EconomyFinancialThe perfect storm that drives the hotel sector in...

The perfect storm that drives the hotel sector in Mexico

The closure of economic activities in Asia at the beginning of the COVID-19 pandemic highlighted a critical aspect of several economies worldwide: the high dependence of the rest of the world on this region. This has unleashed the interest of electronic and automotive companies, among others, to relocate their plants near key markets such as the United States, and it is in this trend that the hotel sector in Mexico has seen an opportunity to grow in the business segment.

The desire of companies from various sectors to move their production centers – known as nearshoring – or to relocate them – reshoring – had been growing, but with the pandemic it skyrocketed. According to a study by the consulting firm McKinsey, in 2020 it was expected that in the next five years the production of goods, which then represented between 16% and 26% of the value of world trade, could be geographically displaced through either of the two modalities. .

The eventual growth of current industrial corridors, and even the creation of new ones, represents a particular opportunity for a hotel industry that, although it has seen a strong recovery in the vacation segment –especially in Mexico–, has also suffered from the fall of the market of business travel, which is not even expected to return to the same levels as before the pandemic due to a structural change derived from the rise of platforms such as Zoom, among other factors.

For Richard Katzman, general director of the consulting firm HVS in Mexico, business hotels have the potential to increase the portfolio of projects under development in the hotel sector, specifically through formats aimed at high-consumption categories. “Especially in the limited service and select service segments, they have greater potential than schemes such as full service , especially in Mexico City.

The potential as part of this trend is closely linked to the interest that certain manufacturing industries show in different areas of the country.

According to an analysis by the consulting firm Newark, while the electrical and electronics industry has the potential to trigger hotel investments in markets such as Tijuana, Mexicali and Ciudad Juárez , the automaker could attract more investment in the Bajío region, and even other industries such as that of medical instruments and aerospace have made hoteliers turn to regions such as Monterrey , Hermosillo and Querétaro .

This potential has increased after the signing of the United States-Mexico-Canada Agreement ( T-MEC ), the trade war between the United States and China, and some pressures on global supply chains, such as the shortage of microprocessors – which it particularly affected electronics and automotive manufacturing – and container manufacturing, which made maritime transport more expensive around the world.

“A perfect storm is changing the global landscape. From our daily lives to our way of working and how the world perceives the hyper-connectivity of globalization,” said Sergio Pérez, executive director of global corporate services in Latin America at Newmark.

Furthermore, the growth of Mexico as a market for the execution of more research and development and the back office as part of the nearshoring and reshoring trends also makes attractive some of the largest urban markets in the country, such as Mexico City, Monterrey and Guadalajara, but also other cities such as Querétaro and Mérida.

For Nicolás Martínez, vice president of development for Mexico, Central America and the Caribbean of the French hotel chain Accor, the opportunity is to grow in a segment that offers high occupancies, from 70% to 85% in several corridors close to the United States.

“Without a doubt, the hotels that we have on the border today have a spectacular performance . Regions like Ciudad Juárez, which depend a lot on nearshoring , have had a good performance,” explains the manager. “There we see an opportunity, especially in business class , in hotels like the Ibis brand, even Novo Hotel, hotels for which we can make very attractive developments, because there is a lot of demand.”

Although there is still a long way to go, the environment in the country is still promising. According to an analysis by the consulting firm Deloitte, Mexico’s lower production costs, as well as its strategic position for the US market, make it a promising region for nearshoring and reshoring growth.

“Mexico is strategically positioned if this scenario becomes a reality. As the country offers proximity to the United States, a young workforce with competitive wages, and a range of trade agreements with more than 40 countries, these advantages cannot be ignored.”

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