Hotel & Motel Management / April 7, 1997
By Larry Luxner
CARACAS -- Venezuela, the only major Caribbean Basin country without legalized gambling, may pass a proposed casino law as early as April.
A bill now being debated before the National Assembly would allow slot machines and casinos throughout the country for the first time, but would restrict them to five-star hotels of at least 200 rooms each. At present, slot machines are tolerated only on Isla Mar-garita, an offshore tourist mecca famous for white-sand beaches and duty-free shopping.
"The Venezuelan constitution doesn't permit casinos, but states and municipalities are able to permit it. We want the law so it'll be totally legal," said Luis González, director of the Venezuelan Association of Five-Star Hotels. "The implementation of casinos should be subject to only one law, and not regional criteria."
Asked why only five-star hotels should be allowed to have legalized gambling, González responded: "To prevent the proliferation of small casinos with no guarantee of seriousness or honesty. The casino must be an honest, decent activity."
Enrique Nuñez, president of Corporación Alphatropolis and a former head of the Chamber of Deputies' tourism committee, helped draft the current legislation. He says his team studied the gambling regulations of 125 states, countries and other jurisdictions -- including Atlantic City and Nevada -- before coming up with its own recommendations. He says his proposal states that if a hotel wants to enlarge its casino area, it'll have to increase the number of rooms proportionally. "If you have a big casino and few rooms, there won't be room for [the casino patrons] to sleep. So the hotels will look for locals."
A deeper problem, he says, is widespread confusion in Venezuela over the legality of casinos.
"In 1992, the first bingo hall and slot machines were established on Margarita. President Carlos Andrés Pérez closed the bingo because it was illegal," he explained. "The owners went to court and got an injunction which said they could continue operating until there was a law regulating casinos. That set a precedent, and after that, others came. But it's still a violation of the constitution."
Under the proposal now being considered, the only exception to the five-star, 200-room rule will be the government-owned Hotel Humboldt. This uniquely positioned property, on the summit of Monte Avila at an altitude of 2,159 meters, overlooks Caracas to the south and the Caribbean to the north. Inaugu-rated in 1957, the 70-room hotel functioned for years as a five-star resort before being shut down in the late 1980s; it has since been taken over by the Venezuelan Investment Fund, which supervises the privatization of government assets. Among other things, the property boasts restaurants, a soda fountain, a heated swimming pool, two cable-car systems and even an ice-skating rink.
Comments the U.S. Embassy: "The hotel is scheduled to have a casino once Congress passes the gambling law. Most prospective investors have made passage of the new a prerequisite for bidding. Since the hotel's capacity is small, it will need the additional attraction of the casino to become profitable."
At the moment, Venezuela's hotel industry is hardly in the black.
González, whose organization's 20 affiliated five-star hotels have 6,632 rooms between them (out of a national total of 23,000 rooms), says the average occupancy rate for 1996 was only 54%, and the average tariff was 38,013.43 bolívares (about $80). Much of that can be explained on Venezuela's dismal economic performance over the last few years. In 1996, Venezuela's inflation rate topped 103% -- the highest in Latin America -- while its Gross Domestic Product dropped by 1.5%, the only country in the Western Hemisphere that saw negative growth.
A recent survey now classifies 84% of Venezuela's 22 million people as "poor," of which 40% are critically poor (up 2% from 1994), and 44% relatively poor (up 4%). That leaaves only 9% in the middle class (down 4%) and 6% in the upper classes (down 2%). Violent crime is up, and purchasing power has never been lower.
Nevertheless, rampant inflation has helped make Venezuela a travel bargain for foreigners. Hermann Luis Soriano, Venezuela's minister of tourism, says 750,000 tourists visited the South American nation in 1996, up from 400,000 in 1993.
"The impressive growth we've had leads us to believe the next few years will bring even greater results," Soriano said during a recent interview at the Hotel Inter-Continental Tamanaco, Venezuela's largest hotel. "Tourism is growing by 12% a year, and should hit one million visitors by 2000."
Soriano said that Isla Margarita now accounts for 35% of all tourist arrivals, though "we have tried to target other, less-known areas of the country. Historically, as a consequence of Venezuela being an oil exporter, it wasn't necessary to develop other sectors of the economy. Tourism was seen as something frivolous, and I think one of the merits of President Caldera is that real alternatives to petroleum have been developed."
He added that "we hope that between now and next year, the remaining 12 hotels in the hands of Corpoturismo will be privatized. The state has proven it's not good at running hotels, so we want to pass that to the private sector and concentrate on international tourism promotion." Yet Corpoturismo's promotion budget is just $2.5 million.
Yet Venezuela is also plagued by violent crime and political unrest. Two attempted coups in 1992 left hundreds of people dead -- and that hasn't helped matters. Tourism officials worried about Venezuela's image abroad are quick to defend the country's reputation.
Responding to reports that major cruise lines have stopped calling on the port of Guaira because of attacks against passengers, Antonio Herrera, general manager of the Venezuelan-American Chamber of Commerce, says "crime in Venezuela is no worse than in other countries. We may have had purse-snatchings, but no dead tourists -- or even raped tourists -- come to mind."
Nuñez says legalized gambling will help lure some visitors to Venezuela and away from more expensive Caribbean island destinations. "I think it'll help. It's an additional service," he said. "But will it boost tourism dramatically? No way."
He added that Venezuela's Senate made some minor changes to the bill in November, and that it'll come up for a final vote anytime between Mar. 1 and June 30 of this year.
"The church was initially against it, three or four years ago," he said."But we convinced them of the virtues of the law, that it would restrict casinos and be more fair. Now the only ones against it are those who will lose."
Whether or not the bill passes, hotel investment in Venezuela seems undeterred.
The five-star Margarita Hilton is spending $12 million to spruce up the property and add a 300-room timeshare project. Another hotel, the 280-room Bella Vista, was recently privatized by the government for around $16 million.
Fiesta Americana, a Mexican hotel chain owned by Grupo Posadas, plans to construct a five-star property in the upscale Altamira district of Caracas. Not much is known about the project -- such as how many rooms it'll have, how much Posadas is investing or whether the new property will have a casino. However, a sister chain, Fiesta Inn, plans to add three four-star hotels in Caracas and five in Colombia over the next few years.
In addition, Club Med, the all-inclusive resort chain famous for its romantic getaways, will soon be coming to Venezuela. Frnacisco Monaldi, vice-president of Caracas-based Corpomedina, says his company is to invest $36 million in a 356-room Club Med tourist project located along a 2,000-hectare beachfront site on the Paria Peninsula.
"We began this project in 1986, but there's been one delay after another," Monaldi said. "Now it's in the process of being approved by the Ministry of Tourism."
Monaldi, an architect, said construction should start this August, finishing by May 1999. Corpomedina is a 50-50 joint venture between GAIA and Banco Mercantil, though Mexico's Grupo Marhnos will have a 15% stake in the project. Monaldi says the resort will seek to attract Europeans, mainly Germans, with all-inclusive rates as low as $600 a week (excluding airfare in high season).
Club Med is now building resorts from Cuba to China; despite the chain's glitzy reputation, it won't have a casino -- even if the law passes. "We'll be bringing families, not just couples," said Monaldi. "This will be oriented toward nature."