Tourism Revenue In Latin America Recovering Despite Airfare, Hotel Room Rate Hikes

Growing demand and the structure of airfare and hotel room prices are marking an upward trend

Passengers await departure in Bogotá's El Dorado International Airport.
May 08, 2023 | 04:08 PM

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Bloomberg Línea — Demand for air tickets and hotel rooms has recovered following the pandemic, despite not yet having recovered from the deficit of personnel (pilots, cabin crew, porters, etc.) who were laid off during the health crisis. With tourists eager to travel, round-trip fares to Europe from the United States average $1,032, 35% more than in 2022, and 24% higher than before the pandemic, according to travel search engine Hopper Inc.

It’s these limitations on staffing and the ability to obtain spare parts for aircraft that, along with strong demand, give the industry a free hand to keep its prices up.

“International fares should reach their highest levels in five years this summer, Hopper’s data show,” according to Bloomberg.

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International travel will be more expensive this year, with international airfares expected to rise to all regions of the world compared with last year, according to Hopper.


Something similar is happening in the hotel sector. For example, hotel prices in the US rose more than 10% in the first quarter of this year compared with a year earlier, according to data from STR, a Costar Group company.

However, during the same period, occupancy rates increased by only around 6%.

Demand for accommodation is now driven more by leisure travelers than business travelers, with demand for the business travel still to recover its pace.

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Demand and prices in Latin America

In March 2023, in Latin America and the Caribbean, the number of passengers carried surpassed 2019 levels for the third time, according to the Latin American and Caribbean Air Transport Association (ALTA). Until the end of last year, the region has led the global recovery in passenger traffic, but this year that place is taken by Africa, with passenger numbers up 101.7% compared to 2019, according to ALTA’s Passenger Traffic Report.

“A slowdown is expected this year, which will have a negative impact on air passenger demand in the region. The most recent economic growth estimates by the International Monetary Fund (IMF), published at the end of April 2023, show that air travel in the region will grow 1.6% this year, a figure that represents a deceleration of 0.2 points compared to its January forecasts”, according to José Ricardo Botelho, CEO of ALTA, and who explains that the economic slowdown will result in shrinking demand for flights.

Added to this is inflation estimated by the IMF at 13% for this year in the region, which will have a negative impact on the demand for travel and tourism services.

“In general, exchange rates negatively affect airlines because 75% of their cost structure is dollarized,” says Botelho.


What also signals an upward trend in prices is the price of fuel, which is at higher levels than pre-pandemic.

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According to Statista Market Insights, travel and tourism market revenues are expected to increase by nearly 60% in Latin America and the Caribbean this year, returning to pre-pandemic levels. In Brazil, revenues from cruise bookings, hotels, vacation rentals and package tours are expected to total around $16.36 billion.

Also, with demand for hotel bookings nearly tripling since the pandemic, travel and tourism revenues in Mexico are expected to exceed $14 billion this year; in Argentina, revenues are expected to total $6.7 billion, and in Colombia, $3.7 billion.


“The market is expected to experience growth of more than 30% this year in Chile, Peru, the Dominican Republic and Bolivia,” the Statista report states.

For its part, the World Tourism Organization warns that “the economic situation could lead to a more cautious attitude among tourists in 2023, with lower spending and shorter trips to closer destinations”.

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