Due to our experience and presence in Mexico, where we have a large number of clients from the Mexican Caribbean to the Pacific, including the main urban centers, at Roiback we have a special visibility (and sensitivity) on the evolution of the national tourism market.
Despite having suffered a significant decline in bookings due to the Covid-19 crisis, Mexico (and specifically its vacation destinations) has proven to be more resilient than other destinations.
The direct sales channel, although also affected, has shown greater resilience and profitability than other channels, such as tour operations, which are much more affected and less profitable for the hotel.
Although Hurricane Delta, which made landfall in Cancun and Riviera Maya on October 7, brought with it an occasional increase in cancellations, the trend in Mexico continues to be upward.
The progressive and determined growth of our clients provides reasons for optimism.
As Graph 1 shows, the lowest point in terms of the number of reservations was recorded in week 15 (April 6 to 12), with a drop of 84% compared to the previous year.
Thereafter, we see a period of steady recovery.
In week 35 (August 24 to 30), coinciding with the change to yellow traffic light in Cancun and Riviera Maya that allows up to 60% occupancy in the hotel plant, we see the number of reservations in 2020 equalize with respect to 2019.
From week 37 (September 7 to 13) and until today – with the exception of week 39 (September 21 to 27) – we see that reservations made in 2020 exceed those of 2019.
Bookings rise, cancellations moderate.
After a period of massive cancellations between weeks 11 (March 9 to 15) and 20 (May 11 to 17), the figures have stabilized to current levels. At the same time, the number of bookings has progressively increased.
The months of March and April, when net bookings (the difference between confirmed and cancelled) were negative, are a long way off (graph 2).
From week 19 (May 27 to June 3) the net between bookings and cancellations is positive, and in some weeks such as week 37 (September 7 to 13), 38 (September 14 to 20) and 42 (October 12 to 18) it even exceeds the 2019 figures.
Although the passage of Hurricane Delta through Cancun and Riviera Maya has caused cancellations to increase, the trend is positive. The rapid and very encouraging start-up of the destination after Delta’s passage has meant that the economic impact has been less than initially expected.
In this phase of recovery, where competition for guests and the price war is fierce, it is important to focus on strategies to gain the customer’s trust and position the hotel in the most effective way possible.
These include flexible rates; differentiation through added value (room upgrades or private transfers, early check-in, late check-out or F&B credits); or tools such as the gift card, which offers guests the option of postponing their trip – instead of canceling it – by means of a credit that can be redeemed in the future.
While it may come as a surprise given how difficult 2020 is proving to be, we see how Roiback clients who have bet on strategies like these have managed to increase their direct channel sales in 2020 – and with it their profitability and liquidity – compared to 2019.
Advance booking increases significantly.
The health uncertainty and paralysis of many destinations in Mexico between March and May have accentuated a trend that we had been seeing since before the start of the Covid-19 crisis: the increase in average advance booking.
Figure 3 shows how average advance bookings are rising in all months of 2020, and rising most sharply during the most severe months of the pandemic. As the health situation returns to some degree of normalcy, we see the average lead time progressively decreasing.
The increase in advance demand is due to several reasons: the tendency of the North American market to book later in anticipation of an improvement in the health situation; a greater focus than in previous years on Early Booking campaigns – even for bookings in 2021; and the cancellation or modification of bookings during the hardest months of the pandemic, to move them to later dates.
If we consider all of 2020, 50% of our clients’ bookings have been made for arrivals in 61 days or more (versus 34% in 2019); and 29% of bookings have been made for arrivals in 121 days or more, (versus 17% in 2019). See figure 4.
In this context, Early Booking offers or promotions – to convert this demand for long-term bookings – take on special importance. Likewise, it is important to load and keep rates updated for the whole of 2021, making offers or promotions for specific dates or periods (school vacations, national holidays or others) in the main issuing markets.
The U.S. market confirms itself as the most resilient, while the Mexican market demonstrates its growing importance.
Within the general decline in bookings for all markets, the Mexican and U.S. markets have seen less pronounced declines than the other markets.
Throughout 2020, the two together accounted for more than 82% of the total. But it is from April onwards, and coinciding with the worst months of the pandemic, that we see how their importance increases (Figure 5).
The U.S. market has contained the decline, demonstrating its resilience and marked tendency to book through the direct web channel. Considering the higher average booking price of the American traveler compared to others, the better this market performs the better it will be for the destination and its hotels.
The Mexican market, although down compared to 2019, has kept the flow of bookings active, partially offsetting the sharp decline in other markets.
Maximizing the potential of the domestic traveler has become one of the keys to the “new reality”. To this end, we always recommend that our clients implement strategies and tools similar to those used by intermediaries and OTAs in their direct sales channel.
These include Interest-Free Months, which allow them to reach a very large segment of the domestic market that is accustomed to this payment model; define prices and market the hotel in local currency to compete on an equal footing with OTAs; and offer Hotel + Flight packages from the hotel’s own website, thus diversifying the value proposition and competing with OTAs and travel agencies.
The future, although uncertain, looks promising.
Driven by the confidence it generates among clients and the reduction or lack of activity of many intermediaries, the direct channel has shown a very encouraging capacity to react during this complicated year. And everything indicates that we will continue to see this upward trend in the coming months.
As we can see in Graph 6, the forward booking trend remains on a similar line to 2019, and in many cases exceeds it.
At Roiback, we remain committed to the recovery of the sector in Mexico and to the development of the direct channel. We will keep you informed of these and other developments.