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Mexico Hotel Market Forecast to Exceed $700 Million in 2014

15 April, 2014

“Positive” is the term used to describe the outlook for Mexico’s hotel market, as commercial real estate research firm Jones Lang LaSalle (JLL) forecasts the largest annual level of transaction volume on record for 2014, with the market expected to increase by 15 percent and exceed $700 million.

“The country enjoys a promising economic and political environment, as well as new domestic investment vehicles,” writes the World Property Channel. “Capital influx grew and hotel transactions topped $600 million in 2013.”

The JLL report cites the nation’s newly formed investment vehicles, including FIBRAs (similar to real estate investment trusts) and CKDs (essentially private equity funds), for driving Mexico’s record-level real estate transaction volumes. In fact, the firm estimates that these new transaction vehicles were responsible for around 25 percent of the sector’s growth in 2012, and at least 50 percent in 2013.

In just one example,Starwood Hotels & Resorts announced a 30 percent expansion in its Mexico portfolio last year, building upon an empire that already spans the entire country, from Puerto Vallarta and Cabo San Lucas on the Pacific Coast, to Cancun on the Caribbean Coast, with new properties opening soon in Cozumel, the Riviera Maya and Merida. In addition, luxury hotel brand Hyatt has also been expanding rapidly in Mexico recently, launching new resorts last year in Cabo and Cancun, while the Hard Rock Hotel brand has opened new properties in the both Riviera Maya’s Puerto Aventuras and Puerto Vallarta.

Mexico’s Caribbean Coast, which includes a wide variety of popular vacation destinations to suit any taste and budget, including Cancun, Cozumel, Playa del Carmen and Tulum, has seen the largest increase. Here, the new hotel pipeline includes a total of at least 160 properties and more than 26,500 rooms, with the upper-scale segment reporting the largest growth, followed by mid-scale and upper mid-scale sectors, respectively.

“The number of hotels under construction increased 15.4 percent year-over-year in January [2014],” estimates hotel benchmark data firm STR. “This represents a 30 percent increase in rooms in the [Riviera Maya’s] active pipeline – including projects in construction, final planning and planning stages.”

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Topics: Investment Hotels