Cablegate: Romania: Tourism Growing, but Falling Short of Potential

VZCZCXRO2331
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBM #0575/01 2031148
ZNR UUUUU ZZH
P 211148Z JUL 08
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC PRIORITY 8498
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 BUCHAREST 000575

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD RO
SUBJECT: ROMANIA: TOURISM GROWING, BUT FALLING SHORT OF POTENTIAL

Sensitive but Unclassified; not for Internet Distribution.

SUMMARY

1. (SBU) Romania offers travelers an intriguing if complicated mix
of stunning scenery and rich culture and history, juxtaposed with
generally poor infrastructure, widespread litter, and
often-disappointing service quality. Industry experts say that
although the travel and tourism sector is expanding, mainly driven
by business travel, growth is far below potential. Leisure tourism
growth is slow and inconsistent, primarily due to the absence of an
international promotional strategy and haphazard development
planning. Underreporting of business activities in the hospitality
industry makes it difficult to quantify the exact contribution of
tourism to GDP. Experts concur that a strategy for addressing these
problems should begin with greater inter-governmental agency
coordination and a greater awareness of the economic importance of
travel and tourism. End Summary.

ENORMOUS TOURISM POTENTIAL...

2. (U) Romania is blessed with incredible natural, cultural, and
historical attractions. Natural features include the majestic
Carpathian Mountains, the Danube Delta Biosphere Reserve, and 152
miles of the Black Sea coast. There are six UNESCO World Heritage
Sites, impressive medieval castles and fortresses, and many
picturesque rural villages where traditional ways of life seem
little changed from centuries past. Major Romanian cities are
connected by a good domestic air network and by the fourth largest
rail network in Europe. Young Romanians tend to be conversant in
several foreign languages, typically English, French, and Italian.

3. (U) Business travel is an important segment of Romanian travel
and tourism, driven primarily by strong inward investment flows and
the corresponding increase in foreign businesses with facilities in
Romania. In Bucharest, 90 percent of travel and tourism is
business-related, of which 60 percent is comprised of international
business visitors, according to tourism association reports. Over
50 percent of international business travelers stay at one of six
existing four- and five-star hotels, with a total capacity of 1,467
rooms. The World Travel and Tourism Council (WTTC) estimates that
Romanian business tourism will grow by 20 percent in 2008, compared
with an overall tourism growth forecast of 7.9 percent.

...BUT SERIOUS CHALLENGES

4. (U) Despite these attractions, there are serious handicaps that
are keeping Romania from realizing its full potential in attracting
foreign tourists, particularly in leisure travel. The main problem
areas were identified in a "Master Plan" for Romania drafted by the
United Nations World Tourism Organization (WTO) at the behest of the
Government of Romania (GOR) and released in early 2008. Pollution,
including Communist-era industrial ruins dotting the landscape and a
major litter problem brought on by societal indifference and poor
waste management, is one serious deterrent. Infrastructure, chiefly
poor road quality and the lack of trans-European highways, is
another concern. There is a general lack of awareness among
Romanians of the importance of tourism and its potential for their
economy, which manifests itself in the dearth of Tourism Information
Centers and signage to tourist sites. The Tourism Sector Committee
of the American Chamber of Commerce in Bucharest tells post that it
concurs with the Plan's conclusions, but notes that the Plan
contains only voluntary targets and is not binding on the GOR.

5. (SBU) In a July 3, 2008 meeting with EconOff, Paul Marasoiu,
President and CEO of the tourism consultancy company Peacock
Hotels/Global Hotel Management, echoed the above list of problems.
He added that the principal problem in his view is a lack of
attention and resources devoted to tourism by the Ministry of Small
and Medium Sized Enterprises, Trade, Tourism, and Liberal
Professions. Marasoiu said the fact that tourism is lumped into a
single ministry with so many other agencies and responsibilities is
an indication of the low regard in which it is held by the GOR.
Marasoiu complained that the tourism authority has suffered repeated
changes in management and the ministry under which it is
subordinated. He added that the GOR earmarks significantly smaller
budgets (3-4 million euro a year) for tourism promotion than do
regional competitors Hungary, Bulgaria, and Turkey.

