Hospitality trends

Observations from the EY Mexico City Hospitality Roundtable

  • Share

We