 |
 |
Urban Land Archives
August 2003
On the Horizon
by Robert Burnett and Matt Shanaberger
Costa Rica is positioning itself as the next international luxury resort destination.
A phenomenon is occurring in Costa Rica, and in its Guanacaste region
in particular, that has become familiar in such destinations as
Bali, Indonesia; Phuket, Thailand; and Los Cabos, Mexico: a scenic,
oceanside, underdeveloped destination once frequented only by ecotourists
and a sophisticated few is about to be transformed into a major
luxury resort destination with international appeal.
The signals are clear: last year more than 1.1 million tourists visited
Costa Rica; within three years, that figure is projected to grow by
more than 40 percent. Delta Airlines is now providing nonstop service
to Guanacaste’s Liberia airport from Atlanta, with American
Airlines beginning service this December from Maine. Four Seasons
Hotels is scheduled to open a $200 million–plus resort, the
Four Seasons Papagayo, on nearby Papagayo Peninsula late this year;
Rosewood Hotels & Resorts has selected a site, and Ritz-Carlton
is said to have a site under contract. In addition, Adrian Zecha,
whose Amanresorts played a major role in helping to put Phuket, Bali,
and other exotic destinations on the high-end resort map, is rumored
to be in discussions with developers on multiple sites for both his
Aman and GHM brands.
As the world’s primary ecotourist destination, Costa Rica combines
world-renowned natural scenery; a stable democratic government; an
educated, available workforce; a favorable business environment; and
positive tourist trends.
Referred to as “the Switzerland of Central America,” Costa
Rica, with its population of 4 million, has steadily developed and
maintained democratic institutions and an orderly, constitutional
process for government succession. Several factors have contributed
to this stability: enlightened government leaders, relative prosperity,
flexibility among social classes, educational opportunities that have
created a stable middle class, and high social indicators.
Also, because Costa Rica, which is located between Nicaragua and Panama,
has no armed forces, it has avoided military intervention in its politics,
unlike many of its Central American neighbors.
The country’s most important economic export is tourism. Business
and government leaders understand the importance of economic development
through tourism, are constantly seeking expert support in marketing
and development, and are experiencing steady relations with established
market promotion groups worldwide. (The government has dedicated $7
million annually to general awareness marketing.)
The 19,652-square-mile (50,895-square-kilometer) territory, surrounded
by both the Pacific and Atlantic oceans, contains approximately 6
percent of the world’s biodiversity.
The majority of development currently is occurring in the country’s
North Pacific province of Guanacaste and the Peninsula of Nicoya.
The region features some of the oldest landscape formations in the
country, such as the caverns of Barra Honda National Park with their
stalactites and stalagmites. The park also protects important expanses
of tropical forest, most of which is in regeneration.
The region is important worldwide for its protection of wildlife species:
the Baula turtle in Playa Grander, the avi-fauna in the lagoons of
Palo Verde National Park, and the Lora turtle that nests in the Nancite
and Ostional beaches are rare species living in rare ecopreserves.
National parks such as Volcán Rincón de la Vieja have
hot mud pools and fumaroles in constant activity. Marine currents
that dredge nutrients from the ocean’s depths nurture a biodiverse
marine life, and the abundance of swordfish, marlin, and dorado have
allowed Costa Rica to surpass Baja California as a sportfishing destination.
The government’s tourism office forecasts continued growth
in tourism, made possible by expanded air service and an increased
supply of hotel rooms. Annual visitor volume is forecast to reach
1.5 million by 2005, and 2 million by 2010. After September 11,
travel quickly resumed normal growth patterns, including extended
service by Delta Airlines, in response to U.S. travelers’
perception of Costa Rica as a safe, U.S.-friendly destination. This
trend and perception are considered critical in redefining Costa
Rica as an international destination.
