Despite seasonal patterns, the tourism industry in Mexico continues its upward trajectory and is one of the most significant sectors in the economy. Both the government and private investors are paying attention and planning for the vacationers of the future.
Who doesn’t enjoy curling up to a good book on a pristine beach while attentive waiters replenish your frothy drinks? Or perhaps you prefer to explore art museums, Maya temples, or active volcanoes. Whatever your pleasure, there are few people who would not consider Mexico to be one of the most enticing tourist destinations in the world. Yet, tourism in Mexico is about more than white sands and a welcoming culture. Scratch below the surface and you will find an industry making a total contribution of US$166 billion to the Mexican economy.
It All Adds Up
“The last three years have been fantastic for the tourism industry in Mexico,” exclaims Julien Debarle, Vice President Operations for hospitality company Grupo Presidente. After recovering from the economic slowdown of 2009, he observes that the industry has experienced double-digit growth since 2014. Debarle foresees more of the same in 2017, despite an air of economic uncertainty.
In 2016, including direct, indirect, and induced spending, tourism accounted for 16 percent of the country’s GDP. Some 8.7 million Mexicans have jobs sustained by the industry—a figure that represents 16.8 percent of the economy’s employment, either directly or indirectly. Direct employment in travel and tourism surpasses that of every sector in Mexico with the exception of retail and agriculture.
The country has truly evolved from a sleepy destination for international honeymooners or a convenient choice for adventurous spring-breakers from the United States. The direct impact of the tourism sector on GDP has increased 77.3 percent since 1997, as compared to a total economic increase of 58.5 percent over the same period. All told, an astounding 35 million international travelers visited Mexico in 2016, making it the ninth-ranked destination in the world for international tourist arrivals. Growth in travel and tourism will continue to outpace the economy over the next decade by a rate of 2.9 percent to 2.4 percent. By 2027, more than 55 million international travelers are expected to visit Mexico.
Yet foreign visitor spending made up only 16.1 percent of travel and tourism’s total contribution to the GDP in 2016. According to Luis Barrios, CEO of Hotels City, “The other [approximately] 80 percent of tourists are internal, domestic travelers, and they travel all around the country.” He adds that the growing Mexican middle class means even more domestic tourism, leading to a higher quality of life and more disposable income for those in the industry. This bodes well for sectoral growth, according to Barrios. “Here is a chance for us to capture that growing market,” he explains.
México City is the most populous city in Latin America, and its International Airport landed more than 20 million domestic and international arrivals in 2016. Long a business hub, the city is beginning to promote itself as a tourist destination, with high-visibility festivals and sports events.
The Hot Spots
“The most important areas in Mexico for tourism are Puerto Vallarta, Riviera Maya, Los Cabos, and Cancún,” attests Victor M. Lachica Bravo, CEO & President of Cushman & Wakefield of Mexico. “The dollar is stronger right now, so our country is attractive to foreign travelers.” Even with a strong dollar, gone are the old days when a handful of change could pay for a taxi ride all the way across town, while a six-course meal with drinks only sets you back a pittance. Nonetheless, the visitors keep coming. Lachica points to occupancy rates in December 2016 of 80 to 90 percent at the most popular locations as evidence of high tourist interest. The nation’s hottest markets, which also include México City, are planning for significant growth—industry analyst JLL indicates that 2,469 new rooms in those areas will become available in 2017.
While beaches draw the most international travelers to Mexico, the nation has much more to offer. Adventure travel in jungles, among volcanoes, and under the sea draws those who seek the wild. Gastro-tourism, fishing, shopping, history, art—Mexico is a treasure trove for every kind of tourist.
Julian Balbuena, President of Best Day Travel, attests to the country’s variety of attractions, saying Mexico offers “the mountains, the valleys, the desert, the jungle, beaches on both the Caribbean and the Pacific.” In the north, he points to the state of Chihuahua and its Copper Canyon, larger even than the Grand Canyon. The Sea of Cortez, which lies between the Mexican mainland and Baja California, is a marine natural reserve. To experience Mexico’s fascinating history, he suggests Guanajuato or Irapuato for Colonial Mexico or the Yucatán for Maya ruins.
International Acclaim
Thirty-four UNESCO World Heritage Sites have been identified around the country, a recognition of Mexico’s unique confluence of the Old World and the New, as well as its incredible biodiversity and varied biospheres. These sites range from preserves for whales, monarch butterflies, and an area of the mysterious Sonoran Desert to the ancient Maya city and surrounding tropical forests of the Yucatán’s Calakmul.
Among the cultural treasures designated by the United Nations, some are well known—such as the pre-Hispanic city of Chichén Itzá near Cancún—while others offer up surprises, such as the Central University City Campus of the Autonomous National University of Mexico, which is not just an icon of Mexico’s brilliant architectural heritage but also a symbol of the modernization of Latin America. The government is well aware of the magnetic draw of these sites and has successfully petitioned to win 13 World Heritage Site designations since 2002.
