LatAm tourism bucks consumer downturn

Consumer spending has been under pressure across Latin America over the past couple of years but one sector that seems to be bucking the downward trend is tourism. And that is not just because cheaper currencies and looser visa policies are making Latin holidays more attractive for Europeans, North Americans and Asians. Growing numbers of Latin Americans are travelling within the region, a trend that reflects long-term secular shifts including the expansion of Latin American airlines and local routes and locally based on-line travel agents, such as Argentina's Despegar.com.

A survey of 6,500 consumers by LatAm Confidential, an FT investment research service, shows the tendency is uneven, with Andean markets especially buoyant. Although an average of 77 per cent of respondents with travel plans this year said they would spend the same amount or more on holidays in 2015 as they had in 2014, 84 per cent of Peruvians and 83 per cent of Colombians planning to travel said they would splash out as much or more. The survey - conducted between February and March - shows Colombians are especially likely to visit Caribbean or Mexican destinations and have become much more likely to fly. In the survey, 48 per cent of Colombian respondents with travel plans said they had flown or planned to fly to their next destination in 2015, more than double the percentage recorded in 4Q13 when a similar poll was last conducted by Latam Confidential.

While those results partly reflect the fact that Colombia and Peru are performing more strongly than their biggest South American rivals, there are some regional specifics. Low-cost airlines are particularly prominent in Colombia, for example. Viva Colombia, part of a Latin business linked to Ireland's Irelandia (co-founder of Ryanair), recently opened flights to Quito, Lima and Panama City, while Easy Fly was this year set to open its first flight outside Colombia to the Caribbean island of Aruba. Interjet, a Mexican operator, offers Colombians a cheap way to visit Mexico City and Cancun. Perhaps more significantly, Avianca, a long-established local operator, has recently dramatically increased capacity on routes to Latin and Caribbean destinations after scaling back its exposure to Venezuela due to difficulties in repatriating revenues.

The other big trend in the region is the growing popularity of online booking agents. Despegar, founded in 1999, has been one of the biggest beneficiaries, with its Brazilian subsidiary Decolar.com especially prominent. With the US online market showing slower growth, Latin opportunities have taken the eye of bigger global players in the segment. In March, Expedia.com, one of the world's largest online travel agents, paid $270m to acquire a 20 per cent stake in Despegar.

But traditional agents are holding their own too. CVC, the first listed travel company in Brazil that is not an airline, sold tour packages, flights and hotel rooms to 20m travellers domestically and internationally last year. Its shares are outperforming the main Sao Paulo index this year, thanks in part to a price plan that allows customers to pay in instalments - and that protects CVC against the weakening real by charging them in US dollars.

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