Though Costa Rica’s hotel inventory is evolving rapidly, it
still is in the low- to middle-market range as far as quality and
pricing. Two hotels have contributed to Costa Rica’s recognition
in the international hotel circuit: the Marriott Los Sueños
and the forthcoming Four Seasons Papagayo. Los Sueños introduced
the concept of a world-class, flagged resort hotel in Costa Rica;
its marina is the only international standard private marina from
Acapulco to Venezuela. The Four Seasons Papagayo, a $200 million–plus,
five-star resort in the Guanacaste region, has justified the government’s
support for tourism development. In addition, the government’s
investment in the airport, roadways, infrastructure, and planning
is seen as an indication of its commitment to make Guanacaste the
tourism center of Costa Rica.
Nationwide, there are approximately 15,000 rooms in all categories
available, with stock expanding an average of 8 percent per year over
the past decade. Growth in supply has slowed recently, due largely
to limitations on infrastructure and development capital, but most
of the future supply is expected to be in the luxury category with
major hotel flags.
Today, Costa Rica characterizes 24 percent of its hotels as five-star
resorts; however, by U.S. standards, they would be considered four-star
at best. There are 2,108 rooms available in this category, with 506
rooms in the Guanacaste region. (See Figure 1.)
The typical hotel guest at a top-tier resort stays in Costa Rica for
a total of 4.5 nights, and is likely to be traveling with friends
or a spouse. Family travel still is in its infancy in the country,
perhaps due to the rugged conditions that have existed until recently.
(See Figure 2.)
The Guanacaste region, where most future development is being concentrated,
currently captures only 21 percent of resort hotel demand. (See Figure
3.) This figure is expected to grow exponentially in the next ten
years due to the certification of the region’s Liberia Airport
by the U.S. Federal Aviation Administration (FAA), the opening of
the Four Seasons project, and the fact that virtually all of the luxury
hotel development proposed for the country is in the Guanacaste region.
An analysis of hotel visitor demand supports the recent focus of developers
on the luxury category. (See Figure 4.) Taking historic factors into
consideration and keying them in to a simple demand model with conservative
assumptions suggests a demand for nearly 194,000 five-star room nights
in 2005 and for 288,000 room nights in 2010.
While Costa Rica is evolving into a destination resort environment
with modern support systems, access, and infrastructure, its resort
real estate market remains relatively undiscovered, compared with
that of Mexico, Hawaii, or the Caribbean. Costa Rica is, however,
already home to some 85,000 U.S. citizens.
Newly developed real estate product typically falls into two categories:
hotel-anchored, planned community projects and freestanding developments.
The average built product sells for approximately $165 per square
foot, with some of the better executed U.S.-designed products now
commanding more than $200 per square foot. The Four Seasons intends
to reach new heights with prices of more than $600 per square foot.
New hotel projects in Costa Rica include the following:
* Los Sueños, located on Herradura Bay, about a 1.5-hour
drive from the capital city of San Jose, includes a 199-room Marriott
Hotel, an 18-hole Ted Robinson–designed golf course, and a
250-slip marina, considered to be the first international-quality
marina in Costa Rica. Three projects have been offered at Los Sueños
to date: Las Colinas, Bella Vista, and Bella Mare. Bella Vista’s
larger unit size makes it desirable to U.S. buyers. Sales at Belle
Vista average roughly two units per month, compared with sales at
Las Colinas, which average one sale per month. An extension of Bella
Vista on a different parcel, Bella Mare offers 36 units ranging
in price from $675,000 to $895,000. A extension of Las Colinas,
on a separate parcel with two-bedroom units, is under development.
Melia Playa Conchal Beach & Golf Resort encompasses a 2,300-acre
resort with a championship 18-hole golf course designed by Robert
Trent Jones II, and a 1.5-mile-long white sand beach called Playa
Conchal. The all-suite hotel has 308 villa units with two master bedroom
suites. The guest rooms are situated in 39 two-story villas, each
with eight units. The hotel’s free-form swimming pool is the
largest in Central America; in addition, there are four illuminated
tennis courts and 11 restaurants and bars. The resort offers custom
homesites, as well as the Bougainvillea project, a condominium development
of 62 two- and three-bedroom, ocean-view condominiums averaging 1,900
square feet and priced at $164 per square foot. At buildout, Melia
Playa Conchal will be able to accommodate four resort hotels, two
golf courses, an additional 1,800 residential units, and over 150,000
square feet of retail space. Plans for the next phase and negotiations
with hotel operators are underway.
