DEEP DIVE: The Mexican Market–What Could Possibly Go Wrong? Answer: Plenty

Delegates to last month’s IPW received the latest updates on key markets¹ from in-market representatives of Brand USA. For the most part, the outlook for Mexico was mildly positive. Despite a dramatic drop in the value of the Mexican peso vs. the U.S. dollar (see table below) in 2015 and 2016, the peso seems to have stabilize and, with it, so has the outlook for inbound tourism from the country which, according to the latest estimate from the U.S. National Travel and Tourism Office (NTTO), supplies almost a quarter (23 percent) of all international visitor to the United States. NTTO has projected annual increases in visitor volume from Mexico of two to three percent through 2021.

What Could Go Wrong? For many who follow developments in Mexico, what could go wrong is already going wrong and could get worse. That is, the Administration of President Donald Trump is preparing to drop out of the North American Free Trade Agreement (NAFTA)—the 1994 trade pact between Mexico, Canada and the United States—if the U.S. cannot improve its terms. Most analysts agree that the dissolution of NAFTA would hurt Mexico the most. In addition, recent tariff measures imposed on Mexican imports by Trump have only exacerbated the trade picture.

Also, President Trump is singularly unpopular in Mexico, with an approval rate in the single digits—an unpopularity that has translated into a diminished regard for the U.S. itself. All four candidates in the July 1 presidential election in Mexico are sharply critical of Trump.

With the above as preface, we have synopsized the information that Brand USA presented at IPW in its market update.

About Mexico—Demographics

• Population: 124.6 million.
• Country is second largest user of Internet in Latin America, behind only Brazil.
• Twenty-one percent of population comprises high and upper middle class.
• Mexicans who have private health insurance: 43.57 percent.
• More than half (51.8 percent) of its population are between 18-44 years old.
• Percentage of overall population under 50 years old: 85.28 percent.
• Thirty-five percent are millennials.
• Of overall population, 48.8 percent are male; 51.2 percent are female.
• Among nations of the world, it ranks No.11 in population.

Source: CIA, World Fact book 2018, INEGI, ComScore     

About Mexico—Economy

• Its $2.406 trillion in GDP makes in the 12th largest in the world.
• It is the No. 2 economy in Latin America.
• GDP real growth rate is 2.1 percent.
• Per capita GDP is $19,500
• Unemployment rate is 3.6 percent.
• Inflation rate is 5.9 percent.

Source: CIA World Fact book 2018

Trend: Increasing Traveling and Increasing Spending

• Mexican visitors to USA spent $20.3 billion on travel to and within U.S.
• Mexico ranked No. 2 market in spending after China.
• While the number of Mexican travelers decreased in 201/17, the average spent per visitors increased.

(Source: U.S Department of Commerce, ITA; National Travel & Tourism Office, Bureau of Economic Analysis)

Airline Seat Capacity: There has been an increase of 10 percent in seat capacity between both nations, resulting I more frequencies, new routes, new airlines and new gateway cities. Much of the growth stems from the success of the low cost carrier Volaris, a young carrier that began service to the U.S. less than a decade ago, and now has a fleet of planes almost the size of Aeroméxico, Mexico’s flag carrier. Also, Delta Air Lines has increased capacity substantially in recent years.

Source:  Dirección General de Aeronáutica Civil (DGAC), from the Ministry of Transports and Communicactions of Mexico. 2016 vs 2017

Mexico’s Gateway Cities

Source: Dirección General de Aeronáutica Civil (DGAC), from the Ministry of Transports and Communicactions of Mexico. Feb 2018

U.S. Gateway Cities

Source:  Dirección General de Aeronáutica Civil (DGAC), from the Ministry of Transports and Communicactions of Mexico. Feb 2018

Market Trends

—Mexico is the largest consumer of video in Latin America.

—By 2020, Mexicans will grow from having 78 million smartphones (2016) to 90.7 million.

—Digital marketing is increasing considerably; it is forecast to increase by 50 percent over previous years.

—Marketers in Mexico allocate 50 percent into event marketing as a source of creating “storytelling” and “client interaction and experiences.”

—70 percent of brand engagement comes from working with influencers.

Source: ComScore, El Economista

Trend: Television audiences are shrinking in comparison to other media platforms, although overall viewership in Mexico is still in excess of 54 million viewers.

Source: NIELSEN MSS – 2016

Trend: YouTube is Capturing the Attention of Millennials

Source: MSS. IBOPE

Trend: Integration of Technology for Travel Journey

—77 percent of Mexican travelers will prefer the use of technology to plan their holidays.

—One third (33 percent) of Mexican travelers say that they feel comfortable if a computer organizers their trips based on their past travels.

—77 percent of Mexican travelers would like to use Virtual Reality, if available, before booking their next holidays.

—71 percent Mexican travelers said that OTAs personalized suggestions are very important when they decide to book.

—72 percent of Mexican travelers will use travel apps.

—Mexican travelers share their travel experiences via social media across all age groups; young millennials also share memories on Instagram.

Source: Booking.com

Top 10 Online Booking Sites

1. Best Day Travel
2. Despegar.com
3. Price Travel
4. Expedia
5. Booking.com
6. Almundo
7. American Express
8. Mundo Joven
9. Carlson Wagonlit
10. BTI – Business Travel International

Source: Euromonitor International