After a rough 2009 and lackluster performance in 2010, Mexico City hotels have swung into to recovery mode over the past 18 months, according to Jones Lang LaSalle Hotels’ new research report, Hotel Intelligence: Mexico City. The firm also forecasts continued growth, with a 10 percent increase in revPar for the city’s upper-tier hotels in 2012 and 2013. For the 4- and 5-Star market, growth won’t be nearly as robust.
“Our study found that this hotel segment is expected to grow in the aggregate by only 4 to 5 percent over the next three years,” says Fernando Garcia-Chacon, executive vice president for Jones Lang LaSalle Hotels and leader of the firm’s Strategic Advisory and Asset Management division in Mexico. “An estimated seven new hotels will open-a relatively tepid supply pipeline considering the size of the market, boding well for the performance of existing hotels.”
Despite the projected growth, hotel investment in the city remains tepid-much of which can be contributed to the perception of Mexico’s security challenges. “Due to the perceived level of risk, downside scenarios have been priced into capitalization rates and many high-quality hotel properties are now valued below replacement cost,” says Clay Dickinson, executive vice president for Jones Lang LaSalle Hotels and leader of the firm’s Strategic Advisory and Asset Management division in Latin America. “For this reason, it is an apt time to assess opportunities in the Mexico City lodging market before institutional investors return in greater numbers and capitalization rates compress. With its size, sound economic fundamentals, and increasingly healthy lodging demand, the Mexico City hotel market should not be overlooked by investors seeking attractive yields.”