Room to Grow
Despite its success, Mexico’s tourism industry can continue to improve. Carlos Kamkhaji, CEO of Corporativo Kamaji, explains that the tourism sector is underrepresented in the Mexican stock market, noting that the hospitality industry is largely represented in the bolsa by the airlines. Concurrently, he sees in this state of affairs a clear potential for growth: “When investment capital enters this sector in a real way, there will be an unstoppable boom.”
Creative businesspeople can likely think of dozens of ways to bring in visitors. Rafting trips down rushing rivers, yoga sessions in the mountains, intensive Spanish lessons in a peaceful town on a lake, or traditional cooking classes in México City might well boost not only international but also domestic tourism.
Experts recommend sponsoring this type of entrepreneurship throughout the country to bolster supply-side innovations and to create a more diversified and higher-value national tourism model. Such innovation would entail unleashing both financial and non-financial support to emerging businesses. These changes could especially pave the way for niches such as small tourism, eco- and adventure tourism, and micro-tourism to grow.
Just Getting There
Industry leaders know that easy international access to their country can only encourage more visits. Imagine: what could be more comfortable than departing business class on an airline carrier leaving from a major city almost anywhere in the world? Just envision an overnight flight accompanied by the comforts of in-air Wi-Fi, your favorite movie, and pushing your seat all the way back. You rest for several hours and—presto!—you awaken from your nonstop journey in a convenient location such as Puerto Vallarta or Cancún.
For the past several years, México City has been working to make this dream travel scenario a reality. In 2014, Mexico’s National Infrastructure Program announced a series of 83 projects totaling an investment of US$16 billion that would build or upgrade the nation’s tourism infrastructure. New and improved air routes, rail lines, and roads will help promote Mexico abroad through better travel experiences, particularly into the interior of the country. There is nothing like navigating a complex system of local transportation in a foreign language to scare off all but the most adventurous travelers—precisely what the nation’s planners seek to avoid.
Similarly, more air flights from Europe, Latin America, and Asia to destinations other than Cancún or México City could also fuel growth. In fact, the opening of a new airport in the capital city, slated for a ribbon cutting in 2020, will doubtless increase the number of flights into and out of, as well as within, the country.
The total contribution of travel and tourism to GDP includes direct spending, like that on accommodations or attractions; indirect spending, like investment or supplier purchases; and induced spending, the goods that direct and indirect employees are additionally able to buy. That number is expected to rise to US$232.2 billion, or 17.2 percent, of Mexico’s GDP by 2027.
Where to Now?
Ideas both practical and theoretical present themselves to Mexico’s tourism directors. From a functional perspective, for example, the government is looking to reduce red tape and wait times at the nation’s airports. Rolf Meyer, Country Manager for United Airlines, notes that today’s savvy traveler seeks connectivity and convenience. “The whole experience and process of traveling” should reflect this demand, he says, “from check-in to tracking their luggage.” The OECD lauds Mexico’s innovations in streamlining and expediting entry at airports but cautions that there is room for improvement, particularly in international travel. Other stimulative measures include continuing to move forward with liberalizing air service agreements to improve connectivity for all airports, both international and domestic.
On the speculative side of the industry, Mexico seems limited only by imagination. It should be possible to grow the nation’s tourism development model to emphasize assets such as ecotourism, gastronomy, and adventure tourism in order to invigorate local economies. There is even room for growth in subsectors such as the wine industry, which is taking off in Baja. “Mexican wine garners great respect,” says Hans Backhoff, CEO of Monte Xanic. “Thirty years ago, the thought was that Mexican wine was of poor quality. That taboo is gone!”
New—and Lucrative—Opportunities
A renewed interest in private investment is sparking the nation’s hospitality industry. Erin R. Green, the VP of Development-Americas for Rosewood Hotel Group, recently noted, “We’re bullish on Mexico,” praising its attractive investment fundamentals. “There’s a relatively low cost basis from construction and operations,” she continued, “it’s a growing economy, and it has beautiful destinations.” Analysts agree that the country has not begun to reach its peak; many regions—even popular beach and business destinations—are not yet fully developed, and emerging and secondary cities are only now realizing the need for hospitality services.
The introduction in 2010 of FIBRAs, an investment trust vehicle similar to REITs, has allowed public equity investment in Mexican real estate. Currently, two FIBRAs are focused on Mexico’s hotel market. Michel Montant, Director of Corporate Development for Grupo Posadas, said in 2015, “The coming of the Mexican REITs has dramatically changed the scenario for Mexican investments.” In addition to FIBRAs, national agencies like Bancomext and FONATUR are encouraging investment and public–private partnerships for tourism development.
Will a rising tide of foreign investment accompanied by a wave of eager vacationers come to fruition in 2017 and beyond? Industry leaders, policy makers, and researchers can only speculate. But one thing is certain—future tourists will not only want to spend their time soaking in the sun; they will also want nature walks, zip lines, and cultural and culinary experiences. Mexico plans to make these, and many other adventures besides, available to its guests.
