HVS Caribbean and Mexico Hotel Industry: 2023 Recap and 2024 Outlook
Caribbean
In 2023, the Caribbean has reached an all-time high in the major hotel performance metrics: occupancy, ADR, and RevPAR. RevPAR for most islands experienced double-digit growth when compared to 2019, driven by exponential ADR growth. Air passengers and cruise arrivals are on pace to exceed 2019 levels. While the majority of travelers are still visiting the Dominican Republic, Jamaica, Puerto Rico, and the Bahamas, an increase of airlift and new airlines in the region have allowed for more visitation to some of the smaller islands. In addition to the record performance metrics, there is less demand seasonality than ever before, with previously off-season months now displaying higher than typical occupancy levels. The region also benefited from minimal hurricane disruption during 2023, positively affecting the annual performance.?
Going forward, despite the record performance metrics and visitation from both air and sea that will be achieved in 2023, the region still has its challenges to work through. Interest in new hotel and resort developments is prevalent as demand continues to outpace supply; however, developers are facing a challenging financing environment to get new projects off the ground and are having to be more creative with their capital stack. In addition, increased insurance costs have proven to be challenging for new development. However, despite these ongoing issues, the Caribbean continues to shine as new air routes continue to be added to the region and cruise ships continue to add new ports of entry. The outlook is favorable for additional ADR and demand growth in 2024, barring any natural disasters.
Mexico
Mexico’s lodging industry combines robust business and leisure-oriented sectors, along with extensive international and national brand footprints. Indeed, additional brands continue to express interest in growing their pipelines across the country both in resort and urban destinations. Mexico’s economy and hotel industry are structurally and fundamentally sound. However, the 2023 macroeconomic environment faced complex challenges, including high inflation and interest rates, currency fluctuations against the U.S. dollar, and, in certain regions, security concerns. During 2024, presidential and local elections will add another layer of uncertainty.?
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During the last three decades, the country has experienced a transition from heavy dependency on oil exports to a focus on export manufacturing. Foreign trade has been the underpinning of Mexico’s economic stability in today’s USMCA era (post-NAFTA). In a post-pandemic environment, after the recurring tension of China–U.S. relations, nearshoring opportunities have been a motor for economic growth in states near the U.S. border and in central Mexico. Hotels in industrial cities have been able to increase occupancy and push average rates, with some evaluating PIPs. However, the anticipated favorable impact of demand growth associated with nearshoring is still in its early stages, and the development pipeline in these cities remains limited. A more gradual recovery has been observed in major cities such as Mexico City, Guadalajara, and Monterrey. Demand in 2023 is below the 2019 level; however, average rate has experienced a healthy recovery. Business and group demand both continue to grow; however, the leisure segment has experienced the greatest increase, particularly in Mexico City. The outlook remains favorable given the macroeconomic environment, tempered to some degree by 2024 electoral influences.?
Mexican resort destinations such as Cancun-Riviera Maya, Los Cabos, and Puerto Vallarta-Riviera Nayarit have experienced strong occupancy and average rate increases in the past years, a trend that surged during the COVID-19 pandemic. However, demand and rate growth slowed during the summer of 2023. Smaller up-and-coming resort destinations have also benefited from this demand growth, and some will continue to evolve toward consolidation in the years to come, including La Paz, Mazatlán, and the Huatulco-Puerto Escondido corridor. Over the past 15 years, Mexico’s resort industry allowed for steady growth both in the variety of product developed (including traditional European plan and all-inclusive hotels) and in demand levels that have accompanied this market expansion. The industry remains well positioned for future positive performance across locations and market segments, including resort residential. Still, challenges persist in some markets, such as the need for more thorough regional planning, infrastructure improvements, zoning, tourism promotion, and security.
About the Authors
Kristina D'Amico is Managing Director and Leader of the firm's Caribbean Region consulting and valuation practice. Kristina’s significant international consulting, advisory, and appraisal experience includes assets in the Caribbean Basin across 22 Caribbean islands, as well as the Riviera Maya region of Mexico and many countries in Latin America. Given her analytical skills, her creative-thinking ability, and her aptitude for solving problems that arise in complex projects, clients particularly value Kristina’s insights and recommendations regarding hotel room counts, product positioning, amenities, and branding for many types of proposed properties, including hotels, all-inclusive resorts, and mixed-use resorts with complementary real estate. Contact Kristina at (305) 338-0354 or?[email protected].
Richard Katzman is Senior Managing Partner for the LATAM region. He established the HVS Mexico City office in 2007. He has been active in Mexico and other Latin America countries since 1992. During this period, Richard formed Grupo Inmobiliario Inova, a real estate advisory boutique that merged in 2001 with Insignia/ESG, then among the most prominent real estate service companies in the world. In 2003, following the merger between Insignia/ESG and CB Richard Ellis, Richard elected to reestablish an independent platform prior to joining HVS in 2007. Richard was born and raised in Mexico City. He completed his undergraduate studies at 美国康奈尔大学 , School of Hotel Administration, and received his MBA from 美国宾夕法尼亚大学 - 沃顿商学院 . He is fluent in English, Spanish, French, and Portuguese. Contact Richard at +52 (55) 5245-7590 or?[email protected].
Lorea Arnoldi is a Vice President with HVS Mexico City. Lorea is a graduate of the EHL (école h?telière de Lausanne), where she earned her Bachelor of Science in International Hospitality Management with a specialization in Finance. Before joining HVS, Lorea gained professional operational?and?administrative experience through different internships. She held various positions such as Front Desk Assistant at the Hotel Arts Barcelona and Project Manager at Lang & Schwander in Miami. In addition, Lorea completed the Certification in Hotel Industry Analytics (CHIA) through the AHLEI - American Hotel & Lodging Educational Institute and STR . Lorea’s international experience provides a strong base from which to serve HVS client interests. Please contact Lorea at +52 (55) 5245-7590 or?[email protected].
To read the HVS Global article, please visit https://www.hvs.com/article/9814-hvs-global-hotel-industry-2023-recap-and-2024-outlook