In recent years, Mexico’s hotel lodging market has become increasingly sophisticated and liquid, as reflected by a 26% increase in transaction volume year-over-year. In fact, according to a recent study by investment management company JLL, new and multi-tiered hotel brands are also entering the Mexico real estate market, prompting investors to explore a variety of strategic lodging investment opportunities in Mexico.
“From bustling urban locations to relaxing resorts, Mexico’s lodging market has experienced strong growth over the last six years, averaging an annual compounded revenue per available room (RevPAR) growth of nearly 5.3 percent in U.S. dollar terms, which illustrates the country’s resilient tourism industry and ability to weather unforeseen situations, such as hurricanes or travel advisory warnings”.
2019 Mexico Hotel Industry Report
According to the report, the quality of lodging supply in Mexico has also improved in recent years, attracting a growing number of active investors, including domestic groups such as FIBRAs and other funds. In addition, 2018 recorded a price-per-key average of $466k - the highest annual average in a decade - driven by the sale of several major luxury hotels in Mexico last year.
Steadily increasing travel to Mexico is behind much of the growth in the country’s hotel and real estate markets, with the majority of visitors heading to locations like the Riviera Maya and Cancun, as well as Mexico City and Los Cabos. According to Tourism Secretary Miguel Torruco Marques, tourists are expected to spend at least $23.2 billion in 2019, which will mark a four percent increase over last year.
There are currently three different types of hotels that are popular among investors, including:
- Hotels in Top Vacation Destinations: Some hotels in areas like Cancun, Riviera Maya, Riviera Nayarit and Cabo have a branded residential or vacation home rental component, which allows developers and investors to get better return on investment.
- Mixed-Use Properties: In cities with a strong corporate presence like Mexico City, Monterrey and Guadalajara, these properties capture the business travel segment by having retail or office space on-site.
- All-Inclusive Resorts: In places that are popular among international travelers, this type of investment property does best with a strong vertically-integrated business model.
“In response to strong tourism numbers and in turn, strong hotel fundamentals, Mexico’s hotel market is estimated to deliver nearly 23,000 new, quality rooms over the next five years”, according to Smith Travel Research Data. “Cancun/Riviera Maya, Los Cabos, Riviera Nayarit and Mexico City are slated to see the largest increases in total incoming supply, predominantly in the upper-upscale and luxury segments”.
Finally, it’s also important to note that ongoing international and domestic development and infrastructure investment planned for key cities is an essential part of the continued growth of the Mexico real estate and hotel investment markets, which are expected to continue to provide attractive returns, thanks to revenue growth in U.S. dollars and operating expenses in the comparatively devalued Mexican Peso currency.
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Want to know more about buying investment property in Mexico? Read 10 Reasons to Invest in Mexico Real Estate Right Now to see more of what the world’s hottest real estate market has to offer!