Javier Arce
Chief Development Officer
Hoteles City Express
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Insight

The Ingredients in a Recipe for Success

Wed, 11/01/2017 - 12:44

With the influx of tourism activities in Mexico, it becomes imperative for hotels to stand out from the crowd. Solid branding can be a major differentiator. Through its broad presence in 63 Mexican cities and three Latin American countries, City Express has built a loyal following, according to Javier Arce, the hotel giant’s Development Director. “We want our clients to think that if they need to travel to any business city in Mexico they will surely find a City Express,” he says. “With the exception of Guerrero and Morelos, we are present in every state of the country.”

Proper growth planning and a focus on the business tourism market over the past 15 years have been factors in the brand’s rapid development. “As a company focused on the business traveler, we wanted to grow along the most important business routes in the country,” says Arce. “There are certain business routes that coincide with pleasure tourism. In these cases, affordable rates, combined with our holistic approach to quality, have also made us a good option for these tourists.”

The group now has 125 hotels operating and it is continuing to open units on average every 6.4 weeks. Arce says that this means the hotel chain is enjoying the most significant growth in Mexico and Latin America. The first route the company opened in Mexico was the NAFTA corridor. This paved the way for expansion into the automotive hub in the Bajio region and allowed the company to branch out further into the oil and gas heartland on the Mexican Gulf coast. Several years later, City Express began to open new hotels along the Pacific Coast, this time aimed at the perishable goods route instead of traditional manufacturing.

According to Arce, the company’s hotel assembly-line approach has been key to the growth of the business. But he also says certain factors hinder the company’s growth. The first is land ownership and location, which plays an important role in the hotel’s profitability, although, according to Arce, this can be solved. The second major challenge is related to permits and regulations, which is not as easily solved. “There are locations that incentivize investment through expedition of permits but there are others where it has become more difficult,” he says. “For instance, in Mexico City getting all the necessary permits can take up to six years.”

For any hotel developer, constructing hotels is just half of the work. The other half is ensuring the building’s profitability. For Arce, the key to profitability is in the building’s design and maintaining low operational costs. “Every component of the building needs to be efficient, which keeps maintenance costs low,” he says. By following this strategy, City Express produces consistently strong balance sheets for its investors. According to the company’s latest financial statements, 2Q17 recorded revenues of MX$609 million, a 22 percent increase on 2Q16.

While there are several factors that add up to City Express’ success, there is one particular aspect in the business model that Arce identifies as key: sustainability. The company goes beyond a commitment to the environment and also touches upon preservation of culture and traditions as well as promoting active involvement with local communities. Its Biosphere Responsible Tourism Certification is evidence of this. “We have several LEED certifications as well as Excellence in Design for Greater Efficiencies (EDGE) certifications, but Biosphere is the only certification that is aimed exclusively at the tourism sector and City Express is the only hotel chain that is in process of certifying all its sites,” says Arce.

Obtaining certifications and being sustainable is easier said than done. For Arce, the hardest part is finding the correct balance between natural resource preservation and guest comfort. “We can ask all our operators to be environmentally responsible but we cannot do it at the expense of our clients’ comfort,” he says. City Express also makes sure its suppliers are onboard with its sustainability targets. “All our suppliers need to comply with two conditions: the first is that their production processes cannot be polluting in any way and the second is that at least 10 percent of the materials they use must come from a recycled source,” he says. “All our hotel furniture contains a certain ratio of recycled material.”