Mexico hospitality sector sees rapid decline after holding $600 million hotel investment

Published on : Tuesday, January 28, 2020

The hotel sector in Mexico is declining after the closure of $600 million hotel investment plan. Concurrently, the average daily rate (ADR) slipped 3.8%, to $112.17, while occupancy fell 2.9%, to 61.6%. The supply also outpaced demand, with the former up by nearly 3.2% year to date through November and the latter virtually flat at 0.1% growth.

Jennifer Dohrmann-Alpert, vice president for advisory services at global design firm HKS, which has an office in Mexico City said that there is certainly a threat of oversupply in Mexico. They have seen tons of developments entering the pipeline, especially in places like Riviera Nayarit and Cabo, and many of these projects are opening between 2020 and 2025.

 

A supply-and-demand imbalance, however, is far from Mexico’s only challenge, added Dohrmann-Alpert. Exacerbating matters is a recent uptick in cartel-related violence, which has sparked safety concerns, as well as the Mexican government’s decision in early 2019 to shutter the Mexico Tourism Board, diverting millions in tourism promotion dollars toward a proposed train to connect key destinations along the Mayan corridor.

 

According to Dohrmann-Alpert, the latter move has likely had an outsize impact on Mexico’s Yucatan region, home to tourism-dependent hot spots like Cancun, the Riviera Maya and Cozumel, which have long been dominated by the all-inclusive model.

 

Dohrmann-Alpert said that Mexico has banked much of its tourism expansion in the broader Yucatan on all-inclusive properties. But millennials, in particular, may not be as keen on all-inclusive resorts, and so that segment may be starting to trend downward a little bit as the travel market more of an experiential travel product.

 

Indeed, STR data indicates that the Yucatan Peninsula has borne the brunt of Mexico’s recent troubles. RevPAR in the market declined 12.9%, to $111.94, year to date through November, while ADR plummeted 10.6%, to $163.28. Occupancy in the Yucatan Peninsula year to date was down 2.5%.

 

Also weighing heavily on the region was last summer’s unusually severe sargassum seaweed outbreak, which at times rendered beaches across the Riviera Maya and Cancun coastlines virtually uninhabitable.

 

In late October, Francisco Zinser, executive vice president of Mexican hospitality group Grupo Hotelero Santa Fe, blamed sargassum for some of the company’s third-quarter woes, while also calling 2019 a tough year for the Mexican tourism sector in general.

 

Grupo Hotelero Santa Fe saw RevPAR slip 10.9% for the nine months through September, as the company’s ADR fell 7.8% over the same period. Occupancy across the group’s portfolio, which includes 25 properties in Mexico, decreased 2.2 percentage points, to 60.9%. With the hospitality segment clearly losing steam, Dohrmann-Alpert believes hotel developers may be hesitant to bet big on Mexico moving forward.

 

 

She cited as one example Apple Leisure Group’s recent decision to put up to $600 million in Mexico hotel investments on hold. Apple Leisure executive chairman Alex Zozaya said at a press conference in December that the company’s AMResorts arm would defer construction of four or five properties, blaming the tourism board’s closure for a downturn in visitor numbers and pointing to growing pressure on hotel profitability and room supply growth outpacing demand.

 

Related Posts

Tags: , ,

Comments are closed.

arrow2Follow TTW
 
facebook-logo  twitter-logo  LinkedIn_logo  rss_logo 
ttw_blogger_logo  ttw_blogger_logo

ADVERTISEMENT

  • 06 MALT-Congress 2020
  • 08 iitm 2020
  • 12 ttfotm 2020
  • 13 digitaltravelapac 2020
  • 15 Digital Travel EU 2020
  • 20 GWS-2020
  • 30 PATA

TRAVEL INDUSTRY EVENTS

    1. TTF Summer Kolkata

      February 21 - February 23
    2. MEETINGS AFRICA 2020

      February 24 - February 26
    3. MALT CONGRESS

      February 25 - February 26
    4. JTTX10

      February 26 - February 28
    5. TTE – TRAVEL TECHNOLOGY EUROPE 2020

      February 26 - February 27
Get our toolbar!
Review www.travelandtourworld.com on alexa.com