Mexico Tourism Report Q3 2008

Q108 Arrivals Hold Up Q108 tourist arrivals released by the Ministry of Tourism (Sectur) indicate that tourism arrivals into the country in the first quarter remained steady, if not spectacular. Total tourist arrivals were 5.7 million, slightly higher than in Q107, when total arrivals reached 5.3 million. Of the Q108 arrivals, the greatest number was received in March, when 2.1 million tourists entered the country. This reflected an earlier Easter than usual, and may result in lower comparative figures for April 2008.

Of the tourists arriving in Q108, the greatest proportion arrived by air, representing 3.4 million arrivals.

We are encouraged that border tourists (defined as those who cross the border for one night before returning) continued to arrive in strong numbers; 1.8 million in Q108 despite rising violence in the USMexico border areas. However, overall we remain concerned about the prospects for industry growth in 2008. With the US economy continuing to slow, related tourism will also decline. We are therefore maintaining a conservative 2008 tourist arrivals forecast of 21.7 million arrivals, representing growth of 1.5%. Should the US economy show signs of greater resilience we will reconsider our forecasts.

Acapulco Initiative Launched President Felipe Calderon in May 2008 launched a restoration initiative in the coastal resort of Acapulco, pledging to spend US$42mn to 2012 in an effort to revitalise the city. Acapulco is one of the major Pacific coastal resorts, attracting approximately 6.0 million tourists per year. However, the city's popularity has declined in recent years. This is in part owing to violent turf warfare raging in the town, which is a drugs trans-shipment point, and also owing to infrastructure bottlenecks. Despite the city's status as a major resort, hotel construction has been slow in recent years, while the provision of utilities such as water is becoming increasingly unreliable. As such, the new project is designed to improve basic infrastructure - including road construction - with the aim of increasing the city's tourist potential once again.

VAT Rebates Planned In a bid to boost tourist revenues, the Mexican government has announced that it will return value-added tax (VAT) on purchases made in Mexico to tourists from June. At present, the government imposes a blanket VAT rate of up to 15.0% on all goods, whether purchased by Mexicans or tourists. From June this will be returned to tourists at the point of departure from Mexico, on presentation of a receipt. Purchases must be over MXN1,200 to qualify for the rebate. This rebate is designed to attract tourists towards Mexican shops, since purchases must be made from authorised stores. The government hopes that this will increase revenues, particularly of high-end goods, despite the fact that some rebates will be made.

Sums spent by foreigners increased y-o-y in 2007 although the number of tourists remained flat y-o-y. In 2007 foreign tourist revenues totalled US$12.9 billion, representing a 6.0% y-o-y increase.