Guide To Investing in Costa Rica Tourism
With Costa Rica breaking tourism arrival records in 2024 and the country's brand worldwide only getting stronger, Costa Rica has become a focus for foreign and local investments in tourism.
The government has a laissez-faire approach to the tourism industry, which, despite high taxes, continues to benefit from an accessible, English-speaking workforce that is service-oriented, strengthening the story for tourism investment.
Top Five Investment Opportunities in Costa Rica
Based on our research and insights from the team at Costa Rica Investments, the following are the top five investment vehicles offering the most opportunity:
- Hotels
- Vacation Rentals
- Tour Companies
- Transport
- Travel Agencies
Investments Options in Costa Rica’s Tourism Industry
The investment opportunities mentioned have significant differences. While some require substantial infrastructure investment, others are more service-oriented. Regardless, all present promising opportunities. Typically, net profit margins for these businesses range from 5-20%, depending on operational efficiency and scale. For example, a high-end hotel with more than 30 rooms in Costa Rica can generate 20%+ profitability in an optimal location.
Key Considerations for Hotel Investments In Costa Rica
Hotels are a popular investment choice among tourism investors, largely because the number of rooms and location significantly impact profitability. Based on our experience, a viable hotel investment should start with at least 15 rooms, with potential for expansion to 25-30 rooms or more to ensure sufficient profitability. Initial investments in hotels can begin at around $500,000.
Financing Challenges for Foreign Investors in Hotels in Costa Rica
A major challenge for foreign investors is the lack of financing options. Costa Rican banks generally do not provide loans to foreigners for hotel purchases, often requiring investors to structure the financing as a second home purchase. Additionally, the banks’ reluctance towards tourism investments stems from the typically slow resale of these assets.
Vacation Rentals in Costa Rica
Many individual investors are drawn to vacation rentals , a solid investment option due to the long rental season—active for 10 months of the year, unlike the typical 4-5 months in the US and Canada. The returns on vacation rentals can vary significantly depending on the location, but typically, net returns range from 3-7%. Beachfront properties, when managed well, can generate even higher returns, often exceeding 10%. Investments in these beach vacation rentals start at around $200,000.
Financial Considerations for Foreign Investors in Costa Rican Vacation Rentals
One challenge that impacts foreign investment in Costa Rica is the difficulty in accessing loans. Typically, all purchases are conducted 100% in cash, with some investors using equity from assets in their home countries, such as home equity lines of credit (HELOC). Although some banks offer financing to foreigners, the interest rates are usually high, ranging from 9.5-11%, with repayment periods of 10-15 years. When comparing the cost of these interest rates with the potential rental returns, the financial viability of such investments may not always be compelling. That said, since 2021, real estate values have steadily increased, leading many to view vacation rental investments in Costa Rica as a secure way to diversify their portfolio.
Service-Based Tourism Ventures in Costa Rica
Service-oriented tourism companies offer a lot of potential for investors looking to get a little more hands-on with their investments. With Costa Rica setting new tourism arrival records in 2024 and aiming to bring in over $385.00m in market volume by 2028 , the tourism market is ripe for growth. The relatively low initial investment required to start a tour, transport, or travel agency makes entry into the market accessible. And, while the competition may be strong, there's a high demand among tourists for unique and varied experiences across the country. Over the past years, we’ve seen niche service-focused travel companies, particularly those in the retreat and yoga sectors, perform very well.
Starting with as little as $20,000, investments in this sector are attractive, especially as many business owners are open to flexible pricing and terms, including owner financing options. The returns from these businesses can be substantial, often exceeding 20% when managed effectively.
Areas with Highest Investment Growth in Costa Rica in 2023
The Northern Guanacaste region is experiencing the most significant growth in tourism investment within Costa Rica. In 2024, Guanacaste International Airport reported a 23% increase in arrivals, surpassing San José 's growth rate of 9%. An analysis of occupancy data from both beach and mountain towns in Costa Rica reveals the top five areas with the highest tourism activity:
| Nosara | 55.60% |
| Tamarindo | 55.50% |
| Samara | 55.00% |
| Manuel Antonio | 54.70% |
| Monteverde | 54.10% |
Beach vs. Mountain Investment Opportunities in Costa Rica
Currently, based on our data, the most significant opportunities are found in the mountain regions of Costa Rica, specifically Arenal and Monteverde. Here, property and land values are approximately 25% of those in coastal areas, yet they offer similar, if not better, rental returns—often exceeding 10%. The key to these investments is finding the right location and property.
