U.S. Economy Sending Mixed Signals To South America
<B>U.S. Economy Sending Mixed Signals To South America</B>
By Bob Curley
The downturn in the U.S. economy is starting to put a crimp on business travel to South America, with companies cutting back on trips or forcing employees to fly economy. While those who do travel may start seeing some hotel bargains as a result, so far demand for air travel to the region still outstrips supply.
"The economy is affecting things, without any question," said Hector De Lara Jr., South Florida regional vice president for TraveLeaders, a member of the Radius network of international travel agencies. "The average travel agency is taking a wait-and-see attitude, but I expect that it's not going to get better until the end of the year."
Gary Grove, regional vice president for sales and marketing at Marriott International, agreed. "We are seeing the first signs that business travel is being impacted in South America," he said, but noted that it is difficult to tease out how much of the slowdown is due to the U.S. economy as opposed to such regional problems as the economic crisis in Argentina, political upheaval in Peru and security concerns that discourage travel to Colombia.
Some companies may be balking at paying up to $6,000 for a roundtrip ticket in first class or business class to countries like Argentina or Chile, rather than $600 or so for economy class. But U.S.- based airlines still don't appear to be having much trouble filling those seats. "We've had a strong year and seen strong travel to the region," said Martha Pantin, American Airlines spokeswoman for Latin America. "Not that we will be adding a lot of new cities, but we are not retreating."
Experts agree that Latin America-bound flights from the United States are typically full. And thanks to the eight-hour-plus flight times to many countries in the region, premium class seats remain popular among business travelers.
Pointing to the free-trade discussions at the recent Summit of the Americas in Quebec, Pantin says American--the dominant carrier in the region--believes travel to Latin America will only increase in the coming years. "The market has a lot of potential, and we have a great deal of confidence in the area," she said. "Many Americans have not been (on vacation) to Latin America, and we also think there's a lot of growth potential for business."
Some of this optimism can be traced to the rebound of the Brazilian economy, the strongest in the region. Higher oil prices also may boost the fortunes of exporting countries like Venezuela, Mexico and Ecuador, said Catherine Resek, director of sales and marketing for Radisson Hotels & Resorts Latin America.
"With a 17 percent growth rate, Latin America was the hottest market in the world in 2000 for exporters of goods and technology," Resek noted. "That import growth is projected to continue at 11 percent during 2001. So, it is not surprising that so many multinationals are looking southward for markets to offset slowing sales in the U.S."
Delta Air Lines, along with Continental Airlines, has emerged as a serious regional rival to American. Delta is continuing its expansion, which during the past year has added new routes from Atlanta to Buenos Aires; Bogota, Columbia; Santiago, Chile; Rio de Janiero; and Leon and Los Cabos, Mexico.
"I'm sure the downturn will have some impact on Latin America just as it has the rest of the economy, but we're still seeing strong growth," said Christine Frias, a Delta spokeswoman. She said that with service to the major business centers in Latin America now established, Delta plans to add more flight frequency and start providing services to some secondary and tertiary markets in the region. The airline also is looking to add Latin American flights from JFK in New York, pending government approval.
A tough competitive environment may be the reason why hotels in Latin America are feeling the impact of a sluggish U.S. economy more than the airlines.
Like Marriott, Radisson Hotels has been expanding its presence in Latin America, with 10 hotels located in major cities throughout the region. Resek said the company has not experienced any noticeable slowdown due to the U.S. economy, but noted, "I believe that the major problem that every hotel located in a key Latin American capital city faces today is the increase in room supply, which has been multiplying itself during the past few years and surpasses the existing demand, originating a tight dispute for basically the very same client."
For business travelers, said TraveLeaders' De Lara, the bottom line may be some discounts in hotel rates, but likely not in airfares. "Demand down there is inelastic," he said. "I don't see fares dropping, but you may see more frequent flyer deals and other incentives that have never appeared in the market before.