Hospitality is Hot

Mexico's hotel industry heats up.

While tourist destinations offer a wide variety of packages for those hoping to soak up some sun, the heat is on in Mexico’s hospitality industry. With new resorts popping up in smaller, lesser-known towns, the country hopes to increase its tourism base as well as attract international investors.

Commercial Investment Real Estate spoke with Pablo Yrizar, CCIM, an executive vice president with Cushman & Wakefield Mexico, about his experience in this growing sector and what it means for Mexico’s future.

CIRE: How did you become involved in the hospitality industry? Are there any specific projects or developments you are currently working on?

Yrizar: Although we originally focused on office tenant representation, large-asset disposition, and investment sales, in 2005, my team’s real estate practice identified an uncovered niche within Mexico’s hospitality industry.

We offered to assist and represent our clients in the disposition of land for resort developments and hotels, which in turn brought in more hospitality business for the team. Last year, Cushman & Wakefield Mexico officially announced the opening of its hospitality services department to service domestic and international clients in Mexico.

Some of the projects we are working on are:

  • The sale of 50 acres in the Pichilingue Bay area of Acapulco for a mixed-use tourist development, which includes hotels, villas, and condos.
  • The sale of an acre of land facing the Acapulco Bay on La Costera, the main avenue in Acapulco, for the development of a 600-room hotel.
  • The sale of an $80 million hotel in Guadalajara, Jalisco.
  • The sale of 3.7 million acres on Bahia Concepción, near Loreto in Baja California.

CIRE: Why is Mexico’s hospitality industry thriving?

Yrizar: Tourism is the second-largest generator of revenue for Mexico after oil, and the government realized that it is the perfect industry and should be supported and promoted because the country can offer so much. With warm and sandy beaches, great food, archaeology, colonial towns, modern cities, and people who enjoy taking care of visitors, Mexico is a perfect place for tourists and hospitality.

Its proximity to the U.S. also allows Mexico to access the largest market in the world with regard to tourism. The real estate opportunities in the U.S. and Spain (the two largest investors in this sector) have become so scarce and so expensive that Mexico became a natural recipient for all the cash that couldn’t find a profitable destiny in these countries.

CIRE: Can non-residents own properties? Are there any specific requirements they must follow?

Yrizar: Yes, non-Mexican investors can and currently own millions of properties in Mexico just like Mexican citizens. However, there are some requirements. For properties located within of 100 kilometers of Mexico’s borders and 50 km from coastal areas, international individuals and corporations need to go through a trust managed by a bank in order to own property.

CIRE: What are some examples of new developments in resort towns?

Yrizar: While traditional beach cities like Acapulco, Cancun, and Puerto Vallarta continue to be dynamic growth centers, several states also are starting to receive large amounts of private investment money. The top five states that are becoming more popular are Guerrero, Quintana Roo, Nayarit, Baja California, and Sonora. Puerto Pen~asco, Sonora, and Loreto, Baja California, are the two main areas of development. While there are a number of projects under development and in the planning stages, the following two in particular portray the magnitude and sophistication of the current state of Mexico’s resort market.

Liberty Cove, on Sonora’s north coast, is a $50 billion project that includes a master-planned eco-resort and retirement community on 15 miles along the coast of the Sea of Cortez and is the largest single resort development in Mexico at this time. The cove will be built on about 46,500 acres of land and include 60,000 residential units including single-family homes, ranches, condos, and multiunit complexes.

In addition, the overall master plan includes resort hotels, retail/commercial centers, golf courses, a Formula One-style race track, several marinas, and a riverwalk. The planned zones for this project provide for a certain balance from high-intensity activities to meditation retreats with half the property targeted as dedicated open space. While this project is in the works, the completion date has not yet been released.

Loreto Paraiso in Loreto, Baja California, also will be built along the Sea of Cortez and will include 6,500 units and several hotels, which will total 7,000 rooms. Four golf courses, a marina, service/retail areas, and ecological zones for outdoor sports also will be a part of this resort complex.
The expected completion date for this project is 2016.

CIRE: What kind of governmental support has this sector received?

Yrizar: Through the “Plan Nacional de Desarrollo” [National Development Plan], the Mexican government will further solidify the country’s position as a leader in the hospitality industry and increase the number of international visitors by 35 percent, which is the equivalent of 29 million additional tourists.

To achieve this goal, the PND has implemented several strategies:

  • Make tourism a national priority to generate investments, create jobs, and fight poverty in areas that enjoy resort characteristics and are competitive internationally.
  • Substantially improve the competiveness and the diversification of the national hospitality industry, guaranteeing sustainable growth and integrated town-and-country planning.
  • Promote the quality of the country’s hospitality services as well as the satisfaction and safety of tourists.
  • Upgrade and strengthen the legal framework of the hospitality sector in conjunction with the legislative authorities, the communities, and the corporations.
  • Develop new markets.
  • Develop tourist resorts with consideration of the life conditions and population of local towns.
    Since the tourism industry is the second-largest source of foreign income in Mexico, the government is constantly looking for new ways to improve and protect the country’s destinations while uncovering new areas for development.

Stephanie Bell

“I went through the [recession in the] 1980s and purposely set out a market plan that would not have the boom-and-bust [nature] that comes with real estate cycles.” — Joe W. Milkes, CCIM, Milkes Realty Valuation, Dallas“We were anticipating a slowdown in the market and wanted to develop an avenue of business that would create a steady stream of income.” — Yvonne Jones, CCIM, CPM, Zifkin Realty Management LLC, Chicago“I help struggling companies rethink their business models, which includes determining the most profitable use of their real estate.” — Audie Cashion, CCIM, Alpha World Properties LLC, High Point, N.C.Stephanie Bell is associate editor of Commercial Investment Real Estate.


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