InsightsFrom Crisis to Comeback

From Crisis to Comeback

How Peru’s tourism is navigating post-pandemic challenges.

As the world grapples with the aftermath of the COVID-19 pandemic, Peru, like many other nations, faces the daunting task of reviving its once-thriving tourism industry. Renowned for its rich cultural heritage and breathtaking landscapes, Peru has long been a magnet for travellers from around the globe. However, the pandemic dealt a severe blow to the country’s tourism sector, plunging it into a state of uncertainty and upheaval. 

Amidst the chaos, the question looms large: Can Peru reclaim its status as a favoured tourist destination? From the highs of pre-pandemic prosperity to the lows of social unrest and political turmoil, the journey of Peru’s tourism sector is a tale of resilience, adaptation and the quest for renewal. Between 2015 and 2019, tourism represented 3.9% of Peruvian GDP and generated an average of USD 4.4 billion per year from foreign tourists. The number of international visitors reached 4.4 million in 2019, signalling a compound annual growth rate of 6% during the period. That year, 1.2 million foreign tourists visited Machu Picchu, the most visited attraction in the country, in which 74% of visitors came from abroad.[i] 

The pandemic plunge 

The pandemic brought an abrupt halt to the upward trajectory of Peru’s tourism industry. In 2020, tourism GDP plummeted to 1.5% of the total, with a mere 897,000 tourists visiting the country, of which only 173,000 ventured to Machu Picchu. Foreign tourists contributed USD 1 billion in revenue, a bare fifth of the 2019 figure. Furthermore, employment in the sector dwindled from 1.5 million in 2019 to less than 700,000 in 2020.[ii] The pandemic’s impact was acutely felt in the financial stability and infrastructure management of the tourism sector, particularly among local tour operators and small- to medium-sized accommodation providers. 

A poignant example is Pariwana Hostels,[iii] which boasted 500 beds in the youth hostel segment across Lima and Cusco in 2019. It was the first Peruvian hostel company to expand internationally, establishing operations in Santiago, Chile, with plans for La Paz, Bolivia. However, the pandemic forced the closure of its Cusco operation from May 2020 to June 2021 and suspended activities in Santiago.  

Remarkably, Pariwana reopened its Santiago operation in January 2024, recouping its 500 beds, albeit burdened with debt incurred during the crisis. Unlike Pariwana, many firms succumbed to bankruptcy or faced severe financial strain due to over-expansion in anticipation of sustained growth. Consequently, maintenance standards plummeted, imperilling the reputations of high-end hotels. 

Alonso Franco, co-founder and Board member of Pariwana, reflected on the challenges faced, “Before the pandemic, our own cashflows allowed for growth and expansion abroad. Pariwana operated without debt, cash flow grew and the change in working capital was positive. [Due to the pandemic] we were then forced to take on debt and take on new investors.” While Pariwana managed to navigate the storm, others floundered. However, Franco and Fernando Razzeto, co-founder and CEO of Pariwana Hostels, remain optimistic about the sector’s recovery, “because of Peru’s undeniable capacity to attract tourists, with the great magnet for visitors that is Machu Picchu.”  

Indeed, with the lifting of border restrictions in February 2022, foreign tourists eagerly returned to Peru, signalling a resurgence in the sector. “National statistics do not reflect our reality, but 2022 was a good year for hostels because, worldwide, younger travellers were the first to retake trips. Our occupation was about 80% on average that year,” explained Razzeto. The sector witnessed a notable uptick, with over 2 million tourists arriving from abroad, a 50% increase from the combined figures of 2020 and 2021. Machu Picchu welcomed 712,000 foreign visitors, contributing to nearly USD 3 billion[iv] in overseas tourism revenue. 

From pandemic to protests 

When President Dina Boluarte assumed office, it triggered a wave of social protests in Peru. In contrast to neighbouring countries that had already regained stability, Peru grappled with various social demonstrations between 2022 and 2024, hampering the tourism industry’s recovery efforts. From November 2022 to March 2023, fewer tourists visited Peru due to protests against Boluarte’s administration and the detention of former president Pedro Castillo. Consequently, tourists found themselves stranded across the country for over 24 hours, lacking necessities and resorting to sleeping on buses.  

