As climate change intensifies, storms and sea-level rise pose growing threats to Caribbean coastal communities' infrastructure and livelihoods. Coral reefs—critical natural barriers that reduce wave energy—have lost more than 50% of their coverage since the 1970s, weakening their protective role against floods. The Iberostar group has a coral reef program aimed at restoring the health of these ecosystems. Besides the many benefits in terms of ecosystems generated by the program, one of the financial benefits the hotel group obtains from it is the lower flooding risk, which translates into financial gains due to avoided losses in tourism visitation.
Conservation Strategy Fund (CSF) conducted a financial evaluation of this coral reef restoration program led by the Iberostar Group in Mexico’s Riviera Maya, assessing its potential to reduce flood risks and enhance economic resilience in coastal tourism.
Using a cost-benefit analysis over a 10-year horizon, CSF measured the project’s effectiveness by calculating the avoided tourism revenue losses resulting from reduced flood risk. Iberostar supplied restoration costs, and benefits were modeled assuming that benefits are observed after a five-year recovery period.
The analysis found that even small reductions in flood risk (as low as 0.29%) deliver a positive return on investment. Under a moderate scenario (2.5% risk reduction), the project yields a Net Present Value (NPV) of USD 7.9 million, a Benefit-Cost Ratio (B/C) of 8.71, and an Internal Rate of Return (IRR) of 87%, with a payback period of six years. Sensitivity tests confirmed the project’s economic viability under various cost and effectiveness assumptions.
These results highlight coral reef restoration as a cost-effective, nature-based solution for climate adaptation—protecting communities while sustaining tourism-driven economies. The study supports broader adoption and scaling of reef restoration as a dual-benefit strategy for environmental resilience and financial sustainability in the face of climate change.
__
Photo: Coral Reefs in Mexico's Riviera Maya
Photo Credit: Iberostar Group