Influenza and crisis affected hotel occupancy

The figures during 2009 have not been positive

By: Ana Milena Alarcón Barreto

Aspects such as the global economic crisis and the AH1N1 virus have wreaked havoc on the hospitality industry during the first quarter of the year, throughout the Americas. The figures have shown a significant drop in average occupancy, when compared with the data obtained from the immediately preceding year.

The performance of the three main indicators of this industry were negative, taking into account the data generated by countries such as the United States, Mexico, Chile, Colombia, Argentina and Panama, as representative markets of this continent.

In the case of the United States, the behavior of the average occupancy rate is only a reflection of the economic deterioration that affects the country. This is how Marik Lomanno, president of the Smith Research Center (STR) explains, who also says that the greatest impact is shown in the luxury segment, where occupancy indicators, ADR and RevPar had the worst performances, showing falls of 17.1%, 7.6% and 23.3% respectively, compared to 2008.

In the same way, the political situation plays an important role in the behavior of this sector, because the decisions taken by the Government of the day can affect the direction of investment and demand in that economic sector.

According to Lomanno, the new government has begun to understand the importance of the role of the travel and accommodation industry and therefore the future is more optimistic. The US executive reveals that in this period the industry reached its lowest fall, and even if it takes another little to recover, it only remains to improve for the third quarter, this added to the fact that the behavior presented is consistent with the acceleration presented in the period from September 2008 to January 2009.

In Latin America
In Latin American countries, the situation has not been much different. An example is the Argentine case since according to the Hotel Occupancy Survey, the number of overnight stays decreased in all regions, comparing the data of March 2008 with 2009, being the most affected region Buenos Aires, which went from 941,558 guests in 2008 to 609,312 in 2009, which implied a fall of 35%, which implied a fall of 35%, while occupancy fell for March, on a national average, compared to last year, registering 25.5% of occupied places.

According to Guillermo Lavallén, president of the Association of Tourism Hotels of the Republic of Argentina (AHT), there were two factors that marked this industry towards a fall during the first half of 2009, the global financial crisis and the AH1N1 flu, this second had greater effects than expected, because its appearance coincided with the winter period in that country, so tourists, mostly foreigners, were a little afraid to travel to the southern zone.

On the other hand, Lavallén believes that the crisis in the hotel industry will take some time to diminish. In the short term, the arrival of the hot season in October is expected to encourage travelers, and for 2010 expect a small recovery of the industry and that it will continue to occupy the third place of importance in the national GDP.

The average daily overnight stays at the end of the quarter went from 7,165 in 2008 to 7,305 in 2009 and occupancy percentage went from 66.8% to 66.7%, which is equivalent to variations of -0.6%, 1.9% and -0.2%, showing a very small fall in this industry in Panama.

Mexico, one of the most affected
Mexico is another country affected by the crisis of the hotel industry, according to spokesmen of the Mexican Association of Hotels and Motels A.C., like Argentina, was hit by the global financial crisis and the AH1N1 pandemic, which had a greater impact, due to the bad image generated by its appearance in this country and problems with the exchange regime that contributed to a decrease in the capture of foreign currency.

In monetary terms, it was reflected in a 15% reduction in industry revenues, compared to 2008, with US$5,241 million in the first five months of this year; although it should be noted that the volume of tourists only decreased by 2% compared to the previous year.

On the other hand, occupancy in Mexico registered decreases in destinations such as Acapulco, Huatulco and Cancun, which went from percentages of 36%, 41% and 79% respectively in 2008, to 20%, 40% and 53% for 2009. But these results are not so bad, if you take into account that at the beginning of the second quarter of this year these were 15%, 20% and 21%, which may show a recovery of this index.

The local hotel guild has strived to promote tourism, with campaigns such as "Vive México" and "México Mágico", which seek to regain the trust of tourists in the country, in addition to promoting facilities for tourists such as promotional packages and online reservations; a recovery of this industry is expected, but they do not intend to achieve indices such as those obtained in 2008.

Instability in Chile
The economic situation makes this economic sector unstable, we take as a sample Chile, which during this first half of 2009 has reached high and low peaks in some variables, for example, according to Mauro Magnani, president of the Association of Hoteliers of Chile, in the summer there were increases in the arrival of both foreign and domestic tourists of 6% and 7.3% respectively; but from March occupancy rates were reduced and have been unstable compared to 2008, presenting rates of 18% and expecting about 68% at the end of the year.

The tourism sector in Chile has also felt the effects of trance in economic matters and of course a tail of the AH1N1 flu, in addition to weaknesses in the exchange rate, which are disorders that can have long-term effects and whose recovery is slow, so that little optimistic results are expected.

Chile has strived to show the friendly face of its cities and strengthen the sector through federations such as Fedetur and legislation such as the Tourism Law, all in order to strengthen this industry in the period of crisis.

Colombia is also affected
According to figures from the Hotel Association of Colombia (COTELCO), national occupancy rates were below those observed during the same period in 2008, in which the reduction of this indicator has been 9.2% on average during the first 5 months of 2009, but if foreign experience is taken into account, the situation of the hotel industry in this country is more stable.

As in other countries, Colombia is being affected by the global economic situation, but it still seeks to generate incentives that reduce these impacts, through associations such as Makro Supermayorista and Cotelco, which seeks to make the businesses of the associates more profitable through improvement in their productivity and training in food handling, management and administration.

On the other hand, campaigns such as "Vive Colombia viaja por ella" and the return plans seek to generate security in national travelers and thus take advantage of the various festivals and fairs that exist throughout the country.

In conclusion
We see then that the behavior of the hotel sector is largely reflected in the economic and social situation of the countries of the region. Analysts believe that the global crisis marks this sector, as well as the political environment of each country and the investment made for the sustainability of its growth.

It is worth noting the role played by the AH1N1 pandemic, which has modified the behavior of tourists and directly affected the hotel industry in America. Efforts to counter this are many, but they are not very optimistic according to experts, which is why entrepreneurs must prepare for a long period of recession. Like any other sector, it has cycles, and it is the first half of 2009, apparently, one of the most difficult phases.