In February 2023, Machu Picchu was temporarily closed amidst the protests, further exacerbating the situation. The Brazilian Ministry of Foreign Relations issued a travel advisory, cautioning its citizens against unnecessary trips to Peru, significantly impacting the tourism industry, given that Brazilians accounted for about 4% of international visitors,[v] particularly in budget-friendly sectors like hostels. 

“From my point of view,” explained Razzeto, “the social outbreak of 2022-2023 was worse for us than the crisis caused by the COVID pandemic. During the pandemic, people were forced to stay home due to the lockdowns that were enacted, but Peru was still seen as an attractive destination. As soon as the lockdowns were lifted, those that could travel happily did so and Peru began to recover international tourist flow.”

The same source continue, “The social protests, on the other hand, deteriorated the image of Peru as a safe tourist spot. Tourists could now travel, wanted to do so, and did, but Peru was no longer a favoured destination.” Unlike previous presidential transitions, street protests began, proving to be more widespread and prolonged than earlier manifestations; even in Cusco, known for its socialist leanings, social upheavals had never escalated to such levels of violence and duration, lasting for over 2 months. 

In 2023, Peru received 2.5 million tourists, amounting to 58% of the 2019 figure. However, the tourism revenue was significantly lower, with only USD 2.6 billion from foreign tourists compared to USD 4.7 billion in 2019 and USD 2.9 billion in 2022.[vi] Machu Picchu welcomed 662,000 international visitors during this period. Estimates from the Ministry of Tourism and Foreign Commerce projected tourism GDP to reach 2.5% of the total,[vii] below the 3.9% recorded in 2019. Pariwana, a prominent hostel chain, experienced a decline in guests, receiving less than 50% of its 2019 occupancy. Although its occupancy briefly peaked at 80% between March and May, it dropped to 50% by late 2023, indicating a more challenging year compared to 2022. 

Will tourists ‘Joinnus’ in Machu Picchu? 

Online ticket sales for Machu Picchu were introduced over a decade ago through the Decentralised Culture Directorate of Cusco. Typically, tourists would purchase tickets in advance, spend the night in Cusco, take the train to Machu Picchu for a day visit, and return by nightfall. However, in July 2022, accusations of corruption surfaced,[viii] alleging that tickets were swiftly sold out through official channels and then resold on the black market.  

Responding to populist demands from Aguas Calientes, the Ministry of Culture mandated the sale of 100 in-person tickets in the town in August 2022, gradually increasing to 4,100 by 2023. This forced travellers to stay in Aguas Calientes (Machu Picchu Town) overnight to secure tickets early the next morning, effectively a tactic to retain tourists in the town. Some complied, while others, with tight travel schedules, departed Cusco without visiting Machu Picchu.[ix] 

As a small town born from the discovery of Machu Picchu, Aguas Calientes has a limited infrastructure, with few services tailored to budget-conscious travellers. Razzeto highlighted the adverse effects of the in-person ticket system, which had “horrendous consequences for the tourist, and thus for the whole industry and the country. It responded to populists demands and followed no reasonable logic.” Alonso Franco added, “visitors left with a bad experience and bad image of Peru, that included black market tickets, bad infrastructure, and in some cases even frustration of not visiting the so longed-for stone citadel.”  

The scheme, implemented during a period of low visitor numbers, became untenable as demand surged in mid-2023. Consequently, the Ministry of Culture opted to limit in-person ticket sales to 1,000 and outsource the remainder to Joinnus, a platform owned by Credicorp. However, implementation was delayed until January 2024. 

Amidst ill-intentioned rumours of Machu Picchu privatisation, protests erupted, blocking access to the site and prompting a new travel advisory from Brazil. The strike concluded on February 1st, with an agreement to retain 1,000 in-person ticket sales with plans to transition away from Joinnus. Despite the anticipated benefits of the new ticketing system, including enhanced capacity control and customer satisfaction, its success hinges on public understanding and support, primarily from the people of Aguas Calientes. “The new ticket sales system for Machu Picchu seeks to be a more equitable and sustainable way of managing access to the site. Any electronic option should be better than the system that was in place until a few months ago in which tickets and money went unaccounted for,” claimed Razzeto.  

Beyond the peak 

With the resolution of the ticket sales conflict, albeit temporarily, and the lingering backdrop of social and political tensions, Peru confronts significant challenges in restoring its pre-pandemic growth in the tourism industry and sustaining investment. The pandemic prompted tourism companies to adapt and innovate, operating with tighter cash flows and incorporating other sources of revenue in the absence of tourism, yielding some long-term positive impacts and lessons. 

