Mexico’s Tourism Hotspots Hurt by COVID-19 Crisis

As Mexico enters Phase 2 of the COVID-19 pandemic, campaigns are being launched encouraging people to stay at home. Other countries experienced earlier exposure to the virus and have long since taken similar measures. With people forced to stay indoors, tourism will suffer greatly.

The OECD reported that Mexico’s tourism sector represents 8.5 percent of the national GDP, 5.8 percent of the full-time paid employment in the formal sector and 77.2 percent of service exports. Tourism is considered a pillar that benefits communities in the unemployed sector, often in areas where other industries are not present. One factor that might already negatively affect these figures is a lack of travel to touristic areas. Mexico’s airlines have grounded planes and cancelled flights already.

Earlier this month, concerns about a decrease in economic activity began to circulate. Local newspapers in Merida reported concerns from hotel owners, who saw trouble looming in the distance. Although a popular event was about to draw in a large crowd from all over the country, the virus could ruin what was usually a profitable period for local tourism. They were right: occupancy rates dropped from 95 percent to 5 percent in one week, as reported by SIPSE. While the virus was nowhere near popular touristic destinations before, it was only a matter of time before it would arrive. This was exemplified by widespread reporting of a person infected with the virus visiting Acapulco’s busy beaches during a bank holiday.

Nonetheless, external turmoil can be just as impactful. On March 16, Canada closed its border for non-essential travel, meaning that the flow of tourists that usually flock to Mexico did not arrive. Cancun depends mainly on foreign tourism. The city is considered the favorite destination during “spring break” season. This morning, Reuters news agency reported that occupancy rates were already 25 percent lower than the 60 percent expected for the season. The Guardian reported even lower occupancy rates. The US government is also restricting non-essential travel. In a normal spring break season, the revenue from tourism in Mexico is between US$50 million and US$60 million. If this drops, it could have dramatic consequences for the sector’s 4.4 million workers.

Moody’s rating agency does not report a favorable outlook. Lower economic growth, worsened by COVID-19’s effects will only decrease the flow of tourists entering the country. Airlines and hotels will be exposed significantly, as the rating agency predicts a drop of 75 percent in worldwide tourism for 2Q20. Cancun and Los Cabos, which rely mostly on foreign visitors, will have to bite the bullet the hardest. For now, all the sector can do is hope the virus blows over without too much collateral damage.