SALVADOR, Brazil - This beautiful coastal city rewards visitors with a variety of intense experiences.
In a single day, you can stroll back in time along the cobblestone streets of the historic Pelourinho district and take in its blend of restored and decaying colonial architecture. You can grab a bite of such typical Bahian foods as acaraje, ground black-eyed peas deep fried in dende oil and served with dried shrimp. After a leisurely afternoon soaking up the sun at the beach, you can savor a folklore show exemplifying the distinctive African-tinged culture of Bahia, including the capoeira martial-arts dance brought to Brazil by Angolan slaves.
For tourism entrepreneurs, such as the executives of Invest Tur, a start-up company engaged in tourism-oriented real-estate development, Bahia holds tremendous untapped potential.
"Brazil has an incredible mixture of natural beauty, [pleasant] climate, a welcoming population and a vast number of different cultural attractions," said Carlos Novis Guimaraes, chairman of Invest Tur's board.
"From the Amazon to tropical forests to colonial history to beaches, it's a myriad of natural and very high-level attractions that have been vastly underdeveloped."
These attractions, combined with a very positive macroeconomic view of Brazil, encouraged Guimaraes and his partners to launch Invest Tur.
In addition, soccer-mad Brazil is gearing up to host the 2014 World Cup, which will accelerate tourist inflows and speed up investment in tourism and infrastructure.
Last July, Invest Tur raised about $500 million in an initial public offering. Its revenue comes from the development and sale of second homes, as well as from co-development and co-ownership of resorts.
Invest Tur buys land and then builds luxurious hotels and second homes. It has about 15 projects in its portfolio. Txai Resort Itacare in Bahia is currently the lone hotel the company has in operation; other projects are in various staged of development.
"We're moving very rapidly," Guimaraes said. "When competition comes, we'd be heavily invested."
In late January, Credit Suisse initiated coverage of Invest Tur with an outperform rating, describing it as "a unique play in the high-growth Brazilian tourism sector."
"Invest Tur is the only listed real-estate company to tap the barely explored potential for tourism second-home real estate in Brazil," wrote Credit Suisse analyst Marcelo Telles in a report. Read more about investing in Brazil.
The availability of land at attractive prices in key tourist destinations for second-home developments creates room for projects with high returns of between 30% and 35%, while returns are between 16% and 20% for the hotel segment, Telles said.
Invest Tur has announced agreements to co-develop projects with several international hotel groups, including Six Senses Resorts & Spas as well as Starwood Hotels & Resorts Worldwide
Invest Tur has projects in the states of Bahia, Ceara, Alagoas, Rio de Janeiro, Santa Catarina and Sao Paulo. With six projects, Bahia is currently the most important state for the company.
"Here in Bahia, there is a very clear situation now that tourism is growing a lot, and many foreign companies, mainly from Portugal and Spain, are arriving and purchasing pieces of land by the sea, building resorts and condos," said Ingrid Weckerle, financial director of Barry Callebaut Brasil S.A., which produces semifinished cocoa products.
Weckerle has witnessed the rise of the tourism industry, as Bahia's cocoa production, which is crucial for her company's business, has been devastated by a disease called witches'-broom. Read more about Brazil's cocoa industry.
Tourism in Bahia is growing at about 5% to 8% a year and brings in about $1.1 billion in revenue for the state. The total number of visitors to Bahia rose from 3.6 million in 1997 to nearly 5 million in 2005, according to data from Bahia's Secretariat of Tourism. The top three source countries for foreign tourists are Portugal, Argentina and France.
"In the northeast, you'll find how aligned the government is around promoting tourism," Guimaraes said. For example, he said, "Bahia has already made more investments in infrastructure than some of the other states." Watch related video report.
In 2007, Bahia's public-sector tourism-related investments totaled about $200 million, much higher than the annual average over the previous 15 years. As for private investment, by 2017, Bahia should have received tourism-related investment of around $3.3 billion.
Invest Tur's clients include domestic travelers and a mixture of Latin Americans, Europeans and North Americans. Most Europeans don't need a visa to enter Brazil, while U.S. citizens are required to get a visa before they travel.
"The good news is I am not overly dependent on any one segment -- foreigners or locals," Guimarães said.
Brazil is "different from central America and the Caribbean, where you don't have a local population with demand for these services," he said. "Here you have a big population with growing incomes, and the ability and willingness to purchase second homes."
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