EconomyFinancialTourism recovers and exceeds pre-pandemic prices in some segments

Tourism recovers and exceeds pre-pandemic prices in some segments

After the drop in travel demand plunged the prices of tourism-related services, at the end of 2021 the sector not only recovered pre-pandemic price levels, but in some cases exceeded them.

According to the National Consumer Price Index (INPC), the inflation of air transport services shot up 63% during December 2021 compared to the same period in 2020, a percentage that can be considered a ‘rebound’ considering that last year the inflation of these services was -30.6%.

Similarly, the prices of tourist package services increased by 20% compared to the previous year –when they fell -12.7% compared to 2019–, while the inflation of hotel services was 9%, which was not enough to compensate the 9.7% drop in 2020 prices.

For Francisco Madrid, director of the Anáhuac Tourism Competitiveness Center (Cicotur), this price increase corresponds to a trend that has been seen since the middle of last year, related to an increase in travel.

“There is a seasonal behavior due to the fact that normally people have more time and the quantity demanded increases and, consequently, prices rise. Easter, summer and the end of the year are an example”, he explains. “Today we see it very strong in the air part, but not in hotels, which are even slightly below the prices of December 2019. Hotels have not yet recovered, and that is not good news.”

Gerardo Herrera, an academic from the Universidad Iberoamericana, considers that inflation in the tourism sector responds to price flexibility that has been very common in the segment, which has presented extensive adjustments according to demand.

“Aluminum has risen, but companies cannot raise prices because the market can’t take it. Tourism does not have that”, he refers. “Consumer goods do have to think about it; in tourism you have an elasticity in prices that you don’t have in the industrial sector”.

When comparing the Consumer Price Index of December 2021 with respect to 2019, air transport and package tourist services register increases, but in the case of hotels, no month presented an improvement in prices compared to pre-pandemic levels, even when the rule among hoteliers aimed not to reduce rates in the face of falling demand.

For specialists, this may respond to less flexibility for hoteliers to lower costs, coupled with pressure in areas such as energy, which has afflicted the union for several years and has intensified in recent months.

“People are willing to pay for the flight, restaurants… but in the case of lodging, which is broader than just hotels, they seek to stay with friends, family or using alternative methods, such as Airbnb,” says Herrera. “People try to spend less right now.”

The search for lower prices could affect the mood of consumers in the tourism sector, especially as headline inflation continues to rise and the effects of the omicron variant of COVID-19 prevail.

Madrid points out that the January measurement will shed greater clarity on the evolution of the sector. “In December there is a slight decrease in consumer confidence compared to November. The first reading is that a cycle of increases in confidence is interrupted, specifically on the subject of travel. We were not far from reaching pre-pandemic levels, but It is one of the indicators that must be monitored.”

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