[Richard Bexon]
Good afternoon, James. How you doing? All good.
[James Neale]
Thank you, Richard. How are you? Good.
[Richard Bexon]
It feels weird. I mean, always when I interview people here on the podcast in the office, it kind of feels weird because we usually are talking face to face or in the virtual world a lot of the time, but I understand you’re in Manuel Antonio at the moment.
[James Neale]
Yes, I’m in Manuel Antonio, checking out some of our projects and looking for some other stuff as well. So hopefully the double.
[Richard Bexon]
Yeah, I know you’ve found quite a bit of property that we’ve bought over the years anyway. So yeah, appreciate your hard work, your tough life down there in Manuel Antonio at the moment. It’s tough life.
Yeah, thank you. One’s got to do it. But anyway, James, the first question I’d love to ask is, there’s been a lot of volatility in Western markets recently, and I think it’s probably here to stay for the foreseeable future.
But I mean, what are you seeing happening in the data at the moment?
[James Neale]
So I agree with you. I think it’s probably going to stay around for a while, this volatility. In the data, I mostly look at arrival data, which gauges from tourists coming in as well as vacation rentals.
And you know what? This year has been a decrease in both of those categories compared to 2024 so far this year in Q1. But better than 2019, which I would say is probably one of the last years of full, reliable data without the COVID-19 skewing things.
Even before COVID was a huge deal, there’s still talk and some hesitation from people. So it’s better than 2019. So the general trend is still going upwards.
But 2025 so far has been a decrease in terms of arrivals of tourists, as well as the vacation rentals main categories, such as their average daily rate, as well as their occupancy. But vacation rentals have been increasing. Every month, vacation rentals keep climbing and climbing.
It’s kind of loitering around the 40,000 mark at the moment. So that’s sort of a quick, brief breakdown without going too specific.
[Richard Bexon]
I mean, that 40,000 mark pre-pandemic, I think was 20,000. So the number of vacation rentals has kind of doubled here. Again, I always say to people of like, look, if we compare ourselves to the previous years, I call them a steroid era.
We really have to go back to 2019. Costa Rica’s numbers are still good. We’re seeing a bit of a reduction this year.
I mean, I think overall, we’ll see a reduction of maybe anywhere from 6% to 8%, I think, probably overall of arrivals. Definitely moving back to seasonality. We’ve discussed that and look at the data.
We have a lot of meetings just talking about data. But I mean, Costa Rica is still strong. And I still think there’s opportunity in a lot of markets here.
I just think some markets got overwhelmed. I think the, you know, Dominicao area, you know, Dominicao, especially with the markets got overwhelmed. Jaco is probably starting to get overwhelmed as well.
You know, even the Flamingo area is as well. And there’s a lot of stuff coming online up in the Playa del Corco. But I mean, you’d mentioned that, you know, let’s get into a little bit about vacation rental market in Costa Rica.
You know, I think you’d mentioned there that the, you know, there’s a lot of listings coming on online. ADRs are shifting a little bit, average daily rates, and occupancy is dropping. But I mean, can you give us just an overall picture of what you’re seeing happening?
[James Neale]
Yeah. So overall listings are increasing. They are increasing at a slower rate than in 2019, 2000, you know, the steroid era, which you just mentioned.
Back then, you know, we were seeing increases, you know, year over year of 30%. The whole market was growing by, you know, 30 to 40% every year. Now it’s, I’m seeing it lower a lot to around 15% it was this month.
Again, with ADRs and occupancy, those have been decreasing year on year. This year, but what you have to remember is it’s been increasing since 2017, I believe is when we started tracking this. So although it’s decreased this year, overall, you know, this is one small little decline on what has been a rather large increase of these variables over the last few years.
Yeah. Yeah. It’s still positive.
And just because places, you know, are looking bad this year, it doesn’t mean they are. Let’s be clear.
[Richard Bexon]
I mean, they’re still doing pretty well, if that makes sense. They’re still making a lot of money. It’s just that like, if you compare it to previous years, it may be not as good, but it’s still doing very, very well.
You know, I mean, typical returns, you know, on, I mean, the top stuff is over 10%, you know, probably the mid stuff, you know, five, 6%, and then kind of some of the lower end stuff and not key markets is probably down in the two, 3%. But yeah, I mean, I think it’s, you know, it’s difficult because you have to understand the market here to understand if like, if you just looked at the data this, like last year to this year, you’d go, Oh, like we’re off. And it’s like, yeah, but you have to understand that was a peak, but it’s still good and still good compared to other destinations.
I mean, I think there’s like an international investment market out there that tracks all countries throughout the world. And Costa Rica is still one of the highest ones for return on investment for investing in real estate as a vacation rental. I think some of the others were like Croatia and those ones and Malta, I think was on there.
