Tourism in Mexico Burned by Violence

MEXICO CITY—For several years, Mexico's tourism industry has weathered the storm of violence in the country, persuading vacationers to visit its beaches and ancient ruins on promises that drug-related crime wouldn't affect their travels.

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Police confront a gang in Acapulco, a resort town marred by violence.

This year, those assurances might not be enough. Many American travelers are turning their backs on Mexico, put off by some gruesome headlines.

Owners of leading tour operators, including American Express Co., have seen sharp declines in American visitors since the first of the year. Starwood Hotels & Resorts Worldwide Inc. recently told analysts the drug wars had "decimated leisure travel" at its Mexican resorts. Three top cruise lines say they've canceled service to Mazatlán, a resort hub that's also become the site of a drug cartel turf war.

"It's very hard for me to think that I'm going to convince someone who lives in Des Moines to take their first international trip to Mexico now," says Trip Barrett, Starwood's vice president of brand management in Latin America. He says violence in Mexico and better deals elsewhere are driving down visitors this year.

American Express's tour operator Travel Impressions says it sent 100,000 passengers to Mexico last year but has seen about a 15% decline in bookings this year for independent travelers, meaning those who aren't part of a group.

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Musicians stroll along a deserted beach in Acapulco, Mexico, looking for clients willing to pay for a song.

"Literally, it's just been a continual barrage of stories of finding beheaded bodies and unearthed graves," said John Hanratty, the company's chief marketing officer.

Tourism is a $12 billion-a-year industry for Mexico. Some 22.4 million tourists visited in 2010, up about 4.4% from the year before. But 2009 was affected more by the economic crisis and the "swine flu" outbreak than the drug violence, even though the violence has claimed nearly 40,000 lives since 2006.

Data compiled by Smith Travel Research, a firm that monitors hotel occupancies among large chains, show occupancy in Mexico so far this year either flat or declining across many mid-range hotel chains, though there were some modest gains on the higher end.

A spokesman from Internet booking company Orbitz Worldwide Inc.wouldn't provide specific figures, but said travel to Mexico is lagging significantly behind previous years. Orbitz cites safety fears and last year's bankruptcy of Mexican airline Cia. Mexicana de Aviación, which led to higher airfares among remaining players.

Mexico's tourism officials acknowledge the challenge but say business remains vibrant and most of the violence is not in tourist districts. "There are still travelers coming to Mexico," says Mexico's Tourism Secretary Gloria Guevara.

Mexican President Felipe Calderón recently met with 22 tourist-industry CEOs during a Las Vegas convention to calm jitters. "I saw thousands of spring breakers in Mexico having fun. My understanding is the only shots they received were tequila shots," he quipped before an audience during the visit.

The majority of violence is between drug cartels and isn't directed at foreigners, says Alfonso Sumano of the Mexico Tourism Board, the ministry's arm that works with the private sector. "They are not going after tourists," he says.

Still, last October, a Canadian visiting Acapulco on business was found dead in his charred rental car after disappearing in the beach town. In January, another Canadian was shot in the leg during a firefight that erupted in Mazatlán. He survived but shortly afterward three luxury cruise lines— Walt Disney Co.'s Disney Cruises, Royal Caribbean Cruises Ltd. and Star Cruise Ltd's Norwegian Cruise Line—canceled service to the port.

According to the U.S. State Department, 107 Americans were killed in homicides in Mexico last year, up from 77 the year before and twice the figure before the drug wars began. The agency doesn't break out tourists from the figures.

Rodolfo López-Negrete, chief operating officer of the tourism board, said he hoped visitors would realize the majority of violence takes place near the border, not in tourist districts.

Acapulco, however, presents a troubling case, tourism companies say. The resort town has also become a major theater of the drug war: On a single weekend this year, more than 30 bodies were found, including night-club workers abducted after hours and later found hanging from a bridge.

Acapulco's violence is affecting resorts that are hundreds of miles away, according to Starwood's Mr. Barrett."When the Joneses hear 'Acapulco,' they know it's a resort," and then other resorts suffer by association, he says. He pointed to recent declines over the usually booked Easter holiday in Puerto Vallarta and Los Cabos, where Starwood operates more than 1,200 rooms under its Westin and Sheraton brands. Puerto Vallarta is about 450 miles from Acapulco and Los Cabos, at the southern end of the Baja peninsula, is even further. But vacancies were high enough that Starwood began offering all-inclusive meal packages and fourth-night-free discounts.

Many foreign hotel companies are banking on security improvement in the long-term and are continuing with development projects in Mexico, according to the Mexican government.

Starwood, which says Mexico remains its sixth-largest country, recently opened a St. Regis in Mexico City and will open a Westin in Guadalajara in August. Hilton Worldwide, the closely held chain that owns brands including Hampton Inns, has plans for 12 new hotels, five of them to open this year, although none is along the border or in Acapulco.

"The perceived situation has been challenging at best to manage," says Terry Dale, president of the U.S. Tour Operators Association, a trade group. "But Mexico is part of the business. It's not going anywhere."

Write to Nicholas Casey at nicholas.casey@wsj.com and Alexandra Berzon at alexandra.berzon@wsj.com

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