Shift Focus to Broaden Growth

Q: What are Mexico’s greatest areas of opportunity within the tourism sector?

A: There are various indicators that demonstrate Mexico’s strong potential for growth. For one, 90 percent of leisure tourism is focused on beach destinations with a lack of focus on cultural, ecological or religious tourism. In Europe, the main reason for travel is cultural, whereas Mexico has a rich culture but the country does not take advantage of this.

Ninety percent of international visitors go to only four destinations: Riviera Maya, Mexico City, Los Cabos and Vallarta. Mexico has a great deal of potential and has grown exponentially with more than 35 million international tourists, approximately 80 percent of whom enter by plane from the US. These are strong numbers but the World Tourism Organization has projected that Mexico should be attracting more than 50 million tourists by now. This can be attributed to the fact that the country does not invest enough in promoting and advertising the treasures that exist within the country. Mexico is much larger than most people expect and the sector has great growth potential.

Q: How has Grupo Posadas positioned itself in the Mexican market and what are its expansion plans in Latin America?

A: Grupo Posadas is the leading Mexican hotel developer and the only one with a presence in Mexico as an operator. We are four times larger than our closest competitor and as of 1Q17, we have 156 hotels with more than 25,000 rooms in operation as well as 40 new hotels under construction, equating to almost 7,000 more rooms. We opened 13 hotels in 2016, which is considerably more than our competitors, which tend to open one or two a year. City Express has 11,000 rooms compared to our 25,000, and others have fewer. We have many competitive advantages. There are more than 80 million Mexicans traveling inside the country compared to the 35 million foreign visitors, so being a 100 percent Mexican company with deep knowledge of the Mexican market adds to our success. Grupo Posadas’ diversified portfolio enables us to cater to each segment in Mexico.

We invested in South America 10 years ago, where we purchased and developed many hotels, all with third-party investments. Grupo Posadas later managed to sell these businesses at 20 times the original EBIDTA, when in this sector deals are usually closed at eight to 10 times EBIDTA.

Q: Why has Grupo Posadas decided not to franchise its brands?

A: We do not franchise because there is no real need to do so. Our business model helps us to continue growing and to maintain optimal quality in our services and hotels. Our success comes from having a balanced portfolio between both leisure and business. Tourism is sensitive to the economic state of a country, but when one segment is underperforming, another complements it. Our large client and investor numbers help us to avoid allocating a large quantity of resources to materials. Instead, we can develop our people, innovation and technology. Of the 40 hotels we have under construction, 90 percent are third-party properties. Our client network is satisfied and has enough confidence in us to sign 20-year O&M contracts. Because we deliver results, most contracts are renewed. The fact that we are listed on the BMV allows us to keep our liabilities in bonds and to raise more money for new projects.

Q: What is Grupo Posadas' growth strategy for the next two to three years?

A: The future is bright for Posadas. In 2016, we reported an EBITDA growth of 21 percent in comparison to 2015. We have maintained our competitive advantage and remained at the forefront of the industry for the last 15 years. We will open 18 hotels in 2017, some under the Fiesta Americana brand, many under Fiesta Inn and a few attached to our new brand, Gamma. Generating more income by room in luxury hotels is possible, but luxury hotels require larger investments that do not necessarily translate into profitability. We prefer to grow all our brands rather than only create luxury resorts.