Thoughts from a Panel of Experts: Though industry-specific numbers are spare and we seem to rely on anecdotal accounts for encouragement, what data there are, along with the opinion of key economic analysts and industry observers suggest the Brazilian economy and its tour and travel industry—following a year of severe economic and political distress, which included the impeachment and removal from office of President Dilma Rousseff last August—are entering a modest phase of recovery as we approach 2017.
“The year 2016 was one of the most complicated in recent history in economics, and the reflexes, of course, were seen in tourism. Fifteen consecutive months of retreat in domestic travel and a steadily falling GDP, even in the year of the Olympics are just a few of the examples,” wrote Rafael Faustino in the Brazilian travel trade publication, Panrotas, and then, as if to take a breath, added, “For some, however, the worst has already passed and a timid recovery has already begun, gaining momentum throughout 2017.” (“Timid” is what the Inbound Report would emphasized in the expression, “timid recovery,” as the forecast of the U.S. National Travel and Tourism Office does not foresee a reversal in the downward trend of Brazilian visitors to the USA until 2019.)
At the same time, the Focus Bulletin, a weekly publication that collects and digests the projections of 100 economic analysts, says that expectations for real economic growth and reduced inflation have improved. As reported by the business news site, InvestinBrazil.biz, economists now expect GDP to grow by 1.10 percent, following a period in which GDP actually contracted.
And then, last Thursday, Rousseff’s successor, President Michel Temer, announced an economic program designed to stimulate the country’s shrunken economy, including measures to reduce red tape and boost productivity by, for example, offering more credit from state development bank BNDES to small businesses and reducing paperwork for hiring. The government is also looking at measures to reduce the time it takes to get authorization for imports and exports and spur new-home purchasing, among other things, the president said.
In addition, reported The Wall Street Journal, Finance Minister Henrique Meirelles said the government will take steps to help companies stretch out payment of some overdue taxes, to allow them access to credit and invest more. Meirelles also listed measures to reduce the cost borne by lenders in credit operations, in hopes this will lead to lower interest rates.
Where to from Here? In order to get a clearer picture of where the tour and travel industry in Brazil is headed, the Inbound Report called on Celyta Jackson, a global marketing and communications professional who has extensive experience with the Brazilian market (she was also once vice president of tourism for New York City & Co.), who got together with two other respected Brazilian travel industry experts—a Silvio Cioffi, former tourism editor for Folha de São Paulo, the largest circulation newspaper and news site in Brazil, and Tereza Lobo, who is the principal of Conecta2You, a luxury hotel marketing company with offices in Rio de Janeiro and São Paulo—who advised us on what to expect.
One point on which all three agreed is that the U.S. is still the favorite destination of long-haul Brazilian travelers. With this point as preface, here are what the three panelists had to tell us.
Celyta Jackson: I believe that the reforms President Temer has put into place are a long time coming and will serve as a palliative for the middle class. Those reforms are not enough but I don’t think the guy has much time left in office and certainly doesn’t have enough support from his party to implement bigger changes even if he does stay till the October 2018 elections. For the moment, I think Brazilians just want to feel some normalcy. If they do, then Brazilian travel might see a modest uptick. But not spending levels. I’m betting those stay flat. The only positive thing I can say about Trump is that he understands the value of tourism and is familiar with the Brazilian market so I doubt he’ll mess with Brand USA or make it harder for Brazilians to get visas.
Silvio Cioffi: There are three burning questions for Brazilians:
—Will President Temer skirt economic adversity with his government spending caps, small business incentives, and easement of tax collecting processes and take his government out of the cross-hairs of the Lava-Jato† corruption scandal?
—What will happen to the U.S. economy under Trump?
—Will it be harder for Brazilians to get visas now?
(Even so) the U.S. will continue to be the preferred destination for Brazilian tourists because the cost/benefit of U.S. travel for Brazilians continues to be excellent regardless of exchange rates. For all the same reasons as years past—lots of flights and still less expensive than Brazilian domestic flights, it’s safe, shopping is better, even the most basic hotels are better. In sum, U.S. tourism just works. Brazilians are obsessed with travel. Worrying about the Brazilian market is a false problem.
† (Fabiano Silveira, Brazil’s minister for transparency, monitoring and control, had to quit his post last May as a result of leaked tapes which suggested there was a coordinated, high-level campaign to quash the Lava Jato [car wash] investigation into a kickback scandal involving the state-run oil company Petrobras and dozens of politicians.)
Tereza Lobo: The situation of outbound tourism had been worsening gradually since 2015 when the dollar increased almost 50 percent. The economic situation together with an unprecedented political crisis generated uncertainty and, consequently, a halt in the middle-class travel planning. Until then, Brazilians were accustomed to an artificial appreciation of their currency and the Brazilian facility of splitting any purchase into monthly installments.
But what most hurt our industry was the increase in unemployment [12 million] and widespread fear of job loss.
The airlines began a tariff war—it was mainly in business class—offering advanced ticket purchase with up to 50 percent savings. In contrast the operators saw the high dollar valuation further reducing their skyrocketing margins (from 25 to 35 percent of the net) and suffered more. The end user became more aware of the cost of money, began to research via the internet before talking with their booking agent, and to object to prices quoted comparing them with internet pricing. In the case of airlines, the end user does not have as much opportunity to evaluate flash sales. And that made airline tickets more of an impulse buy.
With some exceptions, in a way, 2016 was almost stable. The dollar was already at a plateau without intervention of the Central Bank in terms of foreign currencies [or cost of the overseas traveler]. But the great villain was fear of unemployment. All companies were cutting staff in this third year of recession. To survive the era meant (and still does) to cut back to bare bones, “secar” (dry). The tourism industry suffered more than other sectors for not being an essential industry.
In the second semester of 2016, especially after the impeachment episode, and because that all unfolded legally, within the laws of the Constitution, agents began to see a timid resumption of international travel—but with a difference: most reservations and purchases were short term. This is explained not only by the proliferation of special offers but because business executives in this uncertain economic climate, could not plan months in advance.
Some signs in the economy already cheer: Inflation rates that skyrocketed in 2015 will end the year within target levels, and while positive growth for 2017 is predicted to be barely over 0.7 percent, after three years at zero; even that small uptick is positive.
The U.S. as a destination continues to surpass others. What has changed most was the spending of Brazilian tourists. Levels decreased and then stabilized in August. Those spending levels are still stationary. The upper-class Brazilian continues to travel but with adjustments—shorter trips, deluxe rooms have replaced suites.
The election of Trump had no effect here except slight instability in exchange rates, which soon passed.
I see 2017 with hopeful eyes: the country has survived an impeachment, continues to jail those who are corrupt whether they are executives or politicians. We are starting to crawl out of the bottom of the well—the new economic team has credibility, and there seems to be a general feeling that the new regime is at least better than the one we had. Tour operators and travel agencies all suffered a decrease in revenues, whoever claims otherwise is lacking in truth.
But a trend was born of this crisis: these days, even the rich seek special offers, deals, bargains when planning a trip and they are not ashamed of it! Consequently travel agents and tour operators will have to work even harder moving forward.
For further information, you can contact Tereza Lobo at [email protected], and Celyta Jackson at [email protected].