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Vacation seekers flock to Central American tropics as an alternative to Caribbean, Mexico

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Many vacationers have passports bearing the seals of a Latin American or Caribbean country. Now, an increasing number are flocking to six countries that, until recently, have been the best kept secret among destination travelers.

Central America — specifically Belize, Costa Rica, Guatemala, Honduras, Nicaragua, and Panama – collectively generated more than $5 billion in tourism last year, government data show. In fact, Central American countries are popping up more frequently on “Best of” travel guides, with those countries offering an alternative to the often crowded beaches of Mexico, the Dominican Republic and Puerto Rico (before Hurricane Maria).

Alyse Cori, owner of travel agency Travelwise, told CNBC that Central America tops other popular tropical destinations, simply because countries in the region have a wealth of attractions aside from beaches and resorts.

“There is more there,” Cori said, pointing to the ecosystem and cultural diversity. “You can immerse yourself. You get the best of both worlds. It’s not flat.” Still, she voiced concern that Central America might get too “commercialized” in the face of more tourism.

Celeste Brash, a freelance writer and guide book writer for Lonely Planet, says price and accessibility is a factor as well. “It’s quick and easy to get there,” Brash said. “It’s also cheaper than a lot of the Caribbean destinations.”

Cheap, however, might be a relative term. Airfare to Central America can be relatively reasonable, but the wide range of attractions offered by each country means out-of-pocket costs can add up quickly. Recently, CNBC took a look at what each country has to offer.

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Europe’s energy crisis is making the market nervous ahead of winter

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Round bales of straw drying on the field are seen in front of the power station operated by RWE AG near Rommerskirchen, Germany on August 10, 2021. The cost of natural gas and electricity has surged across Europe.

Ying Tang | NurPhoto | Getty Images

LONDON — European power prices have spiraled to multi-year highs on a confluence of factors in recent weeks, ranging from extremely strong commodity and carbon prices to low wind output.

What’s more, the record run in energy prices is not expected to end any time soon, with energy analysts warning market nervousness is likely to persist throughout winter.

The October gas price at the Dutch TTF hub, a European benchmark, was seen to climb to a record high of 79 euros ($93.31) a megawatt-hour on Wednesday. The contract has risen more than 250% since January, according to Reuters, while benchmark power contracts in France and Germany have both doubled.

In the U.K., where electricity bills are now the most expensive in Europe, power prices have soared amid the country’s high dependence on gas and renewables to generate electricity.

British day-ahead electricity prices rose nearly 19% to reach 475 pounds ($656.5) on Wednesday, Reuters reported. The contract was already trading near record highs shortly after a fire at a U.K.-France power link cut electricity imports to Britain.

“By far the biggest factor is gas prices,” Glenn Rickson, head of European power analysis at S&P Global Platts Analytics, told CNBC via email.

Higher gas prices have also been a “big driver” in lifting carbon and coal prices to record highs too, Rickson said, although he noted there are other supporting factors at play, such as low wind generation and nuclear plant unavailability across the continent.

Carbon prices in Europe have nearly trebled this year as the European Union reduces the supply of emissions credits. The EU’s benchmark carbon price climbed above 60 euros per metric ton for the first time ever in recent weeks, trading slightly below this threshold on Thursday.

The EU’s Emissions Trading System is the world’s largest carbon trading program, covering around 40% of the bloc’s greenhouse gas emissions and charging emitters for every metric ton of carbon dioxide they emit. Record carbon prices have made highly polluting sources of energy generation even less attractive because coal, for example, emits more carbon dioxide when burnt.

Rickson said the outlook for European power prices this winter will be “highly dependent” on gas prices, adding that he expects gas prices to rise even further in the coming months. “Aside from the ‘average’ picture, we expect prices to be highly volatile, with swings from low or even negative hourly prices when wind generation is high, to very high prices as already seen when wind is low, and demand is high.”

How did we get here?

European gas prices have accelerated since the start of April, when unseasonably cold weather conditions meant Europe’s gas in storage dipped below the pre-pandemic five-year average, indicating a potential supply crunch.

Europe has since struggled to bring gas supplies that are necessary for the winter period back to where they should be. An economic rebound as countries eased Covid-19 restrictions also coincided with higher-than-expected demand that led to a shortage of gas.

An output filtration facility of a gas treatment unit at the Slavyanskaya compressor station (operated by Gazprom), the starting point of the Nord Stream 2 offshore natural gas pipeline. According to Russia’s Deputy Prime Minister Alexander Novak, the construction of Nord Stream 2 will be completed by the end of this year.

