Don't Cry For Me Argentina - Buenos Aires Hoteliers At Last Start To See Some Signs Of Improvement - Deloitte Reports
Argentina has certainly had more than its fair share of economic, social and political problems over recent years, which have naturally had a knock-on effect on the tourism industry. 2002 saw the country enter its fourth year of recession - GDP contracted by 10.9 percent, unemployment rose to almost 19 percent and peso was devalued by 70 percent in January.
Despite these challenges many are optimistic about the country's future. Figures from the Economist Intelligence Unit (EIU) show that after 17 consecutive quarters of declines, Argentina's GDP grew by 5.4 percent during the first quarter of 2003 (however 2002 performance was amongst the worst months in decades). Overall GDP is forecast to grow by 5.1 percent during 2003 and unemployment is expected to fall to just over 16 percent. In May, the country elected a new president, Nestor Kirchner, albeit with a small majority. Last week however saw the departure of German Perez, the secretary for tourism, plus 11 other officials from the government. The devaluation of the peso as well as announcements earlier this year by some airlines of plans to increase services to Argentina bode well future of the tourism industry.
During the 1990's tourism to Argentina expanded rapidly, between 1996-2000 visitor numbers increased at an average annual rate of 3 percent. However by 2001, both global economic conditions as well as internal challenges were taking hold. According to data from the Secretaria de Turismo de la Nacion in 2001 visitor numbers to Argentina fell by 9.9 percent to 2.6 million compared to the prior year - the largest decline in visitor numbers to the country since 1991. Whilst the main source market in terms of visitor arrivals to Argentina is South America, with Chile, Paraguay and Uruguay ranking amongst the top three, it is Europe, North America and Chile that generate the highest levels of tourism expenditure for the country. Given the importance of the European and North American market it is perhaps not surprising that in 2001 tourism expenditure also fell by 11.7 percent to US$2.5bn compared to the prior year.
Although more recent figures for the country as a whole are not yet available, tourism figures from the country's capital Buenos Aires are encouraging. Latest figures from the CEDEM (Centro de Estudios para el Desarollo Economico) show strong growth in tourism arrivals to the city during the first half of 2003 compared to the same period in 2002. During the first six months of the year, the number of international and national visitors to the city increased by 45.5 percent to 3.4 million, whilst international visitor numbers alone, increased by an impressive 181.2 percent to 1.5 million.
The abandonment of fixed parity in January 2002 and the consequential devaluation of the peso have had a positive impact on tourism. Once considered to be one of the most expensive countries in South America, the devaluation of the peso has sharply reduced prices for visitors, making Argentina a more affordable option than previously. As well as luring visitors from neighbouring countries, the unfavourable exchange rate has kept Argentineans close to home.
Although a number of international carriers reduced their services to Argentina in 2002, the good news is that a number of airlines have recently announced plans to start increasing their services to the country again. Iberia plan to increase the number of weekly flights to Madrid from seven to ten, American Airlines plan to fly daily to Dallas and Lufthansa will in December resume daily flights to Germany. Also, Aerolineas Argentina, the national airline, which until recently has been in bankruptcy proceedings managed to post a profit during the first half of 2003. In November the airline is expected to increase the number of services provided - flying three times a week to Sydney, daily to Miami and ten times a week to Madrid.
Monthly hotel performance data on Buenos Aires from the HotelBenchmark Survey by Deloitte & Touche shows that even during 2000 hotels in the capital were still performing fairly well considering the economic situation. It was not until the beginning of 2001 that hotels really started to suffer. Year-end data shows that compared to 2000, occupancy levels fell from 59 percent to 53 percent, whilst average room rates declined by US$31 to US$144. 2002 saw hotel performance decline further still, with occupancy falling to 42 percent, whilst average room rates fell to US$84 - this is approximately 40 percent lower than in 2001 and 50 percent lower than in 2000. It is however important to remember, that the fixed parity of the dollar to the peso was abandoned at the beginning of 2002 therefore the currency devaluation will have a bearing on these figures.
Data for the first six months of 2003 outlined in the table below shows improved performance for hotels in Buenos Aires compared to the same period in 2002. Both occupancy levels and average room rates have experienced double-digit growth, resulting in an increase in revPAR (rooms revenue per available room) of 53 percent, albeit from a relatively low base.
Note: all analysis in US dollars.
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