But Costa Rica continues to lead Latin America. And I think Columbia has started to come on as well. But I mean, you’d mentioned there a little bit, like Q1 2025 compared to Q1 2024, you know, how’s that looking?
Is ADR steady? Occupancy probably is decreasing, which is, you know, which is the tendency, but like ADR is still staying steady in some markets.
[James Neale]
Yeah. Actually in quite a lot of markets, it’s staying steady or increasing. So I’m going to throw out a few names of locations and La Fortuna and Tamarindo, actually, you know, those are increasing.
Those are doing pretty, pretty well. You know, year over year, you know, the ADRs are increasing by 10%, whether that means the demand is rising or the caliber of rental is increasing as well as becoming more of a luxury market. Maybe some of these rentals are, you know, playing to different demographics, you know, that is also another possibility.
But then places, as you mentioned, like Uvita and Nosara have seen decreases in their ADRs. Yeah. And, you know, they’ve come down from what’s quite high.
You know, you can’t really compare those two markets. Like the ADR has decreased in Nosara, but that ADR was way up compared to many other markets. Occupancy everywhere has taken a decrease.
So I won’t mention anywhere because it has decreased in most places, you know, but not by too much. There are some markets that have seen it far more, but overall it’s been staying pretty steady if taking some hits. So what are the areas of Costa Rica?
[Richard Bexon]
Because I’m sure a lot of people listening to the podcast are interested. What are the areas of Costa Rica that are still performing well and which of the markets that are hit the hardest?
[James Neale]
So hit the hardest, Uvita, that’s a pretty clear one that I’ve seen. I track a lot of data, as I mentioned, and, you know, from even the amounts of listings year over year in Q1, that’s decreased. It’s strange that I rarely ever see that.
It’s decreased by eight. So nothing. It’s pretty, yeah, it’s whatever.
It’s not a meaningful amount, but the occupancy has been decreasing by quite a bit. I think that was roughly 12%. ADR, similar story, same numbers.
So that one was a clear outlier in that sense. And, you know, ones that stand out, again, I kind of answered my own question with the one before, but La Fortuna just keeps on showing signs for improvement. Monteverde as well.
Tamarindo has always seemed strong. And, you know, I wasn’t expecting this, but Jaco, it’s such a big market. Yeah, it’s pretty, pretty resilient.
It seems it didn’t really take too much of a big hit. But, you know, those are those things I’m going to throw out without going too into depth.
[Richard Bexon]
No, I mean, we can go into depth. I mean, I think a lot of people here would be interested to kind of know a little bit more. I mean, you know, Jaco is interesting because it also has a bit of a, quite a bit of a local market here as well, which I think is good.
You know, so it doesn’t just always require, you know, tourists coming in. Yes, but it’s also local tourists coming in as well. And I mean, that’s the interesting thing of probably, you know, 30 to 40% of the revenue there is probably coming from local TCOs, you know, and the rest is coming from foreigners.
So it’s going to be interesting. But what’s going to be interesting in Jaco is to see when all these new product comes online, because inventory is going to double over the next two years there. If all these projects do happen, of course, you know, Ulvita, you know, a broker told me the other day, there are over 100 homes for sale between Dominical and Ojochao that are over a million dollars.
So, you know, a lot of stuff was bought there. So, you know, I always say, you know, price meets in the middle of demand and supply where demand and supply is. And I think we’re seeing that in some markets, you know, Nosada got hit pretty hard.
You know, I think Santa Teresa got hit pretty hard as well. But, you know, Tamarindo continues to do well. Manuel Antonio does well.
You know, and Monteverde, you know, is outperforming as well. You know, I mean, that’s an area we’re looking to actively invest in as well. And just, yeah, I mean, it’s just an area that wasn’t on our market, on our radar.
But like, once we started to see the hotel data there as well, and the demand data from, you know, from some of the agencies here, we were like, okay, you know, maybe we should take a look at this. So we are. But it’s going to be, look, I mean, I think investing in Costa Rica is always interesting.
You need not just the real estate perspective. You also need the tourism perspective. And that’s what we do.
You know, and most people don’t. You have one side that sits on one side and one side that sits on the other. And a lot of the time, they never talk.
But if you were to guess on how Q2 2025 is going to act, what do you think?
[James Neale]
Yeah, so as you said, guess, this is definitely going to be, I guess, educated with the data. This year, Semana Santa, the Holy Week, fell in April. So I imagine April will be pretty similar to March in the sense that we’ll see slight decreases in, you know, arrivals as well as vacation rental key statistics.
And May and June will take a further hit. So April won’t, I think, won’t be too, you know, too impacted, whereas the other months will. Yeah.
No, that’s typical. That’s very clear. It goes in sort of a wave, as you mentioned, seasonality.
I’m sure you’ll be able to explain it far better than me. But, you know, that’s typical. And, you know, it’s just a return to that.