According to observations by Pariwana executives, travel patterns among younger travellers have shifted post-pandemic. Previously, backpackers arrived with flexible itineraries, often extending their stays in Lima or Cusco before moving on to other destinations. However, the trend now indicates a more predetermined agenda with the future of the low-cost and hostel sectors hinging on standardising online ticket sales for Machu Picchu to facilitate pre-planning. 

The long-term outlook for tourism in Peru, as Fernando Razzeto suggested, depends on the country’s messaging to the world. For Alonso Franco, “There is the challenge of ‘de-Machu Picchufying’ Peru, which is the main driver of growth for tourism. When Machu Picchu is closed or there are conflicts less travellers come and the whole sector feels it.” Alonso Franco also underscored the importance of attracting committed capital aligned with long-term interests rather than short-term gains. Yet, amid an interim government focused on satisfying populist demands, immediate concrete actions to support tourism recovery seem doubtful. 

Addressing the over-reliance on Machu Picchu for tourism growth, Franco proposed “developing other touristic routes in the north and in the Amazon jungle. What about ports that cater to cruise ships? There are other Inca archeological sites to be developed and some that need cable cars to access.” Unfortunately, challenges persist in proper policies, incentives, and primarily infrastructure development, with delays in airport expansions[x] and progress on projects like the Coastal Train. 

Ultimately, Peru’s ability to project a safe and welcoming image to travellers will shape its tourism future. By addressing underlying issues and fostering genuine collaboration, Peru can chart a path toward sustainable growth, ensuring its place as a premier destination on the world stage. As Franco concluded, “It all boils down to the fact that Peru has not yet resolved the political question that would allow a transparent image to be projected towards foreign travellers and investors alike.” 

________________________________________________________________________

[i] Data provided by the Ministerio de Comercio Exterior y Turismo. “Principales Cifras de Turismo.” https://www.mincetur.gob.pe/centro_de_Informacion/mapa_interactivo/cifrasTurismo.html

[ii] Idem. 

[iii] https://pariwana-hostel.com/en/

[iv] Data provided by the Ministerio de Comercio Exterior y Turismo. “Principales Cifras de Turismo.” https://www.mincetur.gob.pe/centro_de_Informacion/mapa_interactivo/cifrasTurismo.html

[v] Data provided by the Ministry of Foreign Commerce and Tourism. “Llegada de Turistas Internacionales. https://www.mincetur.gob.pe/centro_de_Informacion/mapa_interactivo/llegadaTuristasPais.html

[vi] Data provided by the Ministerio de Comercio Exterior y Turismo. “Principales Cifras de Turismo.” https://www.mincetur.gob.pe/centro_de_Informacion/mapa_interactivo/cifrasTurismo.html 

[vii] América Economía. 05 de junio de 2023. “Turismo en Perú representara el 2,5% del PIB este año.” https://www.americaeconomia.com/economia-y-mercados-negocios-e-industrias/turismo-en-peru-representara-el-25-del-pib-este-ano

[viii] Infobae. 23 de julio de 2022. “Denuncian mafias en venta de entradas a Machu Picchu.https://www.infobae.com/america/peru/2022/07/23/denuncian-mafias-en-venta-de-entradas-a-machu-picchu/

[ix] Sociedad de Comercio Exterior de Perú. 20 de octubre de 2023. “Liberemos Machu Picchu.” https://www.comexperu.org.pe/articulo/liberemos-machu-picchu*#:~:text=En%202019%2C%201.1%20millones%20de,de%20extranjeros%20a%20Machu%20Picchu%3F

[x] Infobae. 13 de febrero de 2024. “Entrampamiento en Aeropuerto de Chinchero: lentitud de obras amenaza la emblemática obra de Cusco para el 2025.” https://www.infobae.com/peru/2024/02/11/entrampamiento-en-el-aeropuerto-de-chinchero-avance-de-obras-al-10-pone-en-peligro-la-emblematica-obra-de-cusco-para-el-2025/

About the Author

Alejandro Aguilar de Irmay
Alejandro Aguilar de Irmay
Alejandro works as an independent consultant on financial advisory and investment strategies for projects in Latin America. He has advised public institutions, multilateral organisations, international investors and local private companies and start-ups across several sectors.
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