Jorge Herrera
President
Mexican Association of Tourism Development (AMDETUR)
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Insight

New Law Could Hamper Industry Development

Wed, 11/01/2017 - 12:59

The mesmerizing blue beaches and wide spectrum of restaurants, clubs and outdoor adventures that Riviera Maya grants visitors is proof of the positive economic impact tourism can have on a region. Tourists inevitably spend money in local stores and restaurants during their visits, which benefits the surrounding community. But growth could be impeded by new laws in the pipeline, a potential contradiction to the administration’s objective to boost tourism in Mexico, along with a marked disconnect across the country’s roads and flight routes.

“Developers are working toward setting new benchmarks and improving the quality of the sector,” says Jorge Herrera, President of AMDETUR. “Areas such as Los Cabos, Riviera Maya and the north of Cancun have been showing consistent signs of growth. But the tourism industry is particularly concerned about the Consumer Protection Law that is currently under review by the authorities.”

The law includes an increase in cancellation periods to 30 calendar days from five. The action allows consumers up to a 30-day cooling off period after signing any contract with entitlement to a full refund. The industry is worried about the impact it may have as similar regulations in other countries have failed, says Herrera, and this would put Mexico at a disadvantage when competing with countries such as the US and Canada. Aside from the new law, the tourism sector must face the additional challenges that come along with a new requirement to register vacation property contracts twice. “PROFECO normally only applies double registrations to pawn shops,” says Herrera. “The recent change demotivates investment.” According to AMDETUR, the tourism industry is hoping that the government can understand that there needs to be a balance between business needs and consumer demand.

Along with these regulatory obstacles, the asymmetric competition in Mexico’s tourism industry must also be addressed as a way to ensure the growth of the industry. “Foreign companies tend to have access to cheaper credit with longer grace periods and lower interest rates,” he says. “Other countries such as the Dominican Republic offer discounts on rent and payment plans as a way to boost investment. Mexican companies do not receive enough benefits from the government and that puts them at a disadvantage in the market.” However, the market does have certain agencies like Bancomext that offer attractive interest rates. Growth has also been promoted by the government through programs like Mejora Tu Hotel (Improve Your Hotel), which has a designated budget of MX$60 million per hotel. Companies are able to request credit from FONATUR to invest in new hotels, expansion or remodeling. The creation of these financial tools, along with Fibras, help national companies compete more efficiently. But Herrera says that it does not compare to the benchmark set in other parts of the world.

To help close these gaps, communication is key. Considering the regulations that are being created the sector must remain close to authorities and provide them the information they need, he says. The improvement of connectivity in the country can be an important area of opportunity as well. “Developers need to consider connectivity around their projects to avoid recreating a situation similar to other destinations in Mexico that greatly lack access to roads or flights,” he says. “Tourism companies refuse to invest in areas without flights and routes cannot be created in places without enough hotels.”

Despite the challenges, Mexico continues to stand out as an attractive tourism location thanks to its culture, history and geographical position. “Caribbean countries may have beautiful beaches but the treatment visitors receive does not compare to the welcome they get in Mexico,” Herrera says.