Whereas April, I think, you know, because of the landing of Holy Week and how everything, it will not be as fun.
[Richard Bexon]
I agree. I mean, when we have the Easter break in March, we see April being like the start of low season. But when Easter is in April, we don’t see it until after Easter.
And Easter was pretty late in the year this year. So I think, again, April should be a good month, but May and June, I think, are going to be difficult. You know, a lot of the tourism companies that I know and hotels are saying that it’s very quiet at the moment in May, you know, demand wise.
But I think also a lot of people, you know, I was in one of the country’s largest luxury property management companies yesterday that we do some work with. And they were mentioning of like, we’re just getting a lot of last minute stuff, like last minute stuff on high ticket stuff as well. You know, so I think that because of the volatility, people aren’t making plans a long way out and kind of pulling the trigger probably a little bit more short term.
So we’ll see what happens there. So, I mean, where do you think, and maybe you’ve answered this already, but where do you think there is still opportunity to invest in Costa Rica? And what would you invest into as well, based on what you’ve seen?
[James Neale]
Okay. Yeah. I like this question because I hear it often when I’m listening in on some of your meetings.
But, you know, I like mountainous, you know, mountainous areas here. I think that is not like super tapped into yet. I understand that the demographic that goes to the Santos region, so Dota Copay is maybe a more mature demographic than some of the other beach locations.
And La Fortuna obviously is big. So like a mountainous region, Monteverde, you know, in that Dota region where it can connect to a beach holiday. That’s one of the beauties of La Fortuna is that it’s on the way to Guanacaste if you land in San Jose, on the way to Manuel Antonio if you land in Liberia, and that’s what you decide to do.
Places like Monteverde have that ability as well, because it’s on the way to Guanacaste. Places like Dota, well, I say Dota, you know, Los Santos region, that whole area can be on the way to Manuel Antonio. There is a loop around that way.
Yeah. You know, there’s so much to see there. It’s a completely different experience, which is, you know, why it has so much potential and why I feel, you know, some other guests you’ve had have a very similar answer.
[Richard Bexon]
So yeah, I mean, look, everyone’s looking at the beach, dude. No one’s looking at the mountains and the mountain data is just as good, if not better than the beach sometimes. So yeah.
And combining the two, a lot of clients, you know, combine the two. So yeah, I kind of agree on that. You know, I mean, it’s a bit of a biased conversation just because, again, you know, you listen to a lot of my conversations and are in a lot of the meetings.
So you kind of, you know, you have some bias as well. But are there any unique products out there? Because again, you know, I always get concerned that Costa Rica is getting a little crusty.
Everyone’s just building modern tropical, you know, all the time. But is there any unique properties out there, which I think was something that made Costa Rica, you know, unique and, you know, as they said, no artificial ingredients back in the nineties. But like, is there any unique stuff that you’re seeing that’s doing very well?
That’s not my yurt.
[James Neale]
Yeah. Well, I got to cross off the first answer onto that. But, you know, there are some, you know, when you go on Airbnb, anyone can see this.
You go to Costa Rica and press unique, they even have more specific filters, but they range from things that are considered as bird nests.
[Richard Bexon]
Yeah.
[James Neale]
You know, they, you know, a thatched roof looking over the bay of Santa Teresa, I think maybe or Papagayo. I can’t remember one of the two with private hot tubs. They’re technically unique.
And they’re like bird nests, the little pods propped up in the in the trees, as well as being actual, you know, tree houses made out of tree. It’s like built into a tree in Cahuita. It’s crazy.
It just has wood everywhere, you know, curved, somehow built through this humongous tree. There are other things that are unique and maybe not what everyone wants, but they are different, like renovated buses that are turned into stationary homes. Those do quite well in some places.
I understand their appeal of them. They’re cool. They’re affordable.
And they’re everywhere. I mean, they work well, as well as farmstays. They’re, you know, those do surprisingly very well.
That’s in the sea that farmstays do well. A farmstay. Yeah, it’s like a farm.
That’s, you know, it’s modern, you know, it’s, it’s not modern tropical. It’s not like a beachy stuff that you see. Yeah.
Sorry, but it’s, you know, a farmstay. It’s essentially a farmhouse surrounded by sheep farm. And it’s, you know, it’s very cool.
Wow. And I mean, all these things do pretty well. Yeah, they do.
I mean, it’s difficult to compare them with the real big hitters because, you know, the best things in the market are always these amazing view villas and top tourist destinations. So you’ll never see them when you look at the top 100 listings. Yeah.
Costa Rica, they’re not going to be breaking in there. But when you filter down to some specifics and some regions, these things really stick out to perform well, as well as, you know, you’ll mainly see it performing best in its occupancy area. So it’ll be full for more of the year just because of its uniqueness.
