Airlines pull back in Cancún as the region faces negative backlash from patron blackouts 

Cancún’s image has been tarnished during the last year as Milwaukee’s Journal Sentinel engaged in an extensive investigation that revealed hundreds of travellers reporting blackouts after consuming alcohol at the region’s resorts. During many of those blackouts, resort patrons were assaulted and robbed.


Summary:

  • Airlines are adjusting capacity into Cancún as the recent Milwaukee Journal Sentinel investigation impacts traveller demand to the Mexican resort destination;
  • The newspaper discovered more than 170 patrons at the region’s resorts have reported blackouts after drinking even small amounts of alcohol during stays;
  • Milwaukee Journal Sentinel cited a report by Euromonitor International that concluded that as much as 36% of the alcohol consumed in Mexico is illegal.
  • The US is by far Cancún’s largest tourism market and American, Delta and United have all cited weakness in Mexican beach markets.

More than 170 patrons at the region’s resorts reported to the publication that they blacked out after consuming small to moderate amounts of alcohol. “Some have been assaulted and robbed. All reported little or no recollection of what happened. The incidents occurred at various resorts, to men and women of varying ages, single and in pairs”, the publication reported.

Those incidents appear to have occurred within the last two years, and the Milwaukee Journal Sentinel cited a report by Euromonitor International that concluded that as much as 36% of the alcohol consumed in Mexico is illegal. That alcohol is not sold or produced under regulated conditions, the publication explained. Its investigation also discovered the bootleg liquor could be infused with grain alcohol or dangerous concentrations of methanol.

CHART – The US is the largest source market for visitors to Cancún and currently accounts for 55.1% of the international system seats offered into Cancún International AirportSource: CAPA – Centre for Aviation and OAG (data: w/c 03-Sep-2018)

The US is by far Cancún’s largest tourism market, and some of the country’s airlines are adjusting capacity as demand in the aftermath of those incidents softens. The country is Cancún’s largest international country measured by ASK deployment.

American, Delta and United have all cited weakness in Mexican beach markets, and Delta is adjusting its capacity on some of its routes in the region.  US ULCC Spirit Airlines also cited signs of weakness in the Cancún market during 2Q2018, and has calculated sagging demand to the region would affect its 3Q2018 total unit revenue by broadly 100 basis points.

CHART – Air capacity between the USA and Cancun has follows a general growth trend this decade, but with obvious seasonal variation. Despite the impact of the news report capacity this week is up +77.4% versus the comparable week in 2012Source: CAPA – Centre for Aviation and OAG (data: w/c 03-Sep-2018)

Spirit executives stated that the airline had made some select capacity adjustments to Cancún for the US autumn period, and had postponed some new services to Cancún.  As of late Jul-2018, Cancún represented only approximately 2% of Spirit’s overall capacity.

There’s no doubt that the travel advisories that “have been out there all year”, according to Spirit, are also affecting airlines’ ability to price effectively on routes to Cancún. At the time when Spirit outlined plans to make capacity adjustments for Cancún, its executives remarked that the airline believed the situation would “eventually resolve itself”.