Mexican tourism, a key to recovery, springs back after earthquake sag

What a difference a month can make. Last month, rescue efforts in the Mexican earthquake rubble were the drama for dinnertime television news. Anxious tourists canceled vacations. Mexico City hotels saw a 50 percent drop in business. Bookings at other resorts slipped 10 to 15 percent.

Economists warned that if Mexico lost too many tourist dollars, it could seriously jeopardize its ability to cover interest payments on its $96 billion foreign debt.

Mexico still isn't out of the woods. The reconstruction price tag is climbing to $5 billion. Prices on oil, a critical source of foreign currency, remain soft. But Mexico did get a six-month reprieve on foreign loan payments.

And one very important area -- tourism -- is starting to rebound.

``Bookings have returned just about to normal,'' says Tim Warnock, vice-president at Firstours, a Denver subsidiary of the Carlson Company, one of the largest tour agencies in the United States.

Other agents contacted confirm nearly normal bookings at Mexican resorts. In fact, Canc'un and some other east coast resorts (the earthquakes were centered on the Pacific coast) have drawn more vacationers than last year at this time. But travelers are still shunning Mexico City. And there is some regional variation.

For Americans in the Northeast, bookings at Acapulco are ``very slow'' and at Ixtapa are ``almost nonexistent,'' says Doug Frank, vice-president of agency sales at the Boston-based Trans National Travel. Firstours reports the earthquakes had little effect on bookings from the West Coast, while Chicago trade did fall off.

To counter this, officials from the Mexican tourism department are now on a revival mission -- meeting with travel agents and the news media in 19 cities in the United States and Canada.

``Ninety-nine percent of Mexico City is undamaged and back to normal,'' said Guillermo A. Grimm, Mexico's undersecretary of tourism, at a New York press conference this week. In Mexico City, all but 20 of the 500 hotels are operating normally. In Ixtapa, only three of some 30 hotels are closed now. Two of those will be open by December, Mr. Grimm said.

``The challenge now is to correct public perceptions in North America and Europe that Mexico is destroyed, but [in fact it] is alive and well, . . . and to thank all of you for the help received right after the disaster.''

To that end, the Mexican government will spend $10 million in the next three months on its largest promotional campaign ever. Grimm outlined plans to boost spending 300 percent on television ads in 11 markets and 30 to 50 percent in print advertising.

North Americans are an important market for Mexico -- accounting for 85 percent of all travelers to the famous crescent-beach resorts. But even before the Mexican quakes, tourism was hurting. This was in part because of publicity surrounding the murder of a US drug enforcement agent last February -- and in part because of stiff competition from other vacation spots.

Travel agents say favorable currency-exchange rates continue to make Europe ``the place to go.'' An airline fare war on flights to Hawaii has siphoned off some tropical-paradise clientele. And travel agents say fear of terrorism is hurting some locations abroad.

Mexican officials had expected to boost tourism revenues to $2.2 billion from last year's $1.9 billion take. With the huge advertising campaign, Grimm hopes Mexico will bring in at least $2.1 billion in 1985.

Special discounts are not a part of the Mexican government's tourism campaign -- perhaps because there is little need for them. In the last month, the peso has dropped sharply against the dollar. The result: cheap prices for US and Canadian tourists once they get there.

``At this point, the peso is probably undervalued and offers tremendous bargains,'' says Firstours' Mr. Warnock, who returned from Mexico recently. He cites breakfast for $1.25, $3 for a ``nice restaurant lunch,'' and ``a good seafood dinner with drinks for $7.''

In Ixtapa, the Pacific coast resort closest to the earthquake epicenter, the hotels are cutting prices by 50 percent between now and December, Warnock says. Mexicana Airlines is doing some discounting as well.

The peso's recent fall, from around 280 to about 470 to the dollar, is due to a speculative overreaction to the financial burden of earthquake reconstruction and a recent interest rate cut, says Javier Murcio, Latin America economist for Data Resources, the economic consulting firm. As in the US, when interest rates fall, investors tend to seek higher rates of return in other currencies, thus decreasing the demand for pesos and peso-denominated securities.

As speculation subsides and refinancing plans are made, Mr. Murcio expects the peso to slip gradually back under 400 to the dollar within the next three to six months.

On Tuesday, another large aftershock hit Mexico, measuring 5.2 on the Richter scale. Seismologists say this is typical. Aftershocks occur for a year or so after a major quake and get further apart as time goes on. The aftershocks have been smaller than the Sept. 19 quake, which measured 8.1.

``Magnitude 5.2 is big enough to be felt but not enough to do real damage,'' says Dr. Robert Uhrhammer, research seismologist at the University of California at Berkeley.