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A Tale of 3 Cities: The Coming Boom in Tulum

12 September, 2012

Finding and taking advantage of real estate booms can be a risky and tedious proposition,especially when looking internationally. Real estate deals sometimes look enticing from a distance but a granular look exposes weaknesses. Yet,once in a while you stumble across an opportunity that your common sense tells you is obvious. Something that you have seen happen before and you sense it will happen again. Such an opportunity may be unfolding on Mexico’s Caribbean coast.

First,there was Cancun. In 1970,Cancun,Mexico was an undeveloped and uninhabited barrier island. It consisted of a few sand dunes only 66 feet wide in some places. In a forgotten part of the Caribbean,few people even knew it existed. It’s Mayan name,‘KanKun’,simply meant,“nest of snakes”.

But by 1975,a mere five years later,Cancun had over 1,769 hotel rooms in service. Now in 2010,it has grown to over 170 hotels and 35,000 hotel rooms,making it the indisputable #1 tourist destination in Mexico. In fact,over 3.6 million visitors come to Cancun’s crystal shores each year.

The population has grown exponentially from 30,000 in 1980,to around 1 million today with over 200 airline flights per day,making Cancun second only to Mexico City,the largest city in the world. On average, real estate investors in Cancun have seen a very strong 300% return on their investments since the early 1990’s.

Then there was Playa del Carmen, located just 40 miles south of Cancun. In the 1990’s Playa del Carmen was only a small,sleepy fishing village with mostly dirt streets,known as a “hippie” hangout. But from 1990 to 1997 the population of Playa del Carmen exploded from 2,000 to 20,000 residents. 

By 2006,growing at over 30% annually,it became the fastest growing city in the world (Guinness Book of World Records) and remains the fastest growing city in Mexico and all of Latin America. In 2010,Playa del Carmen is approaching 200,000 residents,200 hotels and 40,000 hotel rooms (more than Cancun). Investors in Playa del Carmen have witnessed a stunning 1,000% growth in their real estate holdings since 1990.

Now there’s Tulum, only 40 miles south of Playa del Carmen. Tulum boasts pristine patches of tree-lined,white-sand beaches and huge swaths of undeveloped coastal jungle land,recently dubbed byCondé Nast Traveler,as “The Most Beautiful Beaches in the World” . 

This Mayan Eden is the home of the Corona commercials and is quickly becoming some of the hottest real estate investment property on the planet. Tulum has been proclaimed to be the next “Yoga Tourist Hotspot” by The New York Times“A Gold Rush” by Travel and Leisure,and the “Hottest Section in Mexico” by the Wall St. Journal.

Yet,the growth here is just beginning. Much like Cancun of 1980 or Playa del Carmen of 1990,except Tulum’s trajectory is much steeper and it’s growth is happening much faster.

From 30,000 to 3 Million

A couple of months ago,Felipe Calderon,the president of Mexico,held a press conference in Tulum announcing that this laid back town of 30,000 inhabitants is getting a new international airport that is expected to receive 3 million new tourists each year. 

To provide some perspective,currently Tulum has one red light,one grocery store,two small banks,and only 3,500 hotel rooms. Airport construction is expected to begin this year and near completion by the end of 2012. One can only fathom the economic growth that is about to descend on this sleepy town. Investors in Tulum are expecting to see yields on their investments of anywhere from 500 - 1000% over the next 5 - 10 years,which would indeed seem,unbelievable,if not for the historical growth precedent of the other two analogous cities,Cancun and Playa del Carmen.

Real estate booms can be hard to predict and sometimes impossible to pinpoint but once in a while there comes along an opportunity that the facts tell you is obvious and perhaps inevitable. Based on the evidence all indicators seem to say that the next big boom is in Tulum.