With barely taking time to breathe following the end of what was described in a BBC report in early 2017 “the deepest economic decline since records began,”¹ the country’s outbound tourism industry—specifically that segment which travels to the United States—could be poised this year to set another record: the most Brazilians to visit the U.S. in a single year.
Some of the key figures regarding the performance of the Brazilian market—it is the fourth largest overseas source market for tourist to the USA—are mixed. For instance, the latest numbers from the U.S. Department of Commerce’s National Travel & Tourism Office (NTTO) show that year-to-date visits by Brazilians to the U.S. for first half of 2019 are down 2.7 percent compared to the same period a year ago.
But what gives energy to those who embrace a positive reading of the numbers is the impression that one receives after looking at the collection of data and developments that, historically, have been related to the performance of the nation’s tour and travel industry. INBOUND has pieced together some of the more salient figures and developments, including NTTO data, exchange rate figures, and articles from our own archives, as well as the monthly review of PANROTAS, the authoritative travel trade publication covering Brazil’s tour and travel industry.
First are the NTTO numbers showing that travel to the U.S. from Brazil for the first half of 2019 is down vs. the first half of 2018. They also show that the industry almost set a record for travel to the U.S. that was set in 2015, before the full impact of the economic recession had set in.
Comment: The drop-off in activity for the second quarter of 2019 is partly attributable to the collapse of Avianca Brazil airlines (it was a separate entity from Avianca), which stopped operations in May, cutting seat capacity in Brazil by nearly 8 percent. Confidence in the carrier had been fading for some time. And it had been reducing its operations and lost nearly all of its Airbus planes by April. Avianca Brazil it had flown to Santiago (Chile) Miami and New York. It had about 13 percent of the market
The Currency Exchange Rate—The Real is Holding on: Overall, the Brazilian real has dropped more than 40 percent in value against the U.S. dollar since the beginning of the 2014-2016 recession. However, it has held fairly steady in 2018 and 2019. This has helped to strengthen the position of Brazilian tour operators who had been seriously challenged for several years when they purchased product from the United States, paying U.S. dollars and selling them in Brazilian reais.
While the real is weak compared to 2015, its steady level since the beginning of last year has made it possible to maintain a positive margin.
The Overall Travel Industry Condition: PANROTAS reported that, in April, the volume of specific services from the Tourism sector registered stability in the annual comparison. And from January to April the performance was +2.7 percent. However, the report said, the industry is experiencing “much more of a respite than a recovery,” because when compared to the pre-crisis period, in the beginning of 2014, for example, the current volume of tourism activity is 9 percent below, already discounting inflation. More expensive dollar and weaker economy make consumers with financial conditions to choose a domestic destination rather than an international one.
Comment: While some consumers are opting for a domestic, rather than an international, destination, Brazil’s travel agencies—apparently more confident in the strength of the real—have begun offering more “last minute” and near-term sales, stretching out payments (without interest, usually) over 12 months. Since the line between a travel agency and a tour operator is fluid—they sometimes are house next together in the same office—these sales reflect a confidence on the part of the retail and wholesale sectors of the industry that the real will be stable.
Other Factors that Indirectly Affect Industry Performance: Retail sales in Brazil grew 3.1 percent in April compared to the same month of 2018. In the four-month period, the balance is positive by 2.5 percent.
—The official inflation rate in Brazil (IPCA) in the last 12 months is at 3.37 percent, below the target of 4.25 percent defined by the government for this year. This result was mainly due to the fall in prices of the “Food and beverages” and “transportation” groups, which together account for about 43 percent of household expenses.
—The unemployment rate in Brazil fell 3.14 percent compared to the same period last year, remaining at 12.3 percent. In January the rate was at 12 percent, reached 12.7 percent in March and decreased again according to the last data of May.
—The Consumer Confidence Index (ICC) in the city of São Paulo reached 117 points, which represents an increase of 3.1 percent over the same period last year, but a decrease of 3.9 percent compared to April. (São Paulo, the largest city in Brazil, is also the “economic capital” of Brazil.)
—On the other hand, the Retail Businessmen Confidence Index (ICEC) in the City of São Paulo is more optimistic, reaching 120.6 points, which means an increase of 5.41 percent compared to the previous year, but a decrease of 2.6 percent compared to April. ²
—Earlier this year, we reported that, after falling from the top spot in 2016 and 2017, Brazil reclaimed its position as the top source of international visitors to Miami.
—Brazilians also established themselves as the top international investors in purchases of real estate in the tri-county area (Miami-Dade, Broward and Palm Beach Counties) of Southeast Florida.
¹ See “Brazil’s recession worst on record,” BBC, March 7, 2017
² The ICC and ICEC range is from 0 to 200 points. The level from 100 to 200 points is considered optimistic and below 100 points, pessimistic. Although the indicators are from the city of São Paulo, they follow the trend of what is happening in the rest of the country since the largest city in Brazil represents 11 percent of the national GDP.