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LatinFinance / March 2007

By Larry Luxner

A sudden influx of tourism to the Honduran island of Roatan is bringing badly needed dollars and investment to one of Central America's poorest countries.

A 38-mile-long spit of land off the Caribbean coast, Roatan was settled in the late 17th century by the black Garifunas, who were forced there by the British from their native St. Vincent. In 1859, England granted Honduras sovereignty over Roatan and two smaller nearby islands, Utila and Guanaja. But for more than 130 years the Bay Islands, as they're collectively known, were virtually ignored.

Today home to 65,000 people, Roatan represents the brightest hope for the Honduran tourism industry and accounted for more than 40% of the country's $450 million in 2006 tourism revenue. "Roatan is just now being found," says Bruce Starr, a local real-estate promoter and radio personality. "For years, it was a sleepy island known only by divers.

And these divers wouldn't tell their friends because they wanted to keep Roatan a secret. But now that cruise ships started coming here about two and a half years ago, we will have tremendous tourism growth."

In fact, Roatan is one of several bright spots throughout Central America, for whom tourism represents a major source of foreign exchange. The leader by far is Costa Rica, famous for its tropical rainforests, volcanoes, stunning beaches and political stability. Last year, nearly 1.7 million tourists flocked to Costa Rica, generating $1.59 billion in foreign exchange, according to the Instituto Costarricense de Turismo.

Other key tourist attractions throughout the region include Guatemala's Mayan ruins of Tikal, the pristine coral reefs off the coast of Belize, and the Panama Canal a favorite of cruise-ship passengers.

On Roatan, real-estate ventures, guest houses, condominiums and timeshares are already sprouting all over this palm-fringed idyllic Caribbean island, where Spanish is rarely heard and the bureaucracy of Tegucigalpa seems worlds away. Still to arrive here: traffic lights, McDonald's outlets, high-rises and violent crime.

Yet tourists are flocking to this island famous for its powdery white-sand beaches and spectacular Caribbean sunsets. In fact, cruise-ship arrivals are expected to quadruple from 250,000 passengers last year to over a million in 2008.

Miami-based Royal Caribbean Cruise Lines has signed an agreement with the Honduran government to renovate the cruise-ship pier at Coxen Hole, administrative capital of the Bay Islands, at a cost of $18 million. Beginning in October, cruise visits will jump from 10 ships a month to 30 or more. Rival Carnival Cruise Lines will use Coral Cay, a privately owned dock nearby.

At the same time, real-estate values are climbing as more outsiders discover Roatan. At present, the island has fewer than 1,300 hotel rooms. "We have a lot of condos being built, but we don't have hotel rooms," says Starr. "For one reason or another, the bigger hotel chains are not establishing here."

Michael Wendling, manager of the Infinity Bay Spa & Beach Resort at West Bay anticipates Roatan will get 1,500 new hotel rooms within the next two years. No other island in the Caribbean will come close to doubling its hotel stock in such a short time frame.

"This is a very hospitable place to do business," he says. "This is a kind of entry-level situation from the standpoint of development. Your land costs are far less here than anywhere else in the Caribbean." As a result, a one-bedroom, 830-square-foot condo at Infinity Bay goes for $380,000 while the two-bedroom, 1,400-square-foot version costs $440,000 much less than what the same property would cost in Aruba, the Bahamas or the Dominican Republic.

"Most of the people who buy our units aren't here for a good portion of the year," says Wendling, a Colorado native who has lived on Roatan since 2002. "Rather, they buy it and let us rent it out for them."

Wendling says the first 50 units of the 145-unit, $30 million Infinity Bay project should be ready by this July; the rest of the project will be completed by mid-2008. When finished, the four-star luxury property will boast swimming pools, a private dock and a world-class spa.

A recently enacted law making the Bay Islands a duty-free area is expected to improve security by making it harder for visitors to fly or sail into Roatan without a return ticket. In addition, the government has invested $50 million in sanitation and sewage systems to keep the islands clean and make sure tourists come back.

"This island is unusual in that it is an English-speaking island in a Spanish-speaking country," says Wendling. "The climate for North Americans is quite easy because of the ability to communicate. This is very important for everyone's comfort level."

Also helping Roatan is that several major airlines among them Continental, Delta and TACA International offer direct flights to the island from Newark, Houston, Miami and Atlanta.

Nicaragua hopes for similar success with its own offshore Caribbean islands, though it clearly has a ways to go. Big Corn Island is an impoverished yet scenic English-speaking island of 10,000 people.

Located 18 minutes by plane east of the Atlantic town of Bluefields, Big Corn recently got its first luxury hotel ever. Casa Canada, a 20-room resort that opened a little less than a year ago, boasts its own infinity pool, spectacular oceanfront views and rooms starting at only $65 a night. The hotel represents a $3.4 million investment by Canadian businessmen from Saskatchewan and Alberta, says general manager Gary Kincaid.

"There's a lot of room for the market to be developed here," says Kincaid, noting the lack of local competition. "We have the only swimming pool on the island and power 24 hours a day, though occupancy is still only 20-25%. We need to get to 45%, and then we'll be happy."

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