Home to a wide variety of attractions ranging from the Iguazú Falls in the north-east of the country, wine tasting around Mendoza and the gastronomic night life of Buenos Aires, Argentina has much to offer visitors. Furthermore, with 11 natural and cultural sites included in UNESCO’s World Heritage List, the country presents a varied offering. Building upon these assets, the government has set the goal of boosting both tourism figures and expenditure, with Gustavo Santos, minister of tourism, announcing in January 2018 that the country aims to attract 9m tourists by the end of 2019. In order to meet these objectives, the state has increased public funding and put in place financial incentives to support investment, while reforming the aviation framework.
While these actions appear to already be paying dividends, the sector faces a number of challenges to its long-term development. These include bottlenecks in the transport infrastructure, and high taxes levied on tickets and airport services.
Performance
Progress appears to be under way, however, with Argentina rising seven places between 2015 and 2017 in the “Travel and Tourism Competitiveness Report” published by the World Economic Forum. Overall, the country ranked 50th out of 136 countries, with progress on all main indicators.
It performed particularly strongly in terms of outstanding natural (25th) and cultural (14th) resources. In addition, overall competitiveness gained a major boost from improved human capital and labour market performance (69th), due to higher education enrolment and increased flexibility in employment practices.
According to the World Tourism & Travel Council (WTTC), the sector was worth AR381.8bn ($19.8bn) in 2017, representing 3.7% of total GDP. The overall sum of direct and indirect contributions to the economy stood at AR1.1trn ($57bn) in the same year, or 10.3% of GDP. As a labour-intensive segment, the tourism industry is a noteworthy source of employment, and this contribution is expected to grow in tandem with the sector’s expansion. The industry directly employed approximately 644,000 workers, representing 3.5% of total employment, in 2017, and the WTTC estimates that this number will likely rise to 771,000, or 3.7%, by 2028.
According to data provided by the National Institute of Statistics and Censuses (Instituto Nacional de Estadística y Censos, INDEC), in the first quarter of 2018 almost half (48%) of all visitors came for leisure, adventure, food, history and culture. Meanwhile, a little less than one-third (30%) arrived to visit family members or friends. The remaining reasons for incoming tourists were business (18%) and other (4%), which includes trips related to education, religion and medical tourism.
Using a different methodology, the WTTC determined that in 2017, 69.7% of tourism and travel GDP was generated by leisure trips, both incoming and internal. These tourists generated a revenue of AR481.7bn ($24.9bn), while the business segment generated the remaining 30.3%, or AR209.2bn ($10.8bn). It is expected that leisure tourism spending will increase by 2.7% annually in the coming decade to reach AR652.2bn ($33.8bn) by 2028. The business segment, for its part, will accelerate less rapidly, with annual growth of 2% to reach AR260.2bn ($13.5bn) in 2028.
Structure
Despite the recent growth and rising competitiveness of the sector, the lion’s share of current traffic is composed of domestic travel. In 2017, 86.9% of the sector’s GDP stemmed from domestic spending, while only 13.1% came from foreign visitor spending, according to the WTTC. There are, however, suggestions that this may change, with the WTTC estimating that domestic tourism will increase to AR750.6bn ($38.9bn) by 2028 at a yearly growth rate of 1.9%, while income from international tourism is expected to grow at a stronger annual rate of 5.4% to AR163.8bn ($8.5bn). As such, although domestic tourism will remain the foundation of the sector, foreign visitor spending is set to almost triple over the coming decade, based on current projections.
Investment Patterns
The total value of investment in the travel and tourism sector was AR119.3bn ($6.2bn) in 2017, representing 7.5% of total investments that year and the highest level since 2011. With the current government’s plans to enhance and expand infrastructure, this number is expected to rise by 10.2% in 2018. Speaking at the global summit of the WTTC, which took place in Buenos Aires in April 2018, Christopher J Nassetta, CEO of Hilton and chairman of the WTTC, stated “Throughout this country today, the travel and tourism sector supports a total of 1.8m jobs, and we expect to add another 300,000 in the next decade, thanks to our collective investment of close to $2bn – an important motor for growth.”
Foreign Arrivals
While domestic travel predominates, the number of international visitors to the country is growing. Argentina received 5.6m tourists in 2016, making it the third-most visited destination in South America and the fifth-most visited in Latin America, according to the UN World Tourism Organisation. This figure increased by a further 1.8% to reach 5.7m in 2017.
Nevertheless, the majority of non-resident tourists are from neighbouring countries in Latin America, indicating significant growth potential from customer markets that are further afield.
In 2017, 60% of tourists arrived from other Latin American countries, an increase of 4.8% from the previous year, according to the INDEC. Of these the most popular market was Brazil, with 26.2% of the total, followed by Chile (10.6%), Bolivia (2.72%), Paraguay (2.68%) and Uruguay (2.3%). The highest increase occurred in visitors from Brazil, with the number of arrivals rising 9.8%, while visitors from Bolivia fell 6.4% over the same period. The highest number of visitors from countries outside of Latin America came from Europe, which comprised 21.1% of the total, although this number fell 7.9% from the previous year. Visitors from the US and Canada made up 12% of the total, although this marked a 4.1% decrease on the previous year.
The two main airports welcoming international passengers in 2017 were Ministro Pistarini International Airport (Aeropuerto Internacional Ministro Pistarini, EZE) – also known as Ezeiza International Airport – and Jorge Newbury Airfield (Aeroparque Jorge Newbery, AEP), which together handled 92% of the country’s international traffic. The two airports serve Buenos Aires and the surrounding metropolitan area, and are the busiest and largest in the country. The third-largest airport, in terms of visitor traffic handled, was Governor Francisco Gabrielli International Airport (Aeropuerto Internacional Gobernador Francisco Gabrielli, MDZ), which is located in Mendoza and handled 3.5% of international tourists, followed by Ingeniero Aeronáutico Ambrosio LV Taravella International Airport ( Aeropuerto Internacional de Córdoba Ingeniero Aeronáutico Ambrosio LV Taravella, COR), located near Córdoba with 2.8%. This was followed by Rosario – Malvinas Islands International Airport (Aeropuerto Internacional de Rosario – Islas Malvinas, ROS), with 0.9%, and Martín Miguel de Güemes International Airport (Aeropuerto Internacional de Salta Martín Miguel de Güemes, SLA), which handled 0.3%.
While EZE and AEP are the most significant players in terms of international tourism flows, the overall share of international passengers passing through the two airports fell 2.9% between 2016 and 2017. Meanwhile, the share handled by the remaining airports increased dramatically, rising 84.5% at MDZ, SLA (44.7%), ROS (40.4%) and COR (29.8%). While these changes are relatively small in real terms, they suggest a shift in overall passenger flows as a result of improved regional connectivity.
Nevertheless, given the ambitious expansion plans under way for the upgrade and expansion of EZE, the primary position of the airport appears secure. In March 2018 the Ministry of Transport (MoT) announced that the government would invest AR15bn ($776.7m) in the redevelopment of the airport. As part of the plans, the size of the airport is set to increase to around 217,000 sq metres, with the number of gates planned to rise from 27 to 52 and parking capacity to double. These works are earmarked for completion by 2021.
Government Plans
With the current administration emphasising the development of the sector, international visitor figures can be expected to increase further. The government of President Mauricio Macri aims to increase the number of tourists from 5.6m in 2016 to 9m by 2020, while at the same time raising foreign visitor spending to $8bn. It also hopes to boost domestic tourism to 70m per year and raise domestic spending to AR170bn ($8.8bn). Additionally, the administration hopes to add another 300,000 jobs by 2020, through the development of the sector’s value chain. In order to achieve these objectives, the government unveiled the National Tourism Plan in 2016. The plan envisages establishing the country as the principal holiday destination in the region, by improving the competitiveness and sustainability of the sector through the promotion of innovation.
The plan, which has gained support from all the major industry business associations, offers a range of financial incentives to stimulate both domestic and foreign investment, including preferential credit lines, subsidised loans and favourable interest rates. In addition, AR11.7bn ($605.8m) of state money has been allocated for investment, with an emphasis on upgrading and improving the country’s infrastructure. Financial assistance can be obtained through the MoT, which has formed an agreement with both major national and global financial institutions, including the state-owned Bank of the Argentine Nation, the Federal Investment Council and international creditors such as the World Bank, the Inter-American Development Bank and Chile-based Banco BICE. “As soon as these investments are put into practice, increased connectivity will ensure a constant flow of passengers and support stable demand,” Joaquín Navasal, CEO of destination management company Consolid Travel Argentina, told OBG. “This, in turn, will inevitably generate more investment opportunities in the hotel and accommodation segment of the industry.”
New Airlines
Public investment and the provision of incentives to the private sector form only part of the government’s efforts to stimulate the sector. Since 2016 the MoT has pursued a steady liberalisation of Argentina’s previously highly regulated commercial aviation market.
These changes have facilitated a flurry of investment in the industry, and the launch of a range of new airline services, provided by both new and established operators, including a number of significantly lower-cost airlines.
Following open tenders launched in 2017, over 630 new routes were granted to 13 companies. For example, it was announced in April 2018 that Air Europa – a subsidiary of Spanish tourism and transport group Globalia – would launch direct, twice-weekly flights between Puerto Iguazú and Madrid in late 2018 or early 2019. This move can be expected to open up the Iguazú Falls and Iguazú National Park attractions in the north-east of the country to international travellers and investors.
The company also announced that the service would offer connections to 52 other European destinations through an agreement formed with international low-cost carrier Ryanair. On a domestic level, Avianca Argentina was established in 2016, following the deregulation of the segment, and quickly began to operate flight services to Buenos Aires, Córdoba, Mendoza and Tucumán.
In a watershed moment for the industry, 2018 also saw the establishment of the country’s first low-cost airline services. After being awarded a number of route tenders in September 2017, Norwegian Air, Europe’s third-largest low-cost provider, announced the launch of an Argentine subsidiary, that will offer low-cost domestic and regional flights from October 2018 onwards. Moreover, Argentina launched its first low-cost domestic operator in January 2018, Flybondi. The company currently offers flights between Buenos Aires, Córdoba and 13 international destinations. These developments appear likely to offer a serious boost to the tourism sector, considerably expanding the customer base for domestic and international flights to Argentina.
The increase if budget airline traffic is especially significant as Guillermo Dietrich, the minister of transport, announced in July 2018 that authorities would no longer set minimum prices for domestic airfares. The move, which will come into effect in August 2018, came as good news to low-cost carriers as it is expected to increase competition.
Outlook
The government’s liberalisation of the commercial aviation segment, along with its commitment to improve infrastructure and incentivise investment, appear set to lower operational costs and further expand tourist flows. Furthermore, the establishment of low-cost carrier operations in Argentina appears likely to support long-term comprehensive growth of the sector’s customer base, both at home and abroad. While these changes put the country in good standing to achieve its aims for increased tourism numbers and tourist spending, serious challenges remain to be overcome if the sector is to achieve its full potential. Despite improvement’s to major airports, however, significant regions of Argentina that are home to national parks and areas of outstanding natural beauty continue to suffer from transport connectivity problems. In addition, further regulatory reforms appear necessary to ensure the sector is competitive.
