TravelDailyNews: What are the trends that will drive Latin America’s tourism in 2007?

Sandra Carvao: Confidence levels remain generally high as for the continuation of the good performance that Latin America has presented in the last years. Intra-regional tourism is expected to continue perform very well, in particular in Central America following the decision of the leaders of El Salvador, Guatemala, Honduras and Nicaragua to move towards a single aviation market – giving flights between their countries the status of domestic flights. In the South, the stable exchange rate in Argentina is sustaining its competitive advantage derived from the peso’s devaluation in January 2002 while the growth trend of the country as a source market is benefiting the neighbouring destinations. Simultaneously, the continued favourable US dollar: euro exchange rate is expected to continue contributing in a positive manner to arrivals from Europe and from the USA. In a longer term, and according to the growth trend set in the UNWTO long term forecast Tourism 2020 Vision, arrivals to destinations in Latin America are forecast to grow above the world average. And although intraregional traffic is set to continue accounting for the majority of arrivals, the biggest growth is expected to originate from Europe and from Asia and the Pacific making long-haul arrivals represent around 30% of all arrivals in Central and South American against the actual 12% for Central America and the already 28% share in South America.

TDN: Latin America concentrates a great amount of US travelers. Is this trend going to continue in 2007?

S. C: Following the world pattern, most destinations are much dependent on intraregional traffic and in particular in arrivals from neighbouring countries. For destinations in Latin America this is also the case, though at varied levels, For example, it is much stronger in the case of Mexico and of destinations Central America than in the case of countries of South America. This overall trend is expected to be maintained. At the same time it is important to note that some destinations show a growing volume of arrivals from Europe as tourism development in those countries has been much focused on long haul markets. For example, Cuba or the Dominican Republic already attract a significant flow of travel from Europe, the same happening with Brazil where arrivals from Europe account for 29% of its almost 5 million tourists.

TDN: What are UNWTO’s estimations for 2006 tourist arrivals and tourism receipts in the region?

S. C: According to estimates based on data available up to August, international tourist arrivals to Central and South America did particularly well with a growth rate of 9 and 8% respectively. For the full year, both American subregions are forecast to keep the current trend. As for receipts, and though no estimates for the full year are yet available the excellent performance of most individual destinations in the first semester of 2006 - Guatemala (+15%), Nicaragua (+10%), Panamá (+16%), Argentina (+20%), Brazil (+13%), Colombia (+30%) - give a positive indication. Nonetheless, the overall results may somewhat be pulled down by the stagnation of receipts in Mexico as the country holds a share of more than 30% of all tourism receipts generated in Latin America.

TDN: Latin America region seems to have a strong dynamism in tourism figures over the last years. According to your opinion, what are the factors that contributed to this growth?

S. C: Indeed, the average growth of Latin America in the last years has significantly outpaced that of the world and of the Americas. Factors such as the good moment of the US economy which has encouraged Americans to travel abroad – US travel expenditure was up by nearly 5% through August. At the same time, the euro:dollar exchange rate has continued to favour European long-haul travel and, most importantly, intra-regional travel has been better than expected – boosted, among other factors, by increased marketing and promotion, improved access and investment in tourism. Nonetheless, the evolution of tourism to Latin America has been variable and overall not as positive as it could have been. Growth has not been as strong and fast as we have seen in other emerging regions such as Asia and the Pacific or the Middle East. While between 1990 and 2005 the share of the Middle East in world arrivals more than doubled from 2.3% to 4.8% and that of Asia and the Pacific increased from 12.8% to 19.3%, the share of Latin America grew only by 0.1 percentage points, from 6.4% to 6.5% This was due in great extend to the behaviour of destinations such as Mexico, impacted by the events of September 11 in terms of the US outbound market, Brazil and Uruguay, both with a sluggish performance in 2001 and 2002 under the negative effect of the situation in the Argentinean source market. Nonetheless, Latin destinations in South America still performed above average during this period due to the good results of Argentina, Bolivia, Colombia, a strong winner destination in the last five years, Peru and Venezuela. Latin America is often seen as a sleeping giant, as both volume and receipts are still comparatively very modest, certainly in relation to the resources and opportunities the various destinations offer. So there is still a big challenge of waking up this giant, which has an enormous untapped potential and which has been showing in recent years a new growing dynamics.