Yeah. Whether the ADR can, you know, catch up is a different story. Because, you know, as I mentioned, if it’s some converted bus, you can’t be charging the same rates, although the occupancy will be decent.
So there’s this balance that you need to play, as you mentioned earlier.
[Richard Bexon]
Yeah, it’s interesting. You know, we do a lot of analysis where, you know, we’re looking at stuff that has high occupancy and they’re figuring out like, how would we drive that ADR up? You know, I mean, you know, again, just the year is a great example that, you know, we started like $90 and we’re nearly, you know, $350 over, you know, the top period here.
So, you know, it can be done. It’s just understanding what it is that you’re looking at. And, you know, because we have such a broad range, you know, and a lot of stuff that we look at, we’re able to see that stuff.
And as you said, they’re looking at occupancy sometime is the best thing to do, because you’re not going to see it in the ADR numbers, because it’s going to be, you know, all the revenue numbers, because it’ll be down there. But like, the investment is probably a 10th of what a luxury home could be, probably even less. And that’s what we look at is how much do we have to invest?
And what is the return a lot of the time for our clients? So, so yeah, I mean, like, again, to buy a bus and retrofit, it isn’t that expensive.
[James Neale]
Absolutely. Yeah. And one of the best ways to, I think, increase the initial ADR, I know you’ve been taking some steps is to just get really, really top-notch marketing and, you know, keeping it looking awesome, because that’s the point, people are making their decision where their eyes straight away.
Yeah. Those first impressions matter. So, you know, if you’ve got really good market for a retrofitted bus, you know, maybe you stand a little bit of a better chance against something that’s kind of been taken with like a phone camera and just like chucked up on listing.
Yeah.
[Richard Bexon]
Well, James, this has been great. I mean, we could talk all day about data. We do anyway.
So, you know, but I just wanted to give the listeners kind of a bit of an idea of kind of, you know, our thought process and get an idea of what’s happening in the market. I mean, it’s still good. It’s just not as good as it was last year.
So, you know, and there are a lot of diamonds that are still out there, you know, kind of hidden in the rough. And I think, you know, I’d encourage people to do a little bit more of a unique product, you know, if it’s just pure investment. You know, I’d love staying in my year, don’t get me wrong, but would I stay in a week?
I think maybe a little too much, but I could, because it’s very, you know, it’s very comfortable, but I don’t know whether you want to live in a bus for a week, but like, again, if you’re young and like, that’s what you want to do, kind of, kind of go for it. But I mean, my last question for you, James, is if you inherited $500,000 and you had to invest it into a business or real estate in Costa Rica, what would you invest it into? And it can’t, the answer can’t be give it to me.
[James Neale]
Yeah, well, I’m going to come out with a bit of an interesting one, probably an answer that’s not too typical or thought about it’s, it’s still to do with real estate. I would try and rent slash buy these bodegas. So kind of industrial units that are small and kind of break them up into 10 or so rooms and fit them out with, you know, top notch or not top notch, but, you know, pretty decent DJ equipment that people can play and record and practice with.
So that would include speakers, air conditioning, and, you know, a DJ deck. I say this because, you know, this is a proven product in the UK, and I know it was very popular amongst me and my friends when we were, you know, when we were there and, you know, 24 seven. And so when you, when you please all with codes and you can just go, go there, practice, go with a few friends.
And it’s fun. And I think that could possibly do quite well from what I understand, you know, DJing is sort of coming up and people are enjoying learning it. You don’t have to be the best.
It’s not going to be most people’s professions, but people like being able to do it as well as it being an activity for a rainy day, which I, you know, I look for very actively. It’s raining at the moment. Well, luckily not here.
[Richard Bexon]
So that’s an interesting one that you say that James, it sounds like it’s like a mini private nightclub inside a warehouse. If that makes it like 10 mini private nightclubs where you go with your friends, you can DJ, have a good time drink. Very interesting.
[James Neale]
Yeah. It’s a, you know, it’s a, it’s a different one. It’s instead of just land banking something in a top area or foreseeable top area.
If I had this to just, you know, do something that’s cool, passionate, I’m, or I’m passionate about it. That’s something I think is interesting and very unique, even to the whole continent, basically. I’m not sure that exists anywhere outside of the U S and Europe probably.
So, you know, it’s something new, maybe too new, but it’s something I think is cool and is, you know, will be useful in the future.
[Richard Bexon]
Well, it’s definitely probably one of the most different ones that we’ve had on here. You know, typically people are just like, I’d buy a vacation rental or something, but I like the uniqueness of it for sure. James, it’s been absolute pleasure having you here on the podcast.
I appreciate you taking the time to join us here and kind of share some of this. Anyone that wants to reach out to us can all the contact details are in the description down below, but I appreciate you joining us on the podcast, sir. Absolutely.
Thank you very much. Anytime. No worries.