MEXICO CITY—The overall economic environment in Mexico is having a positive effect on hotel development in the country, according to speakers at the recent Mexico Hotel & Tourism Investment Conference.
“We have a privileged moment for development,” said Jean-Philippe Claret, general director of Accor Mexico, citing political stability and economic growth as key drivers. “We have a positive environment that’s accelerating hotel development.”
Claret said despite these conditions, developers should be cautious when choosing their next project.
“Be careful when selecting a project, segment and brand,” he said. “It’s a good moment for hotel chains and investors to do good selection, good planning.
“We’re surfing in the perfect wave. You’re going to see great growth,” he added.
Richard Katzman, managing director of HVS Mexico City, said hotel demand in Mexico is correlated with gross domestic product, but foreign investment is also a key component. The combination will spur development.
“Mexico’s industrial backbone has strengthened and seems to be well positioned to continue in the same vein,” Katzman said.
According to data from STR, parent company of HotelNewsNow.com, Mexico had 70 hotels comprising 8,962 rooms in the active pipeline at the end of 2012.
Office space as development driver
Locations for development are widely varied, but office space is a development driver for the hotel market.
Victor Lachica, president and CEO of commercial real estate company Cushman & Wakefield, said 80% of the country’s office space—nearly 7.4 million square meters—is in Mexico City.
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| Enrique Villanueva of Pulso Inmobiliario makes a point as Mónica Artigas of La Quinta Inns & Suites listens. |
He said Insurgentes, Santa Fe, Reforma and Polanco are the fastest growing areas of Mexico City, which has tripled the amount of office space since 1998. “They are the four most important markets that demand a lot of hotel services,” Lachica said.
“The amount of business hotels is directly linked to where corporate offices are located,” added Enrique Villanueva, director of development for real estate company Pulso Inmobiliario.
Sergio Pérez, senior VP of corporate accounts for CBRE Mexico, said the northern outskirts of Mexico City is a prime area for hotel development because it has the highest concentration of logistics-oriented companies in Mexico.
“The back office brings a huge amount of personnel that attracts hotel investors,” he said.
Industrial parks are also hotbeds for hotel development.
Lachica said developers need to make sure they target the right industrial park centers to serve as demand generators. For example, manufacturing-based industrial parks are stronger generators than those with distribution centers, which don’t attract a lot of travelers.
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Laura Stringel Starwood Hotels & Resorts Worldwide |
Starwood Hotels & Resorts Worldwide has received inquiries from companies located in industrial parks that are exploring the idea of building hotels to cover customer needs, said Laura Stringel, director of global corporate sales Latin America for Starwood.
“We would all love to have hotels near the industrial parks,” she said.
Future development
Panelists agreed that sustainable development is gaining a foothold in the hotel industry. Lachica said the agency that handles sustainability in Mexico has gone from seven applications seven years ago to 40 applications this year.
“It’s not something that’s a fad; it’s a compelling issue,” Stringel said.
Camilo Bolaños Dutriz, VP of real estate and development Latin America for Hyatt Hotels Corporation, said the inclusion of natural light is an important factor in the new property its building in Playa del Carmen, Quintana Roo.
Hyatt isn’t the only company developing hotels.
George Massa, VP and managing director of development Mexico for Hilton Worldwide, said the company opened eight hotels in Mexico last year and has eight more under construction.
“We plan to have 51 hotels here by end of 2014,” he said. “We have a thirst to keep advancing in the Mexican market.”
Michel Montant, director of corporate sales for Mexico-based Grupo Posadas, said the company is looking to add to its portfolio of more than 100 hotels in Mexico, which includes the Fiesta Americana, Fiesta Inn and One brands. The company has 32 hotel projects in various stages of development.
Montant and Massa said construction prices in Mexico are about 20% lower than construction costs in the U.S.
“With this bubble, it will increase just as real estate prices will increase,” Montant said.