Economics: Tourism approached pre-Covid levels by the second quarter, but based on some indicators has since stalled and turned negative

MEXICO - Report 20 Nov 2023 by Mauricio Gonzalez and Francisco González

Tourism data this year shows that many areas of activity have largely rebounded to pre-pandemic levels. However, the latest figures suggest that a stagnation trend may have begun to emerge in recent months. Among tourism GDP indicators, it is worth noting that the consumption of tourism-related goods decreased 5.0% yoy in the second quarter of this year, a result that contrasted with a 6.3% increase in demand for tourism-related services. Consumption indicators also depicted an important contrast between the domestic column, which increased 7.8%, and the spending of foreign travelers, which contracted by more than 15%.

Along those same lines, the average expenditure of foreign tourists accumulated a drop of 4.6% through September when expressed in dollars, according to figures from Banxico. This decline is even greater when expressed in pesos given the effect of exchange rate appreciation, which not only implies relatively lower revenues when calculated in local currency, but also that goods and services demanded by foreign tourists are more expensive in relative terms.

Hotel occupancy in the country's 70 main destinations climbed back above pre-pandemic levels in 2022, and in the first nine months of 2023 rose to around 55% yoy on average. For this full year it is estimated that hotel occupancy will be down at beach resorts and up in cities.

It is important to consider that the strategies and decisions of this administration have not contributed to an expansion of tourism, which adds to a worsening of security in the main beach resorts, border cities and now on the country's highways. This week’s Economic Outlook analyzes the recent evolution of tourism activity, which faces a complicated context that will make a significant reactivation difficult to achieve.

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