Resorts to Break the Mold

Cheap or luxurious? This is the dilemma of Mexico’s tourism sector. For most vacationers, the stereotype is cheap. For Mexico’s developers, the desire is luxury. For industry executive Jose Rivera, the way to get there is knowledge. Know your market, he says. “It is incredibly difficult to create a new hotel because it requires a high investment but the strongest tool a developer can have is the knowledge of exactly what market it wants to serve and what it is demanding,” says Rivera, Vice President of Development of AM Resorts. Political, economic and social factors have increased skepticism within the market but Mexico is breaking away from the stereotype of being an affordable Spring Break destination to a luxurious, yet reasonably priced vacation spot.

Hotel chains and private investors from all over the world have set their sights on the country’s beaches over the past five years, giving strength to Mexico’s tourism sector. One area that presents opportunity is the four-star segment. “Of the 2 million holidaymakers we serve, 1 million look for 5-star resorts and the other million for 4-star,” says Rivera. “That is where the biggest opportunity for growth is in Mexico and that is where we want to develop.” Owners can be resistant to this change until they learn of the benefits. “Owners want the prestige of a 5-star hotel, but as soon as they discover that 4-star hotels can make more profit, they rapidly change their mind,” according to Rivera. This is “Ego Business,” he says. Fourteen years after opening its first resort in 2003 and with a total of 54 hotels in operation, AM Resorts knows the Mexican market inside and out.

Of the 2 million holidaymakers we serve, 1 million look for 5-star resorts and the other million for 4-starThe company has created six very different brands of allinclusive resorts that serve each market niche. As an operator, AM Resorts operates third-party hotels, guiding them through the planning, development and operational phases of creating one of their six resorts. “We create partnerships with construction companies, architects, and developers to ensure the quality of the project,” says Rivera. In 2017, the company plans to sign off on the development of 12 to 14 more resorts but Mexico will maintain the focus with 35 resorts in operation and five under development. With developers like AM banking on the country, Mexico’s tourism sector seems to be flourishing but there is a factor that continues to hold new investors back. The company has worked with the industry’s most important players and when asked about the biggest fear developers have when building hotels, Rivera concludes that it is times and how they have changed. “Hotels are no longer what they used to be,” he says. “Travelers are looking for an experience and are demanding more space.” He says that 10 years ago, hotels would have a small bathroom and a small pool with an island in the middle. But now, clients want a big, luxury bathroom with a bathtub and a pool as big as the hotel. Tourism also is changing completely. Technology is intensifying competition, with new digital platforms and companies such as Airbnb gaining larger market shares. As of Dec. 2016, the SECTUR estimates that there are roughly 19,000 hotels in the country. The construction of new hotel rooms has increased 11.6 percent, to more than 736,512 in 2015 from 651,160 in 2011. But of those 19,000, most are old hotels that Rivera says will need to take the leap and adapt, or risk collapse. Now that competition is heating up, developers have no excuse to rest on their laurels if they want to compete.