VZCZCXRO6436
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1490/01 1500020
ZNR UUUUU ZZH
R 300020Z MAY 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 6719
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHOT/AMEMBASSY OTTAWA 2618

UNCLAS SECTION 01 OF 03 MEXICO 001490 
 
SIPDIS 
SENSITIVE 
 
STATE FOR WHA/MEX 
 
E.O. 12958: N/A 
TAGS: ECON EIND ETRD KFLU MX
SUBJECT: FLU AND TOURISM: WHEN WILL MEXICO REBOUND? 
 
¶1. (U) This is the fourth in a series of cables reporting on the 
economic impact of the influenza outbreak in Mexico.  It 
incorporates reporting from across Mission Mexico. 
 
¶2. (SBU) SUMMARY:  The influenza epidemic struck a body blow to 
Mexico's number three income generator, tourism.  Government sources 
estimate the loss could reach USD 2 billion, a full 15% of 2008 
earnings.  Cruise and bus lines are predicting a complete recovery, 
but the scene is bleaker inside the hotel business.  Where different 
regions of the country felt the bite of global recession and drug 
violence at mixed intensity in the months ahead of the flu, H1N1 
effectively shut down the industry.  Experts disagree on how long 
recovery will take, but a bargain-priced peso, aggressive government 
and private sector marketing, and some favorable demand-side signals 
argue for a return in force by autumn at latest.  END SUMMARY. 
 
SURVEYING THE DAMAGE FROM MEXICO CITY 
------------------------------------- 
 
¶3. (U) 2008 actually was a good year for Mexican tourism, even with 
recession at year's end.  The sector earned USD 13.3 billion and 
welcomed 1.3 million more tourists than the year prior for a total 
of 26.2 million visitors, thanks in part to increased numbers at the 
border.  U.S. citizens make up 90% of international visitors. 
Canada ranks second, and has boosted its numbers from 600,000 to 1.3 
million annual arrivals in the last four years.  Data just published 
from first quarter 2009 show the weakened peso is attracting 
tourists but impacting tourism revenue.  International tourist 
arrivals were up on the whole versus the same quarter 2008 -- up 35% 
at the border but down 5% among the heavier-spenders that travels 
deeper into the country.  Nonetheless, receipts dropped 8.8% for 
that period.  First quarter results also indicate fewer Mexicans are 
travelling abroad -- 23.7 million versus 27.4 million a year 
earlier, and against a peak of 32.1 million in first quarter 2005. 
Prior to the flu, business destinations Guadalajara and Monterrey 
were doing poorly due to recession; Puerto Vallarta, Acapulco and 
especially Cancun enjoyed solid spring breaks despite 
widely-reported drug violence. 
 
¶4. (SBU) The Secretariat of Tourism worries that Mexico will get 
over the impact of H1N1 just in time for the autumn low season, 
losing the profitable summer months.  The Secretary of Tourism's 
chief of staff estimated total lost revenue this year due to flu and 
recession at USD 1 to 2 billion.  An ad campaign targeting domestic 
travelers launched on 21 May.  Representing 84% of all tourist 
revenue, domestic tourists are the key to recovery -- albeit not at 
the luxury end of the market, where foreigners predominate.  Now 
that the CDC has downgraded its travel warning May 15th, the 
Secretariat of Tourism expects to begin an international ad campaign 
to follow "about a week" after the start of the domestic campaign. 
 
¶5. (SBU) CRUISE LINES:  Cruise lines expect a quick rebound.  The 
downgrade of CDC's travel warning was the necessary condition for 
Carnival and Royal Caribbean to speed resumption of port calls to 
Mexico from the initially announced 15 June.  Royal Caribbean is 
moving faster than Carnival, although Carnival has a more extensive 
summer cruise schedule in Mexico (by their estimate, 80% of summer 
cruise calls).  Royal Caribbean returned a fully-loaded ship to 
Cozumel on 28 May.  Secretary of Tourism Elizondo met the first 
cruisers dockside.  Carnival will restore port calls within the week 
and sees little lingering reluctance among passengers to debark in 
Mexico.  Smaller lines resumed service to Pacific Riviera ports in 
mid-May. 
 
¶6. (SBU) BUS LINES:  Intercity bus lines are the major mode of mass 
transportation for domestic tourists.  The country's largest 
station, the Terminal Central del Norte in Mexico City, took a 60% 
hit in passenger volume at the influenza panic's height.  As of 18 
May, terminal managers reported volume had returned to normal. 
While bus companies fear budget airlines and increased car 
ownership, they are confident the recovery from influenza is well 
underway. 
 
¶7. (SBU) HOTELS:  Mexico's national hotel association calls current 
occupancy rates the lowest in the country's history and estimates 
job losses in the sector could reach 100,000.  Mexico City and many 
resort towns bottomed out in early May below 10% occupancy.  While 
in good times Mexico's 584,000 hotel rooms do not want for guests, 
the combined recession, influenza, and tight credit market have led 
to construction freezes on at least five new major Mexico City 
luxury hotel developments in the last month.  In Monterrey, the 
occupancy rate is now 25% versus 70% during the same period in 2008. 
 The city saw 10,600 room cancellations (apart from reservations 
never booked) and 2,100 cancelled events in the 2 peak weeks of the 
influenza.  While business travel is recovering more rapidly than 
tourism with the end of the CDC travel warning, business conferences 
(especially lucrative for hotels) called off during the outbreak for 
the months ahead have been shifted to other countries and will not 
 
MEXICO 00001490  002 OF 003 
 
 
be rescheduled.  The calendar of government-sponsored expositions is 
more robust.  Expo Guadalajara cancelled 26 expo events and lost an 
associated 60,000 visitors during the outbreak, but will continue 
with most upcoming expos as planned and reschedule many of those 
cancelled. 
 
BREAKDOWN BY REGION 
------------------- 
 
¶8. (U) BORDER TOURISM:  Tourism at many points along the border was 
down prior to the H1N1 outbreak due to narco violence and to a 
lesser extent the economic downturn.  The H1N1 outbreak and 
resultant hotel and restaurant closures further damaged an already 
suffering industry.  Border towns traditionally cater to American 
cross border shoppers and "medical tourists" who visit Mexican 
pharmacies, dentists, and medical providers.  Hunting, fishing, 
ecotourism and beach vacations are also popular in some areas. 
Merchants in border towns have complained in recent years that drug 
violence was destroying the tourism industry.  Many tourist-based 
businesses have shut down in Nuevo Laredo, where tourism is now 
largely non-existent. In Ciudad Juarez, border tourism has dropped 
25-30% over last year, mostly due to border violence.  Restaurants 
in Ciudad Juarez report normal sales during the day, but business 
drops off 70% after 7 PM.  Hotel and restaurant occupancy rates were 
already down 60% in Northern Sonora and fell to 10% during the H1N1 
outbreak.  Mexican tourists who otherwise would have vacationed in 
Mexico crossed to nearby U.S. resorts such as South Padre Island 
when restaurants, beaches and other establishments in Mexico closed. 
 Against this evidence of cities suffering dramatic falloffs along 
the border, the Secretariat of Tourism points to border trippers as 
leading growth in visitor numbers in 2008 and 2009. 
 
¶9. (U) BEACH TOURISM:  Violence and recession had only a mild effect 
on beach tourism at the largest Mexican resorts, with numbers down 
less than 10% during the first quarter of 2009.  When H1N1 hit in 
late April, at the tail end of peak winter season, numbers plummeted 
50% or more against previous years.  Officials expect a slow 
recovery, but are launching a multi-pronged strategy urging Mexicans 
to vacation at home; reaching out to tour consolidators, travel 
agencies, and charter companies to reactivate long-standing client 
contacts; and using traditional media and social networking sites to 
promote "third party spokespersons," for example U.S. students who 
visit Mexico speaking to students and Canadians residing in Mexico 
speaking to Canadians. 
 
¶10. (U) Pacific Coast:  Puerto Vallarta accounts for 11% of the 
state of Jalisco's GDP and 90% of the local population earns a 
living from tourism.  According to economist Jaime Lopez Delgadillo, 
hotel, restaurant and entertainment industry losses will cost the 
state of Jalisco 2% of its GDP, or USD 640 per family.  Vallarta 
hotel occupancy rates are down to 20%, while arriving flights are 
25% full, and buses are operating at 30% capacity.  Several major 
hotels have temporarily closed due to low occupancy. 
 
¶11. (SBU) The Yucatan:  In the main tourist areas in Quintana Roo 
(Cancun, Playa del Carmen, Mayan Riviera), tourists -- 85% of whom 
are foreign -- spend on average USD 200 per person per day in hotel, 
food, and excursions.  May hotel occupancy rates in Cancun have 
dropped to 27%, compared with 73% in May 2008.  As of 14 May, 30 
hotels in Cancun had closed and restaurants were at 20% capacity. 
Current estimates show 20,000 workers displaced by recent shutdowns 
and Cancun officials are clearly concerned about social problems 
that may result as a consequence of increased unemployment.  Merida 
and Cozumel occupancy are also down more than 50% for this time of 
year.  Tourism is the primary industry in the resort areas of 
Quintana Roo.  Services such as scuba diving, amusement parks, and 
archeological ruins all rely on business from tourists.  Cozumel, 
which attracts 44% of all cruise line port calls in Mexico (2 
million-plus passengers per year, spending USD 90 per visit), was 
hit particularly hard when ships diverted. 
¶12. (U) INLAND TOURISM:  Business travel to Mexico dropped 
significantly with the flu, as many organizations cancelled 
meetings, conferences and gatherings.  Sites in the center of the 
country that cater to Mexican and international business travelers 
suffered significant losses but are expected to recover quickly. 
Museums and cultural sites in central Mexico are emptier than usual, 
including important Aztec and Maya archaeological sites.  Many 
school classes have cancelled field trips until the end of the 
school year, causing some museums to consider closing their doors 
several days a week.  Plans to extend the school year to replace the 
weeks lost to closures worry some domestic tourism businesses. 
Cuernavaca, a center for Spanish language education, receives 6,000 
international students annually who spend on average USD 1,800 per 
stay.  The city reports most international students have cancelled 
their summer 2009 training and up to 30 of Cuernavaca's language 
training centers will be forced to close. 
 
¶13. (SBU) COMMMENT:  H1N1 influenza is the most severe of several 
 
MEXICO 00001490  003 OF 003 
 
 
blows to Mexico's tourism industry in the past year, yet it may also 
prove to be the most transitory.  The global economic downturn 
impacted business travel from last fall, especially in industrial 
centers like Guadalajara and Monterrey.  While high profile drug 
violence kept tourists away from some border cities, it affected 
tourism at the major Mexican resorts and along the border as a whole 
less than expected.  Business travel and domestic tourism took big 
losses at the height of the influenza, but will recover more quickly 
than the international tourism segment.  And even here, veteran 
industry operators like Carnival and Mexican bus lines see in their 
demand data signs that, if travelers are not yet rushing to book 
tickets to Mexico today, nor do they seem scared by the destination. 
 END COMMENT. 
 
BASSETT