Fabián Sánchez
Managing Director
Horwath HTL Mexico
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Tourism Recovery Demands Focused Consulting Efforts

By Gabriela Mastache | Mon, 05/25/2020 - 16:54

Q: What opportunities does the Mexican market offer for a company like Horwath HTL?

A: Definitely, location is one of the opportunities we see, given the geographical proximity to the US and Canada. We believe there are important opportunities for setting up resort-type hotels at beaches and to position Mexico as the leading tourism destination for the North American market.

Also, given Mexico’s manufacturing calling and the importance that export operations have for the Mexican economy, three and four-star business or urban hotels are a priority for workers and employees who are constantly visiting OEMs or plants across the country.

There is another opportunity that has not been that explored but that is very clear for us: boutique-type hotels. We have several destinations that highlight Mexico’s history and Pueblos Mágicos that have not been marketed to their full potential. We believe that there is an important opportunity to develop boutique hotels in places that are neither cities, beaches or industrial areas, but colonial cities. Though these are not very large hotels, they have proven to be a very profitable business in European destinations. We believe that Horwath HTL Mexico can service this segment that has not been well-attended. Everybody pays attention to urban and beach hotels but there is an interesting market niche in experience hotels that offer a personal touch. Especially considering the COVID-19 pandemic, we believe that people will prefer destinations that are not so mass marketed.

Q: How relevant is the Mexican market for Horwath HTL?

A: Though we have only been in Mexico for a year, the country is key for us. Mexico is the seventh-most visited country in the world and in 2019 it received 44.7 million visitors who generated around US$24.8 billion in revenue. Though the country is not among the top countries in tourism-income generation, the country does receive a lot of visitors, so the challenge we are facing is how to get tourists to spend more money in the country. We believe that with the adequate support, Mexico can further grow its tourism GDP.

We are certain that the challenges posed by the COVID-19 emergency are transitory. In 2009, the AH1N1 influenza and the US financial crisis impacted the tourism sector in Mexico. However, it was able to recover.

Q: When companies approach Horwath HTL about working in Mexico, what are their most pressing concerns?

A: The main concern is clarity in the country for doing business. However, this concern is nothing new. Obtaining permits and licenses are among the most complicated processes for businesses, and investors often perceive these bureaucratic processes as an obstacle for investment. Another concern is the lack of fiscal incentives for the sector to recover. Starting costs, especially when it comes to construction, are very high considering that in the first years of operation hotels are not highly profitable. It would be ideal for hotels to receive fiscal incentives during their first years of operation. It is important to remember that investments are global and if the country does not offer incentives, then investment is bound to go elsewhere.

It is important for Mexico to follow the lead from other countries that have implemented policies destined to boost their economies and investment like the US and Germany. The government should be aware that companies generate jobs, income for families and taxes which later return to the economy through consumption and public investment.

Q: How do you expect the COVID-19 crisis to change the business model of the global hospitality sector?

A: Recovery will be slow. When you combine the cancellation of events and overall travel with lower population income, it is a perfect storm for the sector. Though this is not the first time that the sector has faced a global crisis, we expect the recovery will take longer than after the 2009 crisis. International beach destinations will face a greater impact given the halt in travel from the US and Canada. However, we expect national destinations to recover more rapidly. We believe that the sector will not return to 2019 levels until 2023.

Q: What preventive or risk management actions is the global hospitality sector taking in light of the COVID-19 crisis?

A: For the hospitality sector, the only preventive action businesses can take is having capital available that can help them face the contingency, in the form of savings or available credit lines. Another action that businesses can take is to diversify their investments. Hotel owners could choose to operate other businesses to avoid depending on income from a single sector.

Despite this situation, there are still opportunities. We believe that there is going to be a relocation of manufacturing plants from Asia to Mexico after the COVID-19 pandemic has passed. This will lead to strong demand for industrial warehouses in Mexico. Stronger demand from the business sector and an increase in activity in the logistics arena will lead to greater hotel demand in industrial and urban areas.

Q: What are the opportunities that arise for Horwath HTL in light of the COVID-19 pandemic?

A: One of the services we are offering is Hospitality Crisis Management. We are in the midst of incorporating a group of experts to help hotels with issues related to crisis management. For instance, we help them with labor and contractual matters, costs, negotiations with banks or with land or property owners.

Another division we are launching is called Transactional Advisory. We foresee that some hotels will have to be sold and that we are about to see a buyers’ market. We want to help those who want to sell or acquire tourism real estate by conducting the valuation process or negotiating the financial terms of the sale process. We are being proactive in that sense to help the tourism real estate community.

Q: What are the trends that you perceive in the hospitality sector at a global level?

A: Before the COVID-19 pandemic, hotels were focusing on providing users with a differentiated experience. They were offering dining experiences and the possibility of integrating environment responsibility, which has become essential for new generations. This is an element which we believe that will continue going forward. Also, we believe that hotels must double their efforts on internet and social media monitoring. A hotel that does not follow its reputation on social media will have a harder time competing and attracting new visitors.

 

Horwath HTL is an international company with offices in 36 countries, it has carried out over 30,000 assignments for private and public clients. It provides consultancy services for the global hospitality sector.

Photo by:   Horwath HTL
Gabriela Mastache Gabriela Mastache Senior Journalist and Industry Analyst