Peter Kovalev | TASS | Getty Images

Further to this, Russia has been seen to slow its delivery of piped natural gas to the region, raising questions about whether this may be a deliberate move to bolster its case for starting flows via Nord Stream 2. The controversial pipeline, bringing natural gas to Europe from Russia, bypassing Ukraine and Poland, is soon expected to be fully operational and could resolve some of the region’s supply problems.

This deficit is “making the market nervous as we approach winter,” Stefan Konstantinov, senior analyst at ICIS Energy, a commodity intelligence service, told CNBC. “That is coupled with the very significant competition for LNG supplies from Asia and South America, which is driving gas prices up.”

Climate crisis concerns

Earlier this month, soaring gas prices and low wind output prompted the U.K. to fire up an old coal power plant to meet its electricity needs.

The move raises serious questions about the government’s environmental commitments amid the climate crisis. To be sure, coal is the most carbon-intensive fossil fuel in terms of emissions and therefore the most important target for replacement in the proposed pivot to renewable alternatives.

When asked how the U.K.’s decision to turn to coal could possibly be squared with the urgent need to dramatically scale down fossil fuel use, Konstantinov replied: “It’s a bit ironic isn’t it?”

Activists march with flags and placards, during the march at Extinction Rebellion’s Nature Protest held in Central London about how nature is in crisis.

Loredana Sangiuliano | SOPA Images | LightRocket | Getty Images

“If there was enough wind, it could maybe meet more than half or two-thirds of U.K. power demand on a relatively low power demand day. But instead what we are seeing is that actually we’ve got no wind and we are forced to fire up polluting coal-fired generation.”

“At first glance, that doesn’t tally up with the government’s ambition to decarbonize. But this is very much driven by the intermittent nature of renewables: both wind and solar,” he added.

The U.K. has committed to phasing out coal power completely by Oct. 2024 to cut carbon emissions.

“The fundamental drivers, i.e. high gas prices and high carbon prices, we at ICIS believe they are here to stay for the coming months,” Konstantinov said.

Analysts at Wood Mackenzie, a global natural resources consultancy, also expect U.K. and European gas prices “to remain elevated at current levels throughout winter.”

“A recovery in UK gas production is critical for this winter,” they added. “And going forward, investment into domestic gas supply remains crucial to ensure a smooth energy transition to renewables and new technologies.”

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Europe’s low-cost airlines could have the edge in a post-Covid world

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Ryanair and EasyJet airplanes.

Horacio Villalobos | Getty Images News | Getty Images

LONDON — European low-cost airlines have clear advantages over larger flag carriers in a post-pandemic world, analysts have told CNBC, despite the massive support packages deployed from governments around the world.

It’s been a bruising time for airlines as the coronavirus pandemic brought travel to a halt. But now, low-cost carriers seem to be showing signs of recovery compared with national carriers, which can often be subsidized or given preferential treatment.

“You are seeing legacy carriers unable to move so quickly compared with the lost-cost carriers out of the pandemic,” Paul Charles, chief executive officer of the luxury travel consultancy firm The PC Agency, told CNBC’s “Squawk Box Europe” Monday.

The International Air Transport Association said earlier this month that both international and domestic flights surged in July compared to June, but demand was still “far below pre-pandemic levels.” In Europe alone, passenger traffic was still down 56.5% from July 2019.

However, easyJet, a British low-cost carrier, said it expects to fly up to 60% of its 2019 levels in the three months between July and September. In comparison, IAG — the owner of British Airways said it only expects to fly around 45% of its 2019 capacity over the same period.

Lufthansa, another flag carrier, predicts it will fly around 40% of its 2019 levels in the whole of 2021. Budget airline Ryanair, meanwhile, said its fiscal full-year traffic to March could reach between 90 and 100 million passengers — which would represent between 60% and 67% of the 148.6 million passengers it flew in the full year to March 2020.

Laura Hoy, equity analyst at Hargreaves Lansdown, said that low-cost airlines benefit from being focused on short-haul flights. These are proving to be more attractive to consumers given ongoing travel restrictions and uncertainty over the pandemic. 

In addition, Hoy added that amid economic uncertainty and potential for further disruption going forward, consumers are not keen to spend much on flights, which also benefits the business model of low-cost airlines.

Ryanair shares are up 1.8% year-to-date. Wizz Air shares, another low-cost firm, are up by 7.5% over the same period, while easyJet’s are down 9%. Wizz Air had approached easyJet over a potential merger, but the latter declined the offer last week.

