Chile is South America’s fourth-largest economy – after Brazil, Argentina and Colombia – based on its 2016 gross domestic product. Copper mining accounts for 10% of GDP, a quarter of the government’s tax revenue and half of the country’s export earnings.
Copper prices began a retreat in 2011, and the effects hit non-mining investment, business and consumer confidence. As a result, Chile’s economic growth slumped to just 1.5% in 2016 – a significant drop compared to the 6% growth in 2010. A recent upswing in copper prices is reviving the mining sector. But there will be no immediate windfall for the wider economy because government budgeting laws restrict the use of mining revenues.
Economic growth in 2017 is estimated to be just 1.3%, as rising unemployment and slower wage growth weigh on consumer spending. The government’s fiscal tightening also limits public sector hiring and restricts growth in public spending. And businesses are cautious; they’re awaiting the outcome of November’s presidential elections.
Oxford Economics forecasts 2.8% growth in 2018, as rising copper prices and low interest rates fuel expansion.
International travel grew an average of 10% per year between 2010 and 2016. Over this period, arrivals averaged growth of more than 12%, while departures from Chile grew more slowly at 7% a year. The government is engaged in a campaign to boost tourism, and improved air connections and a streamlined visa process have helped the effort. Arrivals from neighboring countries like Argentina, Brazil, Bolivia and Peru are up. But Chile also aims to appeal to travelers from the U.S., Mexico, Europe and China.
The Chilean business travel market was worth almost US$4 billion in 2016. Between 2010 and 2016, spending grew, on average, by 7.5% per year in local currency. Growth was particularly weak in 2016; a 4% decline in spending on domestic business trips meant overall spending grew just 2%. Domestic trips account for 43% of spending and inbound travel for another 33%. Total spending on business travel will grow on average by 6% per year through 2020.
The local division of pan-Latin American airline group LATAM dominates the Chilean aviation market. It accounts for more than half the flights departing from the country’s six largest airports.
Sky Airline, which has recently transformed itself into a low-cost carrier, is LATAM’s main rival. It competes on many domestic routes from Santiago, offering multiple daily flights to cities like Calama, Antofagasta and Puerto Montt.
Latin American Wings launched its first scheduled flights at the start of 2017. Ultra-low-cost carrier JetSmart started operations in July. It’s backed by Indigo Partners, which has interests in some well-established LCCs like Frontier Airlines and Wizz Air.
LATAM is responding to this extra competition with a revised fare structure and new domestic routes that avoid the need to connect over Santiago.
While Santiago accounts for almost 30% of total hotel rooms, the international hotel chains have 60% of their properties in the capital. This focus on Santiago continues, with new openings planned by AC Hotel, Hampton by Hilton, Hilton, LQ Hotel by La Quinta and Park Inn by Radisson. Hampton by Hilton Antofagasta is one of only a small number of chain hotels planned outside Santiago.
Chilean chain Diego del Almago Hoteles is currently the largest operator in the market, and is the only company to offer properties nationwide. Marriott/Starwood, AccorHotels and Carlson Rezidor are the largest global chains. But Carlson has seen Radisson properties in Santiago, Iquique and Antofagasta switch to Spanish chain NH Hotel Group, which is expanding in the Chilean market.
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