Hotels & Hospitality Group February Hotel Destinations Mexico

Transcription

1 Hotels & Hospitality Group February 2016 Hotel Destinations Mexico

2 Welcome to the February 2016 edition of our Hotel Destinations Mexico publication, an annual overview providing a snapshot of key hotel markets across Mexico. As you browse through this guide, you will find a selection of notable hotel trends, recent transactions, upcoming new projects and a summary of key market statistics for each destination. We trust you will find this publication relevant, concise and insightful. We hope you enjoy the read. Clay B. Dickinson Managing Director Latin America JLL s Hotels & Hospitality Group Fernando Garcia-Chacon Executive Vice President Latin America JLL s Hotels & Hospitality Group Alfonso de Gortari Senior Vice President Mexico JLL s Hotels & Hospitality Group

3 Hotel Destinations Mexico 03 COUNTRY SUMMARY Mexico s economic outlook over the next five years remains promising. The country has been able to weather the economic slowdown experienced across Latin America as a result of the global decline in pricing for oil and other commodities and a softening US economic outlook, among other issues. Mexico s robust growth in domestic demand, falling unemployment rates and low inflation have helped counter any negative impact caused by currency devaluation and overall economic slowdown experienced across the region. As a result, Mexico s real GDP is projected to average 3% annual growth over the next decade, according to Oxford Economics, supported by an aggressive structural reform agenda, strong private consumption and manufacturing and increases in foreign investment. In spite of the aforementioned positive growth trends, the country is not entirely immune to the effects of the global economic slowdown, particularly any effect on the US, Mexico s key trading partner. Other possible short-term risks include energy sector constraints and further government spending cuts caused by the fall in oil revenues and any ripple effects caused by China s economic slowdown. Moreover, the security issues impacting the country, while less of a concern as of late, remain a potential risk. That said, Mexico has the most developed hospitality sector in Latin America and has enjoyed recordbreaking visitation levels for the past four years, evenly distributed across leisure and commercial destinations. In an effort to incite healthy competition and attract more foreign investment, government-led reforms were implemented to dismantle monopolies in the energy and telecommunications sector. Private consumption continues to be the main driver of growth, but the manufacturing industry is gaining ground due to improving demand from the United States, more favorable cost dynamics compared to China, and improved competitiveness associated with the Mexican Peso s depreciation. In addition, the government is investing in major infrastructure projects such as a new international airport in Mexico City. Foreign Direct Investment (FDI) is projected to total US $30 billion in 2016 and grow 6% annually to $38 billion by The automotive industry, Mexico s top FDI sector, is expected to continue attracting foreign investment given improving conditions in the industrial sector and general infrastructure of the country. Overall visitation to Mexico has increased given the favorable exchange rate and improved connectivity. In the latest United Nations Tourism Barometer, Mexico ranked as the 9th most visited country in 2015, with approximately 32.1 million visitors, an increase of 9.6% compared to 2014 visitation figures. Likewise, with 6.7 million international arrivals, Cancun set a new record in 2015, closely followed by Mexico City and other top tourist destinations. The number of international arrivals is expected to increase due to key infrastructure projects expected to deliver in the short term. Mexico s lodging market has been shaped by the recent macroeconomic trends and is poised for growth in Expect to see a rise in international arrivals given the favorable exchange rate, new-build hotels in manufacturing regions and ancillary markets and potential acquisition opportunities and mixed-used developments in markets with high barriers to entry. Healthy demand fundamentals and continued momentum from strong RevPAR (Revenue per Available Room) growth in 2015 indicate numerous opportunities for Mexico s top tourist destinations.