TDN: Which countries in the region will see an increase in their tourism figures? Are we going to witness any new markets emerging in the near future?

S. C: Many destinations in Latin America have been growing above average. For example, international tourist arrivals to destinations such as Guatemala, Honduras, Colombia or Peru have grown by 10% or more a year in the last five years as compared to the 3% growth rate for the world.

TDN: Where does Latin America’s tourism stand in relation to the global tourism industry?

S. C: The destinations of Latin America received in 2005 a total of over 52 million tourist arrivals, or nearly 7% of the world total. As compared to 2004 arrivals to these destinations grew by 10% or almost the double of the world growth. This volume of arrivals generated over US$ 34 billion or 5% of the world’s US$ 680 billion total receipts.

TDN: In what fields should Latin American countries improve in order to attract more tourists in the region?

S. C: See SWOT analysis below.

SWOT

Strenght

• Richness and diversity of unique resources: space, geography, nature, history, culture, people and authenticity;


• Reversed seasons in relation to major source markets in North America and Europe;


• Geographic proximity to important source markets such as USA and Canada;


• Historic, cultural and social ties with European source markets, in particular Spain, Portugal, Italy, UK, France, Germany and the Netherlands;


• Improved overall image and strong image in some products/destinations: e.g. sun and sea and cruise tourism in Mexico and in the Caribbean, nature and ecotourism in Costa Rica, cultural tourism in Mexico and South America;


• Growing attention of national governments to tourism development;

Debilidades

• Feeble accessibility and connectivity in terms of:
  
  
  
  1. infrastructure
  
  
  2. air connections and frequency
  
  
  3. border procedures and visa
  
  


• High concentration of demand in a limited number of destinations within each country;


• still weak regional source markets and limited development of intraregional market due in many cases to difficult access facilities;


• lack of strong image: resources of the region insufficiently known;


• Human resources;


• Comparatively low investment in promotion and marketing

Threats

• Increasing international competition from destinations which are very active in terms of tourism development: investment, legislation and promotion;


• Price competitiveness;


• Dependence on airlines from outside the region;


• Health threats, natural disasters and other risks: importance of setting warning and cooperation mechanisms in the area of risk management;


• Rising oil prices;


• increased border regulations in the USA;


• Congestion in natural and cultural sites

Opportunities

• Tourism as a key area for development;


• World and regional sustained economic growth: IMF’s September 2005 World Economic Outlook judged the recent economic recovery in the region as more sustainable than in previous periods;


• Political stability;


• Increased economic integration;


• Exchange rate and price advantage: a weak dollar and a strong euro stimulate Americans to travel the own continent and offer a competitive advantage in European source markets;


• Take-off of low-cost airlines could give an important boost to intraregional tourism;


• Growing market of time and money rich senior travellers both in North America and Europe;


• Safety and security image has comparatively improved, also because the perception of other regions has weakened due to terrorisms etc.;


• Recovery of air travel paves the way for long-haul tourism development in particular from Europe;


• Diversification of destinations and motivations leading consumers to search for new destinations and experiences;


• New travel patterns: independent travel, use of ICT for information and booking, direct booking and distribution channels lead to a decreased dependence on tour operators;


• Growing demand for products such as cruise holidays, nature and ecotourism and well-being tourism where these destinations have unique natural resources;


• Potential for the development of a diverse set of products;


• Sustainable tourism development;


• Development of multi-destination products/routes and marketing programmes (e.g. CentroAmerica)


• Increase public + private partnerships

From the previous analysis, several areas arise that may help to focus on the strengths, overcome weaknesses, minimize threats, and take the greatest possible advantage of opportunities for tourism development:

Legislation

Human Resources Development

Measurement of Tourism and Market Intelligence

Marketing and Promotion

Product development

Risk Assessment and Management

Cultural sites management

Relations with third countries and international organizations

Key factors for tourism development
According to the SWOT analysis above there are several key factors to consider in the further development of tourism in the American destinations of Iberoamerica.