Hacienda Pinilla, a 4,500-plus-acre, master-planned community on former
ranchland, is centered on a Mike Young–designed 18-hole golf
course. It provides a selection of housing sites, up to ten hotel
sites, a clubhouse, trails, and ranching facilities. Current offerings
include half-acre or larger residential lots ranging in price from
$85,000 to $140,000 off the water, and from $350,000 to $450,000 on
the water; golf course homes ranging from $700,000 to $1,150,000;
single-family beachfront estates ranging from $895,000 to $1,200,000;
and oceanfront condominiums ranging from 1,797 to 3,997 square feet
in size and selling for $150 per square foot. The development, as
planned, could add some 400-plus custom lots and more than 700 condominium
units. A town village, a beach club, and an equestrian club with miles
of riding trails will also be located within the project.
Four Seasons Papagayo, developed and financed by the Schwann Foundation
in conjunction with Four Seasons Resorts, is part of a larger planned
residential resort community encompassing 2,250 acres of a peninsula,
including prime Pacific Ocean beachfront climbing to a 320-foot
plateau overlooking Virador Bay and Impace Bay. The site is ten
miles from the Guanacaste Liberia Airport.
Its 170 guest rooms and suites and 40 villa units are designed in
one- and two-story buildings forming a landscaped hillside village
overlooking the ocean. The property will offer two dining venues in
addition to poolside dining, a full-service spa and health club, four
tennis courts and a tennis center, freshwater swimming pools, water
sports facilities, a Four Seasons championship golf course designed
by Arnold Palmer plus access to additional courses, and a 40-unit
Four Seasons Residence Club. A marina, a casino, a polo club, and
a village are on the drawing board. Prices for the mostly two-bedroom
villas, which contain 2,400 to 2,600 square feet, are projected to
exceed $600 per square foot. Four estate lots for custom homes also
will be offered.
* Cacique del Mar, a golf resort community with a Greg Norman–designed
course located roughly 45 minutes from the seaside surfing village
of Tamarindo in Guanacaste, is being built in two phases, at a total
cost of $350 million. The project has experienced several false starts
in the past, including environmental difficulties, but is purportedly
back on track to be developed. The site is similar to that of the
Four Seasons Papagayo, with rugged terrain and a small, but nicely
formed, private beach.
Plaza Zapotal is a proposed 1,000-acre resort community six miles
north of Flamingo Beach on a site that has been through various incarnations
since 1992. It purportedly is approved for a resort hotel, a 27-hole
golf course, 1,310 residential units, a retail village, an equestrian
center, and a ranch.
Coco Blanca Resort, a small resort located near Cacique del Mar, includes
an existing 36-room hotel, with plans approved for a 200-room oceanfront
hotel (which is exempt from maritime zoning, as it is technically
inside Papagayo Bay, directly facing the Four Seasons site). In addition,
40 one- to two-acre homesites are situated above the new hotel site
with views of the Papagayo Bay and peninsula in the distance. Two
small private beaches are on site.
As Costa Rica continues on its way to becoming an international destination,
it will face constraints that are much the same as those confronted
in Hawaii, Los Cabos, and the Caribbean: air lift capacity, transportation
infrastructure, development infrastructure, and readiness of investment
capital.
The greatest threat to Costa Rica could be in becoming a victim of
its own success. Increasing numbers of affluent North American and
European visitors are discovering Costa Rica as an ecological haven.
As resort and real estate development proliferates, the country’s
government will have to balance the inevitable tension between the
demands of development and the need to preserve the ecological purity
that draws hotel visitors and real estate buyers in the first place.
Robert Burnett and Matt Shanaberger are cofounders of Synthesis Realty
Group, a company based in New York and California that advises on
markets and sells high-end resort real estate projects worldwide.
August 2003
© 2003 ULI–the Urban Land Institute, all rights reserved.
|
|