4 04 Hotel Destinations Mexico Mexico City Boasting a population of over 20 million in the greater metropolitan area, Mexico City is among the ten largest cities in the world and the most populous metropolitan area in Latin America. The capital accounted for 20.4% of the country s GDP (US$411.4 billion), making it one of the largest global urban economies. Mexico City s main industries include services and manufacturing, although a gradual shift is emerging as the city becomes the epicenter of Mexico s tech boom. It is home to major offices and headquarters of prominent regional and global businesses, as well as government institutions and the Mexican stock exchange. Investors are increasingly drawn to opportunities in the area given Mexico City s status as an established gateway market. Business districts such as Reforma and Santa Fe are seeing a surge in high-rise office buildings, hotels and mixed-use developments. Mexico City is transforming into a vibrant cultural destination, with neighborhoods such as the historic city center, the trendy and art-filled Roma and Condesa and the upscale Polanco area, which generate leisure demand during weekends and bode well for city-wide hotel occupancy. HIGHLIGHTS Tourism Demand Supply Outlook Improved accessibility and the reduced cost of air travel have enhanced Mexico City s status as an established gateway destination. The new airport, currently under development and slated to open in 2020, is expected to be the largest in Latin America and serve as its regional hub, further improving accessibility and tourism to the city. Demand is primarily corporate and government-related, as evidenced by peak occupancy levels in the 85.0% % range during weekdays and low occupancy levels in the 30.0% % range during weekends. Nonetheless, the historical essence of the city center and the upscale shopping and entertainment offerings in Polanco result in some leisureoriented demand. Operators seek a higher occupancy base by pursuing discounted rate strategies to encourage more weekend stays for corporate travelers. NEW HOTELS The city s room supply is relatively small the market s stock of 30,100 quality hotel rooms is comparable in size to that of secondary markets in the US, thus underscoring the opportunity for future growth. The supply pipeline is constrained due to high barriers to entry, such as increasing land costs in prominent submarkets such as Polanco and Reforma. As a result, developers are increasingly turning to mixeduse real estate projects in efforts to allocate land costs across different components. In submarkets such as Santa Fe, supply continues to gradually increase, thereby hindering any significant rate growth. Expect material ADR (Average Daily Rate) gains to drive RevPAR growth given healthy fundamentals, increased capital expenditures by upper-tier branded hotels and a more limited shortterm supply outlook. Operators continue to achieve efficiencies and stronger flow through given dollar-denominated rates and costs in local currency. Amongst the Latin American countries, Mexico remains a bright spot with solid economic growth. Mexico City is expected to be the gateway for investors interested in entering Mexico Number of Hotel Rooms 30,100 Increase in International Visitor Arrivals 11.3% RECENT TRANSACTIONS Hilton Mexico City Santa Fe 260 rooms 2014 Price: $54M Hilton Mexico City Reforma 458 rooms 2013 Price: $91M Four Seasons Hotel Mexico D.F. 240 rooms 2013 Price: Undisclosed rooms rooms rooms rooms rooms AC Hotels by Marriott Santa Fe QUICK FACTS 6.4 million Number of international visitor arrivals (2015) Courtyard Mexico City Vallejo 929 rooms Number of new hotel rooms expected (2016+) Fairfield Inn & Suites Mexico City Vallejo 64.8% Average occupancy for 2015 Hyatt House Santa Fe Sofitel Mexico City Reforma $187 $ % Average rate for 2015 (USD) 2015 RevPAR + % change v (USD) Source: STR, JLL, SECTUR Note: Data is based on select branded upper-tier hotels that report to STR; number of new hotel rooms expected are based on hotels currently under construction and reported to STR.

