EconomyFinancialTourism welcomes summer with the highest prices in recent...

Tourism welcomes summer with the highest prices in recent years

After suffering one of the biggest blows in its history, tourism in Mexico fully enters the summer with the highest prices in recent years. Air transport and lodging services have not been exempt from inflation, which has been triggered not only by a sustained recovery in demand, but also by a rise in operating costs, mainly in the energy sector.

Inflation has hardly given travelers a break. In the first half of the year, regular air transport prices have increased at an average monthly rate of 24.3%, while the consumer price index for the accommodation sector has risen to an average of 12.6%.

In both cases, the rise in prices is higher than general inflation, which has increased at an average rate of 7.5% per month, and which until June stood at 7.99%, according to the National Consumer Price Index (INPC).

“Among services, the largest annual increases in prices are concentrated in tourist services due to the recovery in demand,” says Gabriela Siller, director of economic analysis at Banco Base, in a report on the INPC. “Although an increase in the number of coronavirus cases was observed in Mexico in June, the population has not adopted confinement measures that limit the activity of the service sector, which has allowed its recovery.”

The operational indicators of the airline sector account for this recovery. On the one hand, airports such as Cancun, Tijuana and Los Cabos already have more passengers than before the pandemic. In addition, the average occupancy of the 12 largest tourist centers closed June at an average of 59%, with destinations such as Cancún operating at occupancies of 80%, according to the Ministry of Tourism (Sectur).

Although the variations of the inflation indices have been smaller than in moments of rebound in demand, such as the one seen at the end of 2021, the indices per se are at the highest levels for a summer since at least 2011.

For Roberto Montalvo, a specialist in the tourism sector at the Universidad Iberoamericana, the indices seen in May and June have the potential to rise in July, the period of greatest growth in the reception of tourists.

“Inflation puts significant pressure on high season rates; I estimate that inflation of 13% is at least around 20%”, he warns. “It is going to shoot up due to temporality, it is inevitable, but also many of the inputs of the industry to operate, both the transportation part and the goods that traditionally feed a hotel, have become more expensive.”

For consumers in the tourism sector, the constant change in the prices of flights and hotels is common; therefore, the increases of the companies in the sector are assumed by the users, at a level where a balance is reached with the increase in costs.

“The strong demand has allowed us to gradually increase rates to compensate for the increase in fuel prices,” said Enrique Beltranena, general director and CEO of Volaris, quoted in the financial report for the first quarter of the year. “Our first quarter results give us confidence that demand continues to be strong in the markets where we operate and that we are able to align demand with our capacity,” he added.

For hotels, the recovery has been more segmented. Although the complexes located in cities have not yet recovered their pre-COVID-19 occupations, on the beaches the story is different: there is a strong demand with higher rates than in 2019.

“The resort hotels registered an occupancy of 76% with an available rate of 7,406 pesos, resulting in an effective rate of 5,606 pesos, 86% higher than the previous year and 30% higher than 2019,” said Grupo Posadas, the largest hotel chain in the country. country, in its financial report for the first quarter of the year.

However, as inflation continues to pick up, consumers are expected to increasingly opt for less expensive options, while in the international segment Mexico could stand out as a cheap option for markets such as the United States, although it will not stop competing with other markets that have recently lifted restrictions, such as Europe and South America.

“Traditionally, inflationary moments did benefit us because we became attractive in relation to the price. The issue is that, unlike other inflationary moments, we have a rise in prices but an exchange rate that does not move, so tourists do not see an exchange gain,” Montalvo warns. “This high differential means that this coming summer, even with trends towards December, people will once again turn to see these international destinations.”

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