Rio Olympics No Help to Brazil Economy Based on World Cup

The 2016 Olympics will be no panacea for Brazil’s faltering economy if last year’s World Cup is any guide. Contrary to government projections, Brazil has failed to lure to its beaches and jungles many of the 3.5 billion TV viewers that followed the tournament.

The flow of tourists to the country, which spent more to host the mega-event than any nation before it, has remained flat from a year earlier since the final match July 13, according to tour operators and an online search engine. Spending by foreign visitors fell 7.4 percent from August through November, compared with a year earlier, central bank data shows.

From the rhythms of Carnival in Rio de Janeiro to the Amazon forest and Iguassu Falls, Brazil boasts some of the world’s outstanding travel attractions. Yet several hurdles, from high costs and violence to poor marketing and logistics, mean many potential visitors choose to go elsewhere, said Diogo Canteras, partner at hotel consulting firm HotelInvest.

“Brazil has attractions; it doesn’t have competitive prices, promotion, or infrastructure,” Canteras said in a phone interview from Sao Paulo. “The World Cup wasn’t the generator of tourists that was expected.”

Brazil spent $11 billion on the World Cup, which was supposed to increase the nation’s visibility and consolidate an image of “happiness and receptivity” to boost its tourist potential, according to a government-sponsored study on the economic benefits of the Cup published early last year.

‘Lasting Business’

There is no sign of that happening. “The Cup generated a lot of interest but no lasting business,” said Salvador Saladino, head of the Brazilian Incoming Travel Organization, an association representing travel agencies. Reservations for 2015 showed no significant increase from recent years, he said.

The number of consumers searching for trips to Brazil spiked in the months before the World Cup and then returned to “normal” levels in the subsequent months, according to a study conducted by Skyscanner, a travel search engine.

That could raise questions for companies that have bet on growing tourism. In 2013 Alvaro Diago, chief operations officer of InterContinental Hotels Group Plc in Latin America, said the World Cup and the Olympics would be an opportunity for Brazil to consolidate its tourism image and that the company planned to triple the number of its hotels in Brazil to 39 during the next decade.

InterContinental said in an e-mailed response to questions that it considers Brazil an important country for tourism and that “like all markets, the economic dynamics in Brazil are constantly evolving.”

Bet Heavily

Accor SA is another company that bet heavily on Brazil, signing 34 contracts last year alone to open new hotels in the country. The company’s press office in an e-mail declined to comment.

After hosting the 2010 soccer World Cup, South Africa’s international tourist arrivals grew at an annual average rate of 7.4 percent in the three years through 2013, when it received 9.6 million foreign visitors. Brazil in the same year received 5.8 million tourists. It draws a quarter of the tourists visiting Mexico and a 10th of those traveling to Spain, according to the latest World Bank statistics.

Brazil’s government wants to double the growth rate of foreign tourists by 2016 from the current annual increase of 250,000 to 300,000 visitors, Tourism Minister Vinicius Lages said in an interview, adding that he estimates more than 6 million visited his country last year.

High Costs

High costs are a key reason Brazil is struggling to attract more foreign visitors, said Gustavo Luck, head of Luck Receptivo travel agency in Recife, Pernambuco state. “Brazil is expensive compared with other global destinations,” said Luck, who says his sales in the four months through December were unchanged from a year before and down 70 percent from two years ago.

A week-long holiday at a resort in Porto de Galinhas in Pernambuco departing from Berlin runs 1,520 euros ($1,766) at Neckermann Reisen, the German unit of Thomas Cook Group Plc. That compares with around 950 euros for a similar trip to Thailand or 601 euros to the Canary Islands.

In July the government said that 95 percent of the 1 million foreigners who came for the World Cup had the intention of returning to Brazil one day. For the 2016 Olympics in Rio de Janeiro, the government expects 380,000 visitors.

‘Doing Well’

Brazil continues to face hurdles in attracting foreign tourists such as visa requirements for U.S. citizens and inadequate regional aviation infrastructure, Minister Lages said. A weaker currency and plans to improve tourism promotion agency Embratur’s ability to partner with companies will allow Brazil to generate more business from the Olympics, he said.

“We’re doing well but we could do much better,” he said.

Brazil’s real has weakened 23 percent in the past two years, to a close of 2.642 per U.S. dollar on Jan. 15. While a falling currency makes Brazil less expensive for foreign tourists, the real would have to drop to 3.2 to 3.5 per dollar to make a concrete difference, said HotelInvest’s Canteras. Even then, it would take a year before the impact would be felt, as many travel packages are priced well in advance, he added.

For the World Cup, Brazil expanded and modernized its main airports, stadiums and some urban transportation. To make the most of the Olympics, many obstacles need to be overcome, Senator Antonio Carlos Valadares, head of the Senate tourism committee, said in a phone interview.

Foreign Languages

Among the issues cited by Valadares and tourism operators are that few Brazilians speak foreign languages and not enough are trained for the hotel or restaurant business; assaults and theft scare off visitors; signs on roads and museums are poor in Portuguese, let alone English; flights are expensive and scarce, burdened in part by federal and state taxes.

“Taxes, violence, under-funded government tourism agencies -- we face several bottlenecks,” said Valadares. “If we want to make better use of the Olympics than we did of the Cup, we need to start tackling these now.”

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