On the other hand, beach investments offer higher resellability. Properties in prime beach locations typically sell within three months, whereas mountain properties face less demand and a less developed resale market. Ultimately, the driving force behind real estate values is the cash flow they generate, which creates demand and boosts property values.
Costa Rican Beach Towns with Investment Potential
Up-and-coming beach towns such as Playa Avellanas , Playa Grande, Uvita , Samara, Playa Garza, and Pelada are experiencing steady growth and are poised for further expansion. These areas benefit from a limited supply of nearby locations combined with relatively affordable entry points. Our findings indicate that vacation rentals in these up-and-coming areas typically yield returns of 5-10%, depending on the services and amenities provided. Notably, properties featuring ocean views and pools tend to outperform those without such amenities by 50%.
Maximizing Returns on Vacation Rentals in Costa Rica
An analysis of the best-performing vacation rentals in Costa Rica reveals a clear trend: properties with more rooms generate higher revenue. However, as we mentioned before, location remains a crucial factor influencing Average Daily Rates (ADR). For example, ADRs in Papagayo can exceed $2,000 per night, while in Monteverde, they average around $250. The investment entry points also vary significantly, with properties in Papagayo starting at approximately $2.5 million, compared to $100,000 in Monteverde. Typically, we found that the sweet spot for return on investment happens in properties with five or more bedrooms, particularly those with great ocean views and large swimming pools.
A few examples of the country's top-performing vacation rentals are below:
- Punta de Vista : A fully-staffed, luxury, ten-bedroom, seaside villa with 180-degree ocean views in Manuel Antonio.
- Villa Sozo : A spectacular eight-bedroom, nine-and-a-half-bathroom luxury villa with resort-style amenities and on-site staff in Tamarindo.
- Pasha : A luxury estate set on nine acres in Santa Teresa, featuring over 15,000 sq ft (1500m2) of living space and 700 ft (200m) of pristine beachfront.
Building Strategic Partnerships in Costa Rica’s Tourism Industry
Investing in tourism in Costa Rica can be highly profitable, especially with the support of an excellent advisory group. Richard Bexon, Head of Development and Investments at Namu Travel / Costa Rican Vacations, explains that the tourism industry in Costa Rica operates differently than in most other Latin American countries. Here, local Destination Management Companies and Travel Agencies dominate 40-50% of the market, making a robust local network vital for immediate success. Notably, we’ve seen several major international brands facing challenges upon entering the Costa Rican market and only achieving success after forming partnerships with local advisory and marketing groups.
Legal and Tax Considerations for Tourism Investments in Costa Rica
Forming a great, knowledgeable team to understand the investment, legal, and tax landscape effectively is vital when investing in Costa Rica. Many investors fail to establish the proper operational and legal structures to optimize tax benefits, which can lead to costly consequences later. One of the initial important decisions to consider is whether to hold assets personally or within a corporation. If held in a corporation's name, it is important to determine how gains or losses will be managed—whether they will flow through to a foreign individual or corporation, or be taxed locally in Costa Rica. Additionally, in some cases, it may be advantageous for a foreign entity to loan funds to a Costa Rican corporation, as this can allow for repayment without incurring local taxes.
Investing in Costa Rica’s tourism industry offers substantial opportunities for growth and profitability. As we have explored, the key to success lies in choosing the right investment vehicles, understanding the local market dynamics, and partnering with experienced advisors who can navigate the complexities of the legal and tax landscape. Whether you are considering beachfront properties, mountain retreats, or service-based tourism enterprises, the potential for high returns is significant.
Ready to Capitalize on the Thriving Tourism Sector in Costa Rica?
Richard Bexon, from Investing Costa Rica , can provide the insights and support you need to make informed decisions and maximize your investment returns. Build your success story in one of the world’s most promising tourism markets.