5 Hotel Destinations Mexico 05 Cancun/Riviera Maya Cancun/Riviera Maya is the most visited tourist destination in Mexico and the region. Located on the northern coast of Quintana Roo in eastern Mexico and bordering the Caribbean Sea, Cancun/Riviera Maya offers convenient accessibility from destinations in the US and Central America. Cancun/Riviera Maya welcomes more international arrivals than Mexico City and remains the country s second busiest airport. The destination s tourism product currently competes strongly against prominent resort destinations such as Puerto Vallarta/Nayarit, Jamaica, Dominican Republic and Bahamas. The scarcity of developable land in Cancun led to the emergence of Riviera Maya, located between Cancun and Tulum. The Cancun/Riviera Maya corridor boasts the highest number of hotel rooms among resort markets globally, which are complemented by extensive shopping, entertainment and dining outlets. HIGHLIGHTS Tourism Demand Supply Outlook A record number of 6.7 million international travelers visited Cancun in 2015, an increase of 13.5% year-over-year. This surge in passengers can be attributed to the emergence of low cost carriers in Mexico such as Volaris and Interjet, increased connectivity to feeder markets in the US and the renovation and expansion of existing airport terminals. An increase in airport capacity is expected with the development of a new terminal that is scheduled to be completed in Travelers from the US, Canada and Europe represent the top source markets for Cancun. The favorable exchange rate for US travelers is a draw given the US Dollar s strong buying power. Nonetheless, with Cancun s strong influx of international travelers, any economic slowdown in primary source markets may impact tourism demand growth. After the introduction of nearly 900 high-quality rooms in 2015, a wave of new upper-tier hotels is set to come online in This supply increase, along with expected hotel openings planned for late 2017, may result in increased competitive pressure. The prevalence of the allinclusive model is on the rise as institutional investors enter this segment. Record-breaking visitation levels are expected to continue in the coming years due to improved connectivity and completion of the new airport terminal. New supply will continue developing north of Cancun, in Playa Mujeres, as well as along Riviera Maya as the number of available developable parcels in Cancun becomes scarce. The shift towards the all-inclusive operating model will continue, and we anticipate the all-inclusive lodging supply growth to continue to outpace the traditional European Plan lodging supply growth. NEW HOTELS 2015 Number of Hotel Rooms 31,800/ Cancun/Riviera Maya 42,000 Increase in International Visitor Arrivals 13.5% RECENT TRANSACTIONS Hotel Cacao Playa del Carmen 60 rooms 2014 Price: $15M Mahekal Beach Resort Playa del Carmen 121 rooms 2013 Price: $30.5M Holiday Inn Express Playa del Carmen 145 rooms 2013 Price: $11M ,800 rooms rooms rooms rooms Capella Bahia Maroma QUICK FACTS 6.7 million Number of international visitor arrivals (2015) Andaz Mayakoba 840 rooms Number of new hotel rooms expected (2016+) Dreams Playa Mujeres Golf & Spa Resort 75.3% Average occupancy for 2015 Hard Rock Hotel Riviera Cancun $232 $ % Average rate for 2015 (USD) 2015 RevPAR + % change v (USD) Source: STR, JLL, SECTUR Note: Data is based on select branded upper-tier hotels that report to STR; number of new hotel rooms expected are based on hotels currently under construction and reported to STR.

