Mexico Tourism Report Q2 2008

2007 Arrivals Disappointing Full-year 2007 tourist arrivals figures released by the Ministry of Tourism (Sectur) were disappointing.

Total tourism arrivals for the year totalled 21.4 million, practically flat with the 21.35 million arrivals measured in 2006. As such, our forecast for arrivals of 22.02 million, representing growth of 2-3% y-o-y, was somewhat over-optimistic.

There were several reasons behind the poor performance of the Mexican tourism industry in 2007. First was the ongoing security situation, which shows little signs of improving. With violence particularly high around the border areas with the US, this has deterred cross-border trips by US citizens, traditionally a strong component of Mexican tourism. In addition, slowing economic growth in the US has reduced the arrival of US tourists. This trend is likely to continue in 2008, as the US economy threatens to slide into recession. Accordingly, we have reduced our 2008 forecast to 21.7 million arrivals, representing growth of 1.5%. Should the US economy show signs of greater resilience we will reconsider our forecasts.

Cruise Agreement Signed With arrivals from the US declining, Mexico is seeking other ways to boost the tourist industry. One may be via the cruise sector, which proved relatively resilient in 2007, with 6.8mn tourists arriving in Mexico on cruises during the year. In April 2008 Mexico signed an agreement with four other Central American countries - Honduras, El Salvador, Nicaragua and Costa Rica - to increase their competitiveness as a destination for cruise ships. The aim of this agreement is to increase co-operation between the five in terms of cruise organisation, involvement of cross-border local communities and in forging relations between governments, private cruise companies and local governments. Greater co-operation among Central American countries should help to improve prospects for the cruise industry in the medium term, although in the shorter term it too is likely to suffer from the downturn in outbound tourism from the US.

Aeromxico Launches Charter Service Major national carrier Aeromxico announced in early 2008 that it will enter the charter flight market, by launching new division Aeromxico Travel. Flights are expected to be launched by June 2008, and the division will initially operate with two McDonnell Douglas MD-83 aircraft and one McDonnell Douglas MD-97.

The launch marks a decision by Aeromxico to continue building up its domestic passenger base, following several years of slipping passenger figures and financial turbulence for the airline. Following its purchase by financial institution Banamex in late 2007, the airline now has more resources at its disposal and is attempting to woo customers via low-fare offers and increased routes.