6. (U) The GOR's lack of clear tourism policies has also come under
fire from both the WTO and the AmCham Tourism Committee. One of the
Master Plan's primary criticisms is that the GOR has failed to
produce a strong, positive brand for Romania as a tourism
destination. The AmCham Committee consensus is that there is a lack
of marketing, planning, and research at the national level, and
tourism offices abroad are ineffectual due to low staffing. Current
promotional activities, such as international tourist offices,
fairs, and advertising, are poorly coordinated and scattershot,
according to the Master Plan. Additionally, use of the internet for
information, promotion, and reservations is underdeveloped, and
Romania is not well represented on tourism websites.

BUCHAREST 00000575 002 OF 002

BETTER PLANNING NEEDS BETTER STATISTICS

7. (SBU) The GOR does not fare much better in tourism development
planning, which is fragmented and uncoordinated, according to the
Master Plan. Informal, unauthorized development projects;
over-development in ecologically sensitive tourist areas; discordant
architectural design; and sub-standard support infrastructure, such
as parking and toilets, are threats to future growth that have
arisen through haphazard planning. The Master Plan cites poorly
defined responsibilities and coordination between the national,
regional/county, and local/urban planning authorities as the
underlying causes.

8. (SBU) Local media challenged the veracity of tourism statistics
after the National Statistics Institute (INS) issued a yearly
tourism report in January 2008. The key media claim - that many
hotels and rural inns do not report much of their activities to the
INS in an attempt to conceal earnings and wages - was substantiated
by industry association representatives in discussions with EconOff.
Marasoiu said that the official statistics are meaningless, and
that hotels at all levels underreport activity. This makes accurate
research and planning all the more difficult for tourism
authorities.

DEVELOPMENT OPPORTUNITIES

9. (U) The State Secretary for Tourism in the Ministry for SMEs,
Trade, Tourism, and Liberal Professions, Lucia Morariu, told EconOff
in a July 14 meeting that the biggest missing piece in the tourist
sector is a major convention center. The Master Plan, Peacock's
Marasoiu, and the AmCham Tourism Committee members all identified a
modern conference center, able to host up to 10,000 participants, as
a top priority to raise Bucharest's profile as a major business
travel and tourism destination.

10. (U) There is also a strong need for additional hotel capacity,
particularly in the four- and five-star range. According to
Marasoiu, Bucharest loses five to ten major (defined as over 3,000
visitors) events a year due to a shortage of rooms. The Master Plan
reports that there is a major imbalance between the current room
capacity and future demands: there is an immediate demand for more
four- and five-star hotels; there are ample mid-level (two- and
three-star) hotels to meet forecasted demand until 2020; and there
is a huge oversupply of lower-grade accommodations. According to
Marasoiu and to WTTC studies, international chains looking at
expanding into Romania include Kempinsky, Hyatt, Starwood, Le
Meridian, and Sheraton. Marasoiu said that these chains typically
build larger capacity (250-400 rooms) four- and five-star hotels.
However, State Secretary Morariu told EconOff that none of them has
formally approached the authorities with firm plans so far.

COMMENT

11. (SBU) With the Romanian economy facing many continuing
challenges as it integrates into the EU, it is clear that tourism is
suffering from a lack of attention. The tourism agency within the
Ministry of SMEs and Trade is still trying to digest the 700-page
WTO Master Plan months after its release. State Secretary Morariu's
statements in the July 14 meeting indicate that she considers most
of the problems confronting the sector, such as infrastructure and
environmental degradation, to be outside the Ministry's domain, and
that there are no inter-agency mechanisms in place to address the
problems. Nearly every stakeholder EconOff met with expressed
pessimism that the Master Plan would be implemented, given its size,
lengthy list of problems, and the extensive coordination it would
require among GOR agencies and with the private sector. The AmCham
Tourism Committee, with post's cooperation, is engaging with the GOR
to help it prioritize a list of actions for the short and medium
term. Chief among these would be a request for greater inter-agency
coordination and a greater recognition of the economic importance of
tourism. End Comment.

TAUBMAN

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