6 06 Hotel Destinations Mexico Los Cabos Located on the southernmost tip of the Baja Peninsula, south of California, Los Cabos encompasses the towns of Cabo San Lucas and San Jose del Cabo, as well as the resort corridor that connects both areas. Cabo San Lucas is known for its varied entertainment, shopping and dining options, while the quieter San Jose del Cabo, which has retained its colonial architecture, features a historic town center, art galleries and boutiques. Numerous resorts and golf courses are located on the 20-mile stretch of shoreline, known as the Corridor, between the two towns. After significant damage caused by Hurricane Odile in September 2014, the destination is regaining strength and vibrancy with the reopening of most resorts, as well as new golf courses and additional direct routes from key destinations in the US. HIGHLIGHTS Tourism Demand Supply Outlook International arrivals rose 9.6% in 2015, despite a setback of 2.8% in 2014, attributed to Hurricane Odile. In 2012, the destination inaugurated newly paved roads and a new international airport terminal, which improved accessibility to the destination. In 2015, Los Cabos received more than 100,000 additional air seats resulting from new direct flights, including a United Airlines flight from Washington DC and a Spirit flight from Houston; additionally, Delta resumed its nonstop service from JFK. Los Cabos is a popular destination for US travelers, especially those traveling from the West Coast. The favorable exchange rate is a draw for travelers in addition to the high-quality hotel product, golf courses and broad range of leisure activities. Additionally, any displaced demand resulting from Hurricane Odile is anticipated to return in the medium term as renovated and new hotels reopen their doors. Producing a swift revival story after the natural disaster, the hotel sector in Los Cabos is experiencing a boom in renovations and new hotel openings. Many resorts closed operations and underwent recovery efforts in the aftermath of Hurricane Odile, thus improving the quality of lodging facilities. Los Cabos should regain its position as the premier Mexican resort destination as a result of the aforementioned renovations and new development. Los Cabos is poised to continue its comeback with a new hotel development cycle underway. The debut of luxury resorts with global brands is anticipated to lead to improvements in infrastructure, enhanced connectivity and additional international investment. New rooms, combined with improvements to existing stock, are expected to result in strong ADR gains boosting market performance in the medium to long term. NEW HOTELS 2015 Number of Hotel Rooms 13,900 Increase in International Visitor Arrivals 9.6% RECENT TRANSACTIONS Fairfield Inn Los Cabos 128 rooms 2014 Price: $8.6M Hilton Los Cabos Beach & Golf Resort 375 rooms 2013 Price: $113M rooms rooms rooms rooms rooms Ritz Carlton Reserve Los Cabos QUICK FACTS 1.3 million Number of international visitor arrivals (2015) Park Hyatt Los Cabos 373 rooms Number of new hotel rooms expected (2016+) Hard Rock Hotel Los Cabos 55.8% Average occupancy for YTD Sep 2014 Luxury Collection Solaz Los Cabos Montage Los Cabos $457 $ % Average rate for YTD Sep 2014 (USD) YTD Sep 2014 RevPAR + % change v. YTD Sep 2013 (USD) Source: STR, JLL, SECTUR Note: No year-end 2014/15 data reported for Los Cabos market given Hurricane Odile damage; data is based on select branded upper-tier hotels that report to STR; number of new hotel rooms expected are based on hotels currently under construction and reported to STR.

7 Hotel Destinations Mexico 07 Puerto Vallarta Puerto Vallarta is located on the Pacific Ocean s Banderas Bay and is the fifth largest city in the state of Jalisco. Puerto Vallarta is Mexico s third largest resort destination and its tourism activity has increased steadily over the years, representing almost 50% of the city s total economic activity. In the early 20th century, the town of Puerto Vallarta was considered a gateway to a number of important mines, but given its unique tourism product offerings, the town quickly emerged as a resort destination that attracted North American and Mexican artists alike. Today, the resort destination is known for its cruise port, marina, hotel zone and mile-long Malecon; its thriving retirement and secondary home real estate market is popular among US and Canadian travelers. Rapid growth in tourism has spilled over from the city limits to Nuevo Vallarta, a planned residential and resort community. Adjacent to Nuevo Vallarta is a 20-mile stretch of beaches, including Punta Mita, which is also known as Riviera Nayarit. HIGHLIGHTS Tourism Demand Supply Outlook International visitor arrivals to Puerto Vallarta increased 13.4% in 2015, mainly attributed to improved airlift. New Southwest flights from Denver, Houston and California s Orange County resulted in an additional 276,000 air seats. In 2016, airlift will continue to increase with new Air Canada flights as well as a non-stop Southwest Airlines flight from Seattle and a non-stop Volaris flight from Oakland. More than 130 cruise ship calls were recorded in 2015, an increase of 25 cruises over the previous year. Cruise ship arrivals are expected to increase with the US$20 million renovation of Puerto Vallarta International Port, set to open in three phases over five years. The three main source markets for Puerto Vallarta are the US, Canada and Mexico. Local visitors represent about half of total air arrivals, and this figure is set to increase due to Puerto Vallarta s improving connectivity through new direct regional flights and the growth of the automotive industry in the Bajio region cities of Aguascalientes, Guanajuato, San Luis Potosi and Queretaro. Visitors from Mexico City and Guadalajara are also drawn to the coastal city not only for its proximity, but also for its affordability relative to other more expensive Mexican resort destinations such as Los Cabos. NEW HOTELS The city s push to capture other market segments such as meetings and medical tourism has led to improved lodging infrastructure across different operating models such as all-inclusive hotels and vacation clubs. Luxury hotels entered the market in 2015, including the 443-room Grand Fiesta Americana, which boasts the largest conference center in the city, and the 335-room Hyatt Ziva, an all-inclusive hotel operation. Although new supply is constrained in the medium term, the W Punta Mita is expected to enhance the destination s luxury hotel offerings. After experiencing the highest occupancy levels since 2010, Puerto Vallarta is anticipated to continue making strides in tourism growth. However, the high influx of regional travel to the city has resulted in lower rates compared to other tourist destinations in Mexico that tend to welcome a higher volume of international travelers who are less rate-sensitive. New luxury hotels are expected to help lift the rate ceiling, while the limited new supply underscores the opportunity for future growth given healthy demand indicators and anticipated ADR gains Number of Hotel Rooms 18,700 Increase in International Visitor Arrivals 13.4% RECENT TRANSACTIONS Four Seasons Punta Mita 173 rooms 2014 Price: $170M rooms W Punta Mita QUICK FACTS 1.2 million Number of international visitor arrivals (2015) rooms Holiday Inn Express Nuevo Vallarta 120 rooms Number of new hotel rooms expected (2015+) 67.0% Average occupancy for 2015 $107 $72 6.0% Average rate for 2015 (USD) 2015 RevPAR + % change v (USD) *Number of Hotel Rooms includes Punta Mita and Riviera Nayarit Source: STR, JLL, SECTUR Note: Data does not include Punta Mita hotels; data is based on select branded upper-tier hotels that report to STR; number of new hotel rooms expected are based on hotels currently under construction and reported to STR.

