Hoteliers see opportunities beyond Mexico’s markets

Mexico is more than just its major metropolises like Mexico City, Guadalajara and Monterrey. It’s also more than its resort destinations in Cancun and Los Cabos.

Hotel brand representatives speaking during the “Drilling down on supply and demand—Business travel” panel at the recent HVS-organized Mexico Hotel & Tourism Investment Conference, said there is ample opportunity to grow in markets throughout the country, noting the country has various demand drivers.

Targeting new markets in Mexico
Many with a U.S.-centric point of view tend to think of travel to Mexico as a leisure proposition, fueled largely by the country’s beaches and resorts or large city centers like Mexico City, speakers said. But a strong base of manufacturing and other growing industries are driving more and more business to the country, and that demand is often headed to secondary markets that house manufacturing or agricultural facilities.

Camilo Bolaños, VP of development and real estate for Latin America and Caribbean for Hyatt Hotels Corporation, said an important part of making hotels work in those areas is adapting offerings to those markets.

He said Hyatt is looking to adapt its Hyatt Place brand for areas like Bajío in central Mexico.

“We’re trying to focus on creating a product that keeps the identity of the brand—its standards and values—a constant to tap into places where the prototype would not fit,” Bolaños said. “That’s why we’ve been working for several years to drop the costs of development and work with local sourcing in the region.”

He said those efforts are now bearing fruit.

“In comparison, when we opened the first Hyatt Place four years ago in Mexico, we’ve dropped costs nearly 40%,” Bolaños said.

Oscar Chávez Pacheco, franchise sales and development director in Mexico for InterContinental Hotels Group, said his company is currently rolling out its midscale Avid brand to partners in the country and have noticed that owners of Holiday Inn properties have shown particular interest.

He said IHG was quick to push the brand into Mexico because it believes Avid has a unique growth opportunity in smaller markets in the country.

“We thought, ‘What would happen if we launched immediately?’ knowing that we have an important base of franchisees that will support the brand and it’s in a segment that has an opportunity to grow in secondary and third-tier cities,” he said.

He noted success hinges on offering a “well-crafted product” and being flexible. He is hopeful the overall power of the IHG system will buoy the brand.

“We believe we’ll be able to not only provide keys to the country, but give value to travelers with our loyalty program and by creating this virtuous cycle,” he said.

Opportunities in different sectors
Alexis Ralph, AccorHotels’ development director for Mexico, Central America and the Caribbean, said his company is poised to see huge growth throughout the country in various segments, from low-cost hotels in small markets to lifestyle offerings in larger ones. The company currently has 20 properties operating in the country.

“Our presence can be exploded,” Ralph said. “It can grow even more in 26 different cities with different projects we’re working on.”

He said he foresees growth in large markets like Mexico City, Monterrey and Guadalajara, but there are also opportunities for lifestyle offerings, including with the Mama Shelter brand and a “lifestyle extension” of Sofitel. Growth in that segment can’t simply be a numbers game, he noted, it has to be targeted growth.

“We don’t want to look aggressive,” he said. “We’re not aiming for 30 lifestyle hotels in Mexico.”

Mónica Artigas, director of development for Mexico and Central America with La Quinta Inns & Suites, said there is plenty of opportunity across the board for brands and operators that are able to operate efficiently in Mexico.

Artigas said many in the country don’t understand how to compete on rate in the way La Quinta does. She said that has led upper-midscale properties like La Quinta to be competitive with larger hotels even in major markets like Mexico City.

“We find that we have our best (revenue-per-available-room numbers) in convention center areas,” she said. “That’s where La Quinta has been positioned perfectly.”

Artigas noted the company has tweaked the brand to include some full-service amenities in order to compete more directly.

Bolaños noted there is still a place in Mexican markets for hotels that cater to high-end travelers, as shown by the success of a Hyatt Regency property in Guadalajara. He said that’s a matter of finding and opening in a market and seizing on it. He said that hotel has occupancy in excess of 90%, which “we never see in Guadalajara.”

“An investor needs to think about where their business is coming from and what the different markets that are being served are,” he said.

Because Hyatt as a company targets high-end travelers, Bolaños noted his company benefits in countries like Mexico from a high incidence of loyal customers who travel internationally.