Charles el-Mann
Director General
Parks
/
Insight

Venturing into Tourism for Diversified Portfolio

Wed, 11/01/2017 - 12:38

With Mexico’s tourism industry on the brink of a boom, Charles El Mann, Director General of Mexican developer Parks, believes that one thing is preventing its growth: the country’s stunted infrastructure development. “Cancun, for example, is the top tourist destination in the country because it has the second-most important airport, and it is building a fourth airstrip,” he says. “This is important because air routes work like roads to bring more tourists.”

Parks has traditionally worked in commercial, mixed use and industrial development but began to venture into the tourism segment when it recognized the market’s potential. It is building 10 hotels: two Hiltons, a Marriott and two other projects in Cancun and Riviera Maya, and inaugurating a couple more. Parks mainly works to develop hotels across a variety of chains, including Waldorf Astoria, Hilton All Inclusive, Marriott, J.W. Marriott, Aqua and Fiesta Americana. “We are targeting different market segments through diversification,” says El Mann.

Parks has 4,800 operating rooms in 10 different states, each with a unique appeal. “Merida perfectly mixes tourism and business,” he says. “Oaxaca, given its outdated infrastructure, receives few tourists despite its beautiful beaches. What we need is a development program in these areas, like those that have been implemented in Cancun or Cabos.” As real estate developers, Parks is willing to invest in the country but El Mann stresses that the industry needs adequate infrastructure.

There are many high-quality hotel chains establishing operations in Mexico, so he sees the need to position Parks with higher quality and better cost supply. “We must try to generate growth in tourism expenditure in the country, which depends on the sort of tourism we foster,” he says. “But there are many market segments we are not reaching due to our lack of infrastructure.” An example he gives is Puerto Vallarta, which has not grown as it could because its airport is small given the potential demand. “I believe Mexico possesses the optimal market demand and a strategic geographic location to exponentially and quickly grow in this sector, but it lacks the infrastructure,” he says.

Despite infrastructure challenges, Parks chose to enter the tourism segment because it saw promise. In the Riviera Maya, the developer has invested US$1 billion. “We are still estimating the returns, which depend on the credit mechanism we choose to use,” El Mann explains.

“We are considering several financial alternatives to be able to move forward with all our projects, as we believe this is a great time for Mexico, given its macroeconomic indicators and the market’s performance.”

El Mann believes tourism will continue to grow as long as the government guarantees security and certainty to developers. One problem that could be addressed is that of community relations. “The biggest challenge is to comply with all the regulations and to obtain all the required local, state and federal permits,” he says. “Also, the land acquisition process has been difficult, given that we often build on ejido land, so we need to purchase the land and overhaul it.” This often requires negotiations with the ejido leaders and the revision of historical land rights to avoid the risk of previous owners making future claims.

But although the developer is experiencing success in tourism at the moment, he says Parks will not shut itself off from other sectors with potential. “As a group, we are experiencing significant growth, which I believe positions us as the real estate company with the greatest presence in different sectors,” he says. “Our biggest advantage is our level of diversification, which gives us great flexibility to adapt to changing demand. Also, in the face of international competitors, our expertise and knowledge of the local market is our added value.”