The Mexican hotel industry enjoys solid long-term prospects, investors said, even though it’s going through some growing pains.
Editor’s note: Quotes in this story were derived from a Mexico Hotel & Tourism Investment Conference panel that was conducted in Spanish and translated by event staffers in real time at the event.
MEXICO CITY—Investing in Mexican hotels can be a complex and difficult task, especially when viewed as a short-term prospect, but the country’s long-term growth and maturation gives investors hope for the industry’s long-term future in the country, experts said.
Speaking during the “Investment strategies in a changing environment” panel at the 2019 Mexico Hotel & Tourism Investment Conference, Guillermo Bravo, chief investment officer for publicly traded FibraHotel, said he sees a “very positive trend going into the future.”
“The opening of capital markets helps to bring attention (from institutional investors) as people start to understand the sector and the returns on projects,” he said.
Capital markets continue to mature
Bravo’s company is one of two hotel-focused FIBRAs in the country, which are the Mexican equivalent of real estate investment trusts. Since FibraHotel started in 2012, the sector has grown along with company, which now has 85 hotels.
The growth of FIBRAs “has been a great way to have more capital attracted to the sector, but we need to keep working because these investments need to be profitable in the long run,” Bravo said.
Alexis Ralph, VP of development in Mexico, Central America and Cuba for Accor, said he’s seen a drastic, positive impact in the country from the days before the existence of FIBRAs.
“In the past, it was a mixed bag of a market with no structure for transactions and nothing was clear,” he said.
He said in the past investors viewed Mexican hotels as a short-term diversification play and would often stray away from the industry, but now they’re more likely to “hold a long-term position in the country.”
At the same time, short-term economic concerns have had an impact and have “slowed down the speed of new investment.”
Interest in investment
While some industries in Mexico have faltered, Rafael Lang, director general for Mota Engil Turismo, said he sees continued strength for travel and tourism in the country.
“I see an appetite for continued growth,” he said.
But Enrique Villanueva, director of development for Pulso Inmobiliario, said the shift to a new president has thrown up obstacles for the industry with an “abrupt stop in development.”
“There’s a new way of thinking and a new way of governing,” he said. “I don’t know if it’s good or bad but it’s different than before, and it will take time to adjust. You just have to be creative, dynamic and patient.”
He called the rough period amid a politic change natural as is the real estate markets' reaction to uncertainty.
Bravo said in the end, the Mexican hotel industry will reap the benefits of drawing international clientele, which has the additional hedge against currency fluctuations. But for the time being, market conditions are keeping his company from doing any development or buying any assets.
“Right now we’re investing in our own stock instead of hotels and waiting for better opportunities in the market,” he said.
Ralph said the tight market conditions will reward more creative companies.
“It’s important that we innovate in the product, and that’s not mentioned enough,” he said.