The Momentum Builds in Papagayo  

Gulf of Papagayo 

Perseverance and patience are truly virtues when it comes to investing in Costa Rica. This couldn’t ring truer than in the Gulf of Papagayo, where international hoteliers are betting that all-inclusive luxury resorts placed in a rich tropical setting and overlooking the Pacific will attract enough tourists to finally put Guanacaste and Costa Rica on the travel map.

They are participants of the State-sponsored Papagayo Tourism Project aimed at creating a sustainable economic boost to Costa Rica’s northwestern province. Although the project has been in planning for nearly 20 years, it is only lately that the grand scheme actually seems on its way to fruition. Five resorts—Nakuti, Giardini, Blue Bay, the Allegro, Costa Smerelda and Costa Blanca—are in operation, while several others, including the huge and highly touted Four Seasons endeavor, are currently under construction.

Even so the full realization of the project is still several years away as its developers cope with a huge range of hurdles—from the need for adequate infrastructure to the challenges of delivering five-star hotel service with a workforce culturally unacquainted with it. But then mining the tourism potential in a developing country is rarely fast or easy. As Anna Moscarelli, president of Grupo Papagayo, puts it: “Costa Rica will wake up in the coming years. But you have to be patient and you have to battle.”

Grupo Papagayo owns Nakuti and Giardini, two resorts operating in the Playa Panama area. More than 20 developers in all have purchased concessions under the Papagayo project. When they are done, an estimated 20,000 rooms will dot the landscape off of Bahia Culebra. 

Indeed, the project is Costa Rica’s most ambitious undertaking to attract tourism to the country—one that holds out the potential for putting the Gulf of Papagayo on a competitive par with other major resort areas, including Cancun. The government hopes it will do far more than bring jobs and economic prosperity to Guanacaste, however. It sees the project as a springboard for tourism development in other parts of the country as well.   

Certainly the Papagayo Gulf is ideally situated for the task, according to Walter Niehaus, Costa Rica’s Minister of Tourism. Guanacaste’s drier climate makes it well suited for year-round tourism. Plus the project’s proximity to both the Pacific and inland parks and reserves gives visitors easy access to the country’s rich natural diversity.  Equally important, says Niehaus, is that the site fared well in a series of environmental impact studies. The government remains intent on developing tourism without sacrificing its biggest asset—Costa Rica’s natural beauty. Hence in exchange for discounted property concessions—the chief direct incentive offered to investors in the project—the Papagayo resorts are limited to 20 rooms per hectare of land and other environmental guidelines.

That was one of the attractions of the Papagayo project for Moscarelli, who believes the environmental controls will help preserve the area’s tropical atmosphere. A hotel owner and investment advisor from Italy, Moscarelli arrived in Costa Rica via a circuitous route. “I wanted to do something in a country that needed the investment. That meant a developing country,” she says. She tried Africa first, but decided the economic and political climate was too unstable for sound investment.

On a friend’s suggestion Moscarelli traveled to Costa Rica between 1996 and 1997, scouting out Mal Pais and other areas of the country for prospective investment opportunities. Then she discovered the Gulf of Papagayo. “This is the best place in Costa Rica,” she says. “It is a question of feeling.” Tourists ultimately come because they like the peace and the ecology, she believes. It is an easy, safe place to relax and the people are friendly and honest.

Accordingly, Grupo Papagayo is betting the bulk of its $15 million investment in Costa Rica on the tourism potential of the Papagayo gulf. In April 1998, it purchased its first concession—an existing hotel with 40 rooms and 20 villas in Playa Panama. It began development in September that same year, and opened Nakuti for business with 100 rooms in December, 1999. Bythe next year in November, the all-inclusive resort was operating at 85% capacity, with half of Nakuti’s guests coming from the US and Canada; another 25% from Europe and the rest from Costa Rica.

While developing Nakuti, Grupo Papagayo took on other investments. In January, 1999 it bought its second Papagayo concession, the 76-room Giardini resort in Playa Panama, and 10 months later, moved outside the gulf to buy the 50-room Jungle Lodge in Tortuguero.

Now, Moscarelli is prepping both of her Papagayo project hotels for expansion. The group is buying another five hectares to bring Nakuti’s room count to 200 by the end of next year; in three years time the number should reach 600. At Giardini, expansion is already underway to bring its total room count to 100 by November and finally to 260 in three years. Ultimately, the two resorts will have 860 rooms available to accommodate 1720 people.

Moscarelli is determined to meet the Grupo Papagayo’s three-year timetable just as she hit the deadline for the opening of Nakuti. But she holds no illusions about what the task will entail. To get the job done, she says, “you have to be there everyday and push and do battle.”

Inevitably challenges arise on just about every front and dealing with them means factoring in more time, effort and expense into the operation of the business. For instance, Moscarelli would have liked to hire local workers exclusively for her hotels, but found their skill levels often weren’t up to the standards she needed. As a result, for some positions she has had to hire from outside the country. The absence of regular public buses between the gulf beaches and neighboring towns has meant that Grupo Papagayo must provide transportation to and from work for resort employees—at a cost of as much as $3,000 a month. Inefficiencies in Costa Rica’s banking system creates regular cash flow headaches. “There is no transportation, no basura, no good roads,” Moscarelli continues. “The service they give here is low. Sometimes it doesn’t exist at all.”

The slow pace of infrastructure development is perhaps the biggest problem for all of Papagayo’s resort developers. Besides providing the land concessions, the state’s role in the Pagagayo project is to deliver adequate water, electricity, telecommunications and a network of paved roads to the area. But so far, it has fallen woefully short on the promise. The five resorts in operation have already been faced with periodic water shortages and power outages. The demand for these services is only set to escalate as new resorts come on line and existing ones expand. Indeed, aside from Grupo Papagayo, Occidental Hotels, which owns the Allegro and Costa Smerelda, is in the throes of expanding Costa Smerelda, to be renamed the Flamenco Beach Resort, as well as reportedly contemplating other gulf investments.

In response to the infrastructure concerns, the association of the Papagayo Tourism Project (ASOPAPAGAYO) was formed to spur more rapid action from government institutions (see article on page 19). “We want to motivate to comply with their commitments to provide the public services on time to each project,” says Chairman José Manuel Gutiérrez.

Despite all the problems there are positive signs of progress. The start of Grupo Isthmus¹ Four Seasons resort—the largest development of its kind in Central America—has refocused attention on the endeavor and adds a new level of credibility to its vision. The group is spending as much as $150 million to build 1,007 rooms along the stretch of land overlooking Playa Blanca. It is also building the Arnold Palmer golf course. If the project goes well, it could entice other name brand international chains into Costa Rica.

In addition, the all-important Daniel Oduber Quiros International Airport has finally met international civil aviation standards and is attracting an increasing number of charters that are bringing tourists directly into Liberia (La Revue Feb/March 2001).

Plus, a new hospital in Liberia and the privately run Papagayo 2000 clinic in Sardinal now ensures accessible medical care if needed to tourists in the area.

Amidst all of this, tourism in Costa Rica is once again on the upswing after a flat period in the mid-1990’s. The Instituto Costarricense de Turismo is also responding to sustain the trend by spending more to promote Costa Rica in the US, Europe, Asia and Latin America.

Twenty years is a long time to wait to realize your vision. But with a little more patience, the players in the Papagayo Tourism Project could just finally realize theirs.

by Marci Baker, journalist