the art hotel equipment, particularly since most of the new projects are designed to appeal to more upscale clientele at the higher end of the market.
There is also a trend for the construction of new boutique hotels and other non-all-inclusive resorts that was the traditional focus of the DR’s hotel and hospitality industry. Another trend is the development of luxury villas and high-end beachfront apartments, often co-located with luxury hotels in resort areas. The projected demand for second homes for the retiring “babyboom” generation is, in part, driving this segment part of the market.
As a member of CAFTA-DR, the DR market offers preferential duty-free (or low tariff) access for U.S. suppliers of hotel and restaurant equipment.
The Ministry of Tourism invested over US$8 billion over the course of 2008-2012 in the development of infrastructure projects in the tourist areas, including the construction of new highways, expansion and improvement of existing transport infrastructure and the upgrading of existing beach areas. The Minister of Tourism also launched a successful promotional campaign developed to attract tourists to the Dominican Republic which has been supported with a US$23 million budget from 2005-2008. The new government administration has announced a goal of attracting over 10 million tourists annually to the Dominican Republic within the next ten years.
Both the investment in infrastructure and in promotion are important ways to secure a continuous increased flow of tourists that will support the private sector’s initiative to make more investments in the sector.
Almost all of the DR’s US$35 million market for hotel and restaurant equipment is imported from overseas. Purchases from the U.S. represent approximately 50 percent of all imports, accounting for approximately US$17.5 million in 2011 and are estimated to grow by 10% during 2012. European countries represent the other 50 percent of the major suppliers to the Dominican market.
Large European hotel chains and resort operators (mainly Spanish – such as Melia, Barcelo, Iberostar and Occidental) and hotel operators (such as German LTI) have a dominant presence in the DR and tend to have well established commercial relations with European distributors and suppliers of hotel and restaurant equipment. However, due to the tariff exemption derived from membership in CAFTA-DR, U.S. exports are at a distinct advantage in the commercial Dominican market. As a consequence, even the European chains are sourcing more from the United Sates.