1. Cooperation




• At the public level between ministries and other institutions involved in areas of key relevance for tourism: economy, culture, transport, immigration, security, etc.


• Between the public and private sectors


• Between national, regional and local stakeholders and public institutions


• At the transnational level: the cooperation that Central American destinations are currently undertaking under the slogan “Centroamerica, tan pequeña… tan grande...’ (see for more information www.visitcentroamerica.com), as well as the work developed by the Caribbean Tourism Organization (CTO) are excellent examples.


• At the international level with organizations such as UNWTO and others institutions that can play a key role in the area of tourism development such as the Banco Interamericano de Desarollo



2. Institutional and legal framework – further development of a favourable, effective, hassle-free, smooth and stable environment for investment and business



3. Infrastructure - further development of infrastructures in the areas of transport (to and within destination countries), accommodation and facilities for products such as Meetings, Cruise tourism



4. Diversification of destinations and product development – special interest products, nature and cultural routes, cruise tourism, adventure tourism, wellbeing



5. More and “better” marketing and promotion - planning, market intelligence, branding, segmentation, evaluation of promotional activities



6. Development of a set of different source markets, including:





• domestic market: often an important basis on which the sector can take off and be sustained



• short- and mid-haul regional market: both inbound (marketing and promotion aimed at exploiting those markets) and outbound (making it attractive for Americans to visit neighbouring countries instead of going overseas)) -- spread of travel into the emerging middle-classes as we have seen in Asia and the Middle East



• longer-haul markets, North America and Europe have outstanding prospects at the moment for expansion because of changed security perception and strong euro; Asian market could be targeted for niche products



• comunidades específicos, como nacionales residentes en el extranjero (emigrantes) o hispanohablantes en EEUU





7. Human resources development and training



8. Risk Assessment and Management



9. Sustainable Tourism Development - Tourism should be understood as a sector on its own that can play a vital role within the country’s economic and social structure. In order to assure reward in the long-term, planning and management should take place according to the principles of sustainable development.



10. Investigación, conocimiento y información sobe el sector incluyendo la Cuenta Satélite de Turismo (CST).

TDN: What does the future hold for Latin America’s outbound traffic?

S. C: Traffic from Latin America is still comparatively small. For example, the biggest tourism spender in the region, Mexico, occupies the 22nd post in terms of world source market regarding expenditure on international travel with a volume of US$ 8 billion in 2005. The following market in the region, Brazil, with around US$ 5 billion occupies position 28 while Argentina with US$ 3 billion is ranked 44th. Nonetheless, though from a small basis the recent evolution of outbound in the region has been positive and is expected to continue to do so as economies in the region improve and grow above average – GDP growth is set at 4.8% for 2006 as compared to the region’s 3.7% - factors such as access and supply infrastructures continue to improve further.

How UNWTO perceives the general situation in the region:

1. There is a clear political awareness regarding the (economic) contribution of the tourism sector.


2. Tourism policies are increasingly regarded as part of general policy objectives and gain weight within the legislative framework.


3. Both the private sector and tourism authorities are ever more professional at dealing with the tourism sector as an economic cluster and driver of socio-economic development.


4. Favorable global economic outlook: oil price is less volatile, the exchange rate advantage of the euro versus the US$ promotes European outbound tourism.


5. International tourism arrivals to the region is more diversified.


6. New products are designed and tourism destinations developed, satisfying the demand for responsible tourism (rural, ecological, cultural).


7. Increasingly solid vertical co-operation between the national tourism administration, regional/departamental and down to local authorities.