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Mexico Tourism Continues Growth Even As Some Airlines Decrease Offerings

TravelPulse logo TravelPulse 8/4/2018 Mia Taylor

Santa Maria Bay, Los Cabos, Mexico: PHOTO: Santa Maria Bay, Los Cabos. (photo courtesy of Barna Tanko / iStock / Getty Images Plus) © Getty Images PHOTO: Santa Maria Bay, Los Cabos. (photo courtesy of Barna Tanko / iStock / Getty Images Plus) While Mexico’s international tourism continues to grow well beyond industry averages, a handful of U.S.-based airlines are reducing flights to the country, citing decreased demand.

According to various media reports, United, Delta, American and Spirit have or will consider reducing flights from the United States to the beaches of the Mexican Caribbean.

Executives for the airlines discussed their decisions during quarterly earnings conference calls with financial analysts.

"While the region is more challenged than others, flights to Mexico, these destinations in particular, had pretty severe demand weakness due to increased supply and travel warnings," United’s Andrew Nocella said, according to transcripts of the calls.

"We made adjustments to capacity in this region and we continue to monitor our capacity levels in the region going forward," Nocella added, noting that he expects Latin performance will trail other regions for the remainder of 2018.

American Airlines’ President Robert Isom said the company’s Latin America business showed "strength across the board, with the exception of Mexico pleasure markets.” Delta President Glen Hauenstein issued a similar message, noting that the airline is reducing capacity to match the demand in affected markets.

The reductions among these carriers however, come as the country’s tourism industry continues its significant growth trajectory and other airlines are increasing flights to its tourist hotspots.

Mexico is currently the sixth-most visited country in the world, hosting 39.3 million international visitors in 2017, a spokesperson for the Mexico Tourism Board told TravelPulse. About 20 million of those arrivals were American visitors. Just five years ago, Mexico was ranked 15th most visited in the world.

“This rapid climb is due to sustained, above-industry-average growth fueled by the incredible diversity of Mexico’s tourism offering and close collaboration with the industry, government and other parties to develop new products and infrastructure to support this growth,” the spokesperson said.

From January through May 2018, Mexico’s international tourism grew 9.6 percent compared to the same period in 2017, with air arrivals increasing 5.6 percent, numbers that far exceed the industry average, said the Mexico Tourism Board.

“In regards to the recent decreased demand compared with prior years from some of the legacy U.S. airlines, the exact causes for this are not yet known,” added the spokesperson. “It may be related to the rapid expansion of connectivity to Mexico in the past 12 months by those airlines and by competitors in the U.S. and Mexico.”

Indeed, Rodrigo Esponda, managing director of the Los Cabos Tourism Board, said there was a substantial increase in flights to Mexico from the United States after the 2016 renegotiation of the bilateral agreement between the two countries.

In July 2016, the United States and Mexico exchanged diplomatic notes to bring a new Air Transport Agreement into force. The landmark agreement was designed to significantly increase trade and travel between the United States and Mexico.

In particular, the agreement allowed for increased market access for passenger and cargo airlines to fly between any city in Mexico and any city in the United States.

Immediately after the agreement, airlines such as Southwest, Delta, and American announced they would begin new flights, according to a Los Angeles Times report. Southwest began offering three new nonstop flights from LAX to Cancun, San Jose Del Cabo and Puerto Vallarta. Delta, meanwhile, launched new daily nonstop services from New York JFK to Cancun and from LAX to Los Cabos, as well as a Saturday flight from Kansas City, Missouri to Cancun.

Not to be left out, American Airlines started new daily flights from LAX to Cancun and Puerto Vallarta.

Before the frenzy was over, about 400 new routes between the two countries had been approved, reported Vallarta Daily News.

“Before the bilateral agreement there were only two American and two Mexican carriers flying each route, but as soon as it was renegotiated everybody jumped into the market and there was a big jump in the number of seats,” said Esponda.

That there is now some review and scaling back happening is only logical, Esponda added.

“There has to be an adjustment after big growth in big markets such as Los Angeles and Chicago,” Esponda said.

As for Los Cabos, it has remained largely immune to reports of declining visitation. In fact, over the coming months, even more direct flights to the destination are being added by carriers, Esponda said.

For instance, as of January 2019, Vacation Express will start flying direct to Los Cabos from Cincinnati. Also, in January, Apple Leisure Group will begin offering direct flights to Los Cabos from both Milwaukee and St. Louis, Missouri. The destination is projecting a positive, six percent growth in terms of airline seats to Los Cabos.

“We have been communicating with airlines,” added Esponda. “We have not seen any decrease in terms of what we are projecting into the end of 2018.”

Such insulation from shifting tourist numbers may be due in large part to the unique product Los Cabos represents. It is a luxury destination made up of one-third all-inclusive resorts, one-third time share properties and one-third European plan hotels.

“Because of that composition we are less exposed to change. A small change can affect bigger destinations that are primarily all-inclusive resorts,” Esponda said. “But Los Cabos is a very different destination because of our product. We are focused on the luxury market, we don’t have big properties, we’re not a mass market."

As for Mexico as a whole, it continues focusing on the winning proposition it offers travelers: access to beaches, vibrant cities and magical towns, said the Mexico Tourism Board.

In addition to all of those attractions, officials are working to create new experiences to bring more visitors to Mexico, such as the Viajemos Todos Por Mexico campign, which invites Mexican-American residents to the U.S. to reconnect with their culture.

"And, just as we have done in years past, we are hosting world-class events through the end of the year including the Day of the Dead parade in Mexico City, Formula 1, NFL, the Los Cabos Film Festival and the Extreme Sailing Series," said the spokesperson. "We remain optimistic about Mexico's growth in 2018, including from the U.S. market."

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