Land of Opportunity

The land of opportunity, a phrase often used to describe the US and its economic opportunities for the hardworking common man, could more accurately describe Mexico’s tourism industry. Mexico is […]

The land of opportunity, a phrase often used to describe the US and its economic opportunities for the hardworking common man, could more accurately describe Mexico’s tourism industry. Mexico is the American land of tourism opportunity. Classic destinations such as Riviera Maya, Mexico City, and Acapulco are beloved favorites; simultaneously, new locations are constantly unveiled as up-and-coming destinations and are helping to diversify Mexican tourism. Its combination of enchanting beaches, natural wonders, historic and cultural riches, and local flavors sets it apart from regional competitors in Latin and North America. To little surprise, the tourism industry is still growing and complementing Mexico’s overall economic growth.

According to data from the World Travel and Tourism Council (WTTC), the tourism industry directly contributed MXN1.4 trillion (USD76.7 billion) to the Mexican economy, or 7.4% of total GDP, in 2016. Tourism’s total contribution to GDP, including direct, indirect, and induced contribution, was MXN3.1 trillion (USD165.9 billion) in 2016, representing 16% of GDP. WTTC forecasts tourism’s direct and total contributions to GDP will increase in 2017 by 4.1% and 3.7%, respectively. Tourism’s total contribution is expected to increase 3% per annum to MXN4.3 trillion (USD232.1 billion), 17.2% of GDP, in 2027. Mexico ranked tenth out of 185 countries in terms of the absolute size of tourism’s total contribution to GDP in 2016. The expected growth in tourism’s contribution to Mexican GDP in 2017 is higher than the anticipated growth in both the US and Canada.
Mexico’s tourism sector is particularly significant for the job market. In 2016, tourism directly supported some 4 million jobs, 7.9% of total employment. WTTC estimates this figure will rise by 2.6% in 2017 and 1.8% per annum to almost five million jobs in 2027, accounting for 8.5% of employment.

Broadening the scope to tourism’s direct, indirect, and induced contribution to employment, Mexico claimed the fourth spot in WTTC’s 2016 country rankings. Tourism directly or indirectly supported over 8.6 million jobs, some 16.8% of employment. WTTC predicts this number will rise 2% per annum to over 10.6 million jobs in 2027, totaling 18.1% of employment.

The World Bank recorded a 9.3% increase in international tourism’s total number of arrivals from 29.3 million in 2014 to 32.1 million in 2015, and data show international tourism expenditures in 2015 made up nearly 3% of total imports. In 2017, WTTC expects Mexico to welcome some 37.8 international tourist arrivals, who are expected to spend approximately MXN411.1 billion (USD22 billion). Visitor exports are projected to increase 4.5% per annum between 2017 and 2027, reaching MXN638.6 billion (USD34.2 billion) in 2027.

A quick breakdown of tourism’s contribution to GDP shows the contribution is mostly from domestic, leisure travelers. Tourists’ spending in 2016 was largely comprised of leisure spending, totaling 88.7% of tourism’s contribution to GDP, as opposed to the 11.3% from business spending. Domestic spending also far outweighed foreign visitor spending. Spending from domestic tourism represented 83.9% of tourism’s total contribution to GDP, and spending from foreign visitors represented 16.1%.

While spending by domestic travelers represents a larger portion of tourism’s contribution to GDP, non-border tourism—tourism sourced from countries that do not share a border with Mexico—reached 18.4 million people in 2015, increasing 46.4% since 2005 at a rate of 3.9% growth per annum. Non-border tourists represent a higher value market because they spend more and stay longer. Data from the OECD Study on Tourism show four out of the top-five source markets for international arrivals are non-border countries and include Canada, the UK, Colombia, and Argentina. Additionally, several US airlines are increasing their service to Mexico following the elimination of restrictions on the number of flights between the two countries in August 2016.
WTTC predicts large increases in tourism investment, indicating the accelerating growth potential of tourism in Mexico. Tourism investment in 2016 was MXN143.4 billion (USD7.7billion), 3.3% of total investment. Predictions from WTTC show a 5.6% increase in investment in 2017 and a growth rate of 5.9% per annum over the next 10 years. The National Infrastructure Plan 2014-2018 includes a MXN181.2 billion (USD9.7 billion) portfolio of tourism-related infrastructure projects, with more than half of investment coming from the private sector.
Peak tourism season typically begins in mid-December and continues through mid-April. Tourism revenues and tourist arrivals peaked in December 2016, according to Trading Economics. Tourist arrivals peaked at 2.49 million corresponding to USD2.12 billion in tourism revenue.

Sunset of Sun-Sea-Sand Era

Combining these statistics with the fact that the World Tourism Organization (WTO) ranks Mexico as the seventh major tourist destination in the world, it is hard to imagine any sort of decline in Mexico’s tourism. Its strength is built on the development of large-scale resort tourism on its coasts. However, a study on tourism by the OECD prioritizes a shift in Mexico’s long-term strategy from the sun-sea-sand model, common to Latin American countries in previous decades and focused on resort-based tourism, toward a more diversified, sustainable tourism model.

Known for its dazzling beaches, Mexico’s natural treasures also include mountains, rainforests, deserts, coral reefs, and archaeological sites. Future growth will depend on Mexico’s ability to develop and diversify its offerings to visitors sustainably. Despite an overall reduction in public expenditure on the sector’s development in 2016, over one-fifth of public expenditures went to regional and sustainable tourism development in 2016.
Not only is Mexico expanding its offerings; the country is also developing its tourism investment models. Diversifying its offerings will facilitate and benefit from the development of FDI. Mexico is also looking at public-private partnerships at the sub-national level to develop tourism-related infrastructure projects through the Program for the Promotion of Public-Private Partnerships in Mexican States (PIAMPPEM), an initiative of the Multilateral Investment Fund of the Inter-American Development Bank.

Not Just Tourism

As its tourism industry continues to thrive, Mexico is looking to align tourism, and its success, with other industries such as transportation, hoping to use tourism as a driver of economic prosperity. The National Development Plan 2013-2018 highlights tourism as one of six priority sectors through which the government plans to capture economic potential. In the OECD’s Study on Tourism in Mexico, boosting connectivity and mobility of visitors as well as supporting market diversification are noted as key strategies for developing Mexico’s tourism. This strategy includes continuing to liberalize air service agreements, increase connectivity of airports, and improve road transport.

The opening of Mexico City’s new international airport in 2020 is expected to boost both tourism—most especially international tourism between Mexico and Asia—and transportation. Expanding air traffic capacity and replacing Mexico City’s current international airport, the new airport will serve up to 120 million passengers per year when all six runways are opened. According to government data, the national airline fleet has grown 41% and 789 routes have opened since 2012. Mexico has also modernized and expanded 28 airports. With a new Center for Innovation and Space Development, Mexico is the third-top destination for aerospace project FDI. In alignment with its tourism development, Mexico is positioning itself as a leader in the aerospace industry. The focus on air transport comes as cruise tourism has declined 8.8% between 2005 and 2015, according to data from the OECD Study on Tourism.

Popular Destinations

Riviera Maya and Mexico City are the country’s top destinations, according to OECD data on arrivals at hotels. Riviera Maya is located on the coast of the Caribbean Sea on the Yucatan Peninsula and is home to both large, all-inclusive resorts, and small boutique hotels along the white-sand beaches. Its turquoise coasts are home to the Mesoamerican Barrier Reef System, the second longest barrier reef system in the world, and boast some of the world’s best aquatic activities. Visitors looking for activities a little further inland are attracted to popular archaeological sites such as Chichen Itza and Coba. Ecoparks, natural water theme parks, also include smaller archaeological ruins in addition to flora, fauna, adventure activities, and exhibitions. Riviera Maya and its ecoparks are easily accessible through the recently modernized Cancún airport.

Mexico City, in addition to being a financial center of the Americas, is an incredibly popular tourist destination in the high plateaus of Valle de México. The historic center of the city and the floating gardens of Xochimilco are UNESCO World Heritage sites. The metropolis hosts hundreds of museums, art galleries, and concert halls, which draw cultural events year round. Mexico City offers a full range of eating, shopping, and exploring for all types of travelers. Just outside the city, the ruins of Teotihuacan are home to some of the largest ancient pyramids in the world.

Also noteworthy is Tijuana’s transformation as a destination for great food. According to the 2017 New York Times annual list of 52 places to visit, Tijuana cracked the top ten for its culinary renaissance, luxury condo surge, and USD60 million investment in a bus rapid transit system. With support from the Mexican federal government, the transportation project will connect residents and visitors to the downtown district, burgeoning with breweries, coffee shops, and diverse culinary options ranging from high-end restaurants to food trucks.

Tourists are no strangers to Oaxaca, but the coastal town of Puerto Escondido is drawing people from the popular capital, Oaxaca City. Puerto Escondido translates to “hidden port“ and attracts mostly surfers, backpackers, and Mexican families. Bars, hotels, cafes, restaurants, and nightclubs parallel the beach and line the town’s promenade, Perez Gazga Avenue. Here visitors can find handmade Oaxacan souvenirs such as traditional blouses, tapestries, bags, hammocks, and jewelry.