Travel and Tourism in Chile

Abstract

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• Get insight into trends in market performance
• Pinpoint growth sectors and identify factors driving change
• Identify market and brand leaders and understand the competitive environment

Product coverage

Airline capacity and utilisation; Arrivals by country of origin; Arrivals by mode of transport; Arrivals by purpose of visit; Car rental services by sector; Demand factors; Departures by destination; Departures by mode of transport; Departures by purpose of visit; Domestic tourism by destination; Domestic tourism by mode of transport; Tourism receipts and expenditure; Tourist attractions; Transportation; Travel accommodation; Travel retail services

Executive summary

1. EXECUTIVE SUMMARY

Chile's unique and varied nature attracts increasing numbers of foreign tourists

In 2005, incoming tourism in Chile was boosted by the increased numbers of international tourists, especially long-haul travellers, who visited the country. Improvement in the world economy and lessened fear of terrorist attacks led to a better outlook for tourism in general. Chile's increased success as a tourist destination relies on its unique and varied nature, its reputation for stability and safety, and the government's effort to promote tourism.

Improved economic situation encourages Chileans to travel more

The Chilean economy improved during the review period, leading to a decrease in unemployment and higher salaries. In general, Chilean purchasing power increased. As a result, Chileans started to spend more on leisure, and especially on tourism. Although only a third of the population went on vacations, more and more Chileans took short trips to the beach or the countryside. The wealthier part of the population also travelled more, in particular abroad. In 2005, departures from Chile were boosted by the low value of the US dollar, making travelling internationally more affordable.

Travel and tourism industry works towards more regulation of quality

Realising the great potential of tourism, the Chilean government and trade associations worked to provide a better service to tourists during the review period. The biggest initiative in this field was the renovation of the star rating system. Indeed, the normative system will completely change during the forecast period, based on international standards, in order to guarantee a certain quality level in service and equipment. A new certification system will also concern adventure tourism activities and tourist guides.

New options to finance travels increase accessibility

The entry of the main department stores into the travel agents sector during the review period considerably changed the rules of the games. Previously it was unaffordable for most Chileans to travel abroad, but the department stores, thanks to their payment cards, offered very interesting payment facilities. This made travel packages more accessible to middle-class Chileans, who were more likely to have a department card than a bankcard. As a result, Chile's outgoing tourism increased, especially to cheaper destinations such as Brazil.

Travel and tourism industry is highly concentrated

Chile's travel and tourism industry was highly concentrated during the review period. Lan Airlines dominated Chilean airlines, with a 75% value share in 2005. The travel accommodation and car rental markets were mainly in the hands of a few international players. Domestic players were significantly smaller and more fragmented.

Government promotes travel and tourism with new initiatives

The Chilean government implemented many initiatives in 2005, in order to increase travel and tourism in the country. The budget for the promotion of travel and tourism doubled, thanks to an increase in the boarding tax. Advertising campaigns to be undertaken during the forecast period will most likely result in an increase in arrivals to Chile. Another important measure will be casinos, with 17 more casinos due to open throughout the country. Finally, the government will need to encourage local initiatives for etnotourism and ecotourism, in order to attract more tourists to regions, and create a new economic activity for local communities.

Airline profitability damaged by high oil prices

In 2005, the oil price peaked, severely damaging airline profitability. Oil can represent up to 30% of an airlines' total costs, so a strong increase in the oil price can be particularly harmful. Consequently, companies had to increase their prices according to fluctuations in the oil price, with increases of up to US$30 for domestic flights and US$100 for international flights. Airline value sales were affected, and did not show the good results that were expected. Moreover, Chilean airlines became more competitive following the entry of Aerolineas del Sur.