Travel Agent Sales down 29 percent for First 4 Months of Year: While it may come as a surprise to U.S. travel suppliers and those who occasionally follow the Argentinian inbound market, the developments in recent weeks show that a consistent diet of bad economic news threatens to upend leisure traffic from what has been a regular part of the Top 15 overseas source markets for the U.S.
One need not be a serious economist to know that these data show that the state of the Argentine economy is in seriously bad shape. Some numbers:
—GDP in for the first quarter of 2019 fell 6.2 percent vs. the same period a year ago. It was the worst quarterly performance since 2009, in the midst of the Great Economic Recession of 2008-09.
—According to Bloomberg News, the nation’s economy shrank 2.5 percent last year, the worst since 2014 when the nation defaulted on its debt under the previous government.
—Unemployment is above 9 percent.
—Argentina is in the midst of a two-year recession coupled with stubbornly high inflation, which has forced its central bank to take drastic measures to stabilize the peso, which lost 50 percent of its value against the dollar last year.
—A CNBC article last month said: “It (the Argentinian peso) is — by some distance — the world’s worst-performing currency so far this year.
—The Argentine peso was $0.06447 on May 12, 2017 and on May 12, 2019, it was $0.02255—a decline of 65 percent.
What Kind of Impact Will this Have on the Tour and Travel Industry? There should be little impact on travel to the U.S. over the next one or two quarters, as almost all long-distance travel has already been purchased and booked.
However, it will pose a serious problem for the country’s international tour operators, as many Argentines pay for their travel over time—mostly for 12 months. In such cases, the customer and travel agent are paying operators Argentine pesos. Yet, the operators usually pay for U.S. product in U.S. dollars. Since operators exist on small margins, a continued, declining economy could put some operators out business.
Such was the case in Brazil during its 2014-2016 economic crisis, which claimed one of the largest operators in the country—Nascimento Tourism—in the spring of 2015, when it went bankrupt. It was selling its Visit USA product in Brazilian reais, and trying to pay for it in U.S. dollars. It didn’t work.
Much of the U.S. inbound tourism industry will receive some in-person reports several weeks from now when Argentine operators show up for IPW June 1-5 in Anaheim. It appears likely that the positive forecast by the National Travel and Tourism Office (NTTO) is unlikely to be fulfilled. And it also looks like we at INBOUND were wrong when we wrote early this year that “NTTO is right to forecast a 3 percent increase in visits to the U.S. from Argentina in 2019.”