On the other hand, IAG is down 2.6% year-to-date and Lufthansa shares are also lower by 19.7% over that period.

The outlook

“You are going to see the likes of easyJet able to take up more opportunities. That means potentially getting more slots, but also moving their fleet around more quickly in order to take advantage of where demand is,” Charles from The PC Agency also said.

This is despite the massive injections of cash that different governments made in the wake of the pandemic to flag carriers, namely the 9 billion euros ($10.6 billion) that the German government gave to Lufthansa. British Airways also received a £2 billion loan from the U.K. government in December.

“The aid got them through a bad time,” Hoy said, but it didn’t support their growth. The financial help came with a lot of conditions attached, including restrictions to dividend payouts, she added.

In addition, there are question marks about how far governments will be willing to go to keep their flag carriers afloat. They have supported the sector, but some are facing legal action over it and they are, in general, strapped for cash after the efforts to contain the economic shock from the virus.

“There is going to be a change of tune,” Charles said, as “governments are looking to offload where they can, they can’t afford to keep some of these stakes, they would rather cash them in and see private sector buyers inject more innovation into the sector.”

“I think you will see some loosening over time, especially in Europe, of some of these restrictions on who can own carriers, so now is the time that actually you will see more private equity starting to emerge into the sector. And this is on the back, of course, of many short-haul carriers able to take their market share from those legacy carriers,” he added.

 

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Southeast Asia added 70 million online shoppers since Covid: Report

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Grab delivery cyclists ride past each other in Singapore on April 20, 2020.

ROSLAN RAHMAN | AFP | Getty Images

An estimated 70 million more people shopped online in six Southeast Asian countries since the pandemic began, according to a report from Facebook and Bain & Company.

As governments encouraged people to stay home to slow the spread of the coronavirus, Southeast Asia saw a rapid adoption of digital services like e-commerce, food delivery, and online payment methods.

And that trend is likely to continue. The report, which surveyed more than 16,000 people in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, projected the number of digital consumers in Southeast Asia will reach 350 million by the end of this year.

By the end of 2021, Facebook and Bain expect more than 70% of people 15-years-old and above in the surveyed countries to shop online. The report predicted the number of online shoppers in Southeast Asia will reach 380 million by 2026.

Among surveyed countries, the report said Indonesia, Southeast Asia’s largest economy, continues to see the highest growth rate. Its digital consumer population is predicted to grow around 15%, from 144 million in 2020 to 165 million in 2021.

E-commerce boom

Many parts of Southeast Asia are grappling with a resurgence of Covid due to the highly transmissible delta variant. Vaccination rates remain low in some emerging economies. As intermittent lockdowns and movement restrictions make it difficult for consumers to visit brick-and-mortar shops, many e-commerce markets have thrived.

The survey, which was conducted in May, found that the share of respondents who said they shop “mostly online” rose from 33% in 2020 to 45% this year, with the greatest gains coming from Singapore, Malaysia and the Philippines.

Facebook and Bain projected that average online spending will grow 60% this year from $238 per person in 2020 to $381 per digital consumer. Online retail’s share of overall retail surged in Southeast Asia from 5% in 2020 to 9%, the report said, noting that paces is faster than in Brazil, China or India.

“Over the next five years, Southeast Asia’s ecommerce sales is also projected to keep pace with these countries, growing at 14% per year,” the report said.

Fintech investments reach new heights

With more purchases being made online, fintech services such as “buy now, pay later,” digital wallets and cryptocurrencies have also become more widespread.

In the first three months of the year, 88% of private equity and venture capital investments in the region flowed into the technology and internet sector. Of that, 56% went into financial technology, according to the report.

“We are looking at a massive triple explosion of fintech. Not only are regulators removing the regulation barriers, we’ll also see a roaring river of capital with no friction,” Dmitry Levit of Cento Ventures said in the report.

Digital wallets were the preferred payment option for 37% of respondents, compared with 28% who preferred cash, 19% for credit or debit cards and 15% in favor of bank transfers. The Philippines, Malaysia and Vietnam saw the biggest gains in digital wallet adoption, at 133%, 87% and 82% growth, respectively.

Southeast Asia’s rapid digitalization during the pandemic proves the immense opportunity in the region’s digital economy, the report said.

“The region will be a growth market for at least the next 10 years as new verticals, industries and products emerge,” Justin Hall, partner at Golden Gate Ventures said in the report.

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