8 8 Hotel Destinations Mexico Hotel Destinations South America Quick facts Los Cabos Mexico City 1.3M arrivals +373 rooms 6.4M arrivals +929rooms Puerto Vallarta 1.2M arrivals +120 rooms Cancun/Riviera Maya 6.7M arrivals +840 rooms Number of international visitor arrivals (2015) Number of new hotel rooms expected (2016+)

9 Hotel Destinations Mexico 9 Lodging Performance by City Profiled As observed in the individual city overviews, RevPAR levels across all of the cities profiled in this report have shown stable growth since Although the US dollar continues to strengthen against the Mexican Peso, hotel operating fundamentals in USD terms remain strong. From 2013 to 2015 Cancun and Puerto Vallarta averaged 14% and 12% annual RevPAR growth, respectively, while Mexico City averaged 7% annual RevPAR growth during that period. REVPAR USD$300 $250 $200 $150 +8% +7% +15% +14% $ % +6% $50 $ Mexico City Cancun/Riviera Maya Los Cabos Puerto Vallarta Note: No year-end 2014/15 data reported for Los Cabos market given hurricane damage data pertains to YTD Sep 2014; data is based on select branded upper-tier hotels that report to STR

10 Contributors Clay B. Dickinson Managing Director Fernando Garcia-Chacon Executive Vice President Alfonso de Gortari Senior Vice President Wendy Chan Vice President Kent Michels Vice President Americas Head of Hotels & Hospitality Research Nicolas Martinez Associate Eric Gorenstein Analyst Javier Rodriguez Analyst

11 About JLL JLL s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totalling more than $68 billion worldwide. Between negotiating the world s most extraordinary, enticing, and profitable property deals, the group s 350-strong global team also closed more than 4,400 advisory, valuation and asset management assignments. Investors worldwide turn to JLL to shape their strategies, tailor their portfolios and maximize the value of their assets. We are recognized as the global leader in real estate services across hospitality properties of all shapes and sizes. Our expert advice is backed by industryleading research. We apply our broad spectrum of hotel valuation, brokerage, asset management and consultancy services through every phase of the hotel lifecycle. We have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world. Whether you are looking for a hotel or you re ready to sell, we ll use our capital markets expertise, hospitality industry knowledge and global relationships to put the right parties together and execute a bespoke deal that exceeds your objectives. To find out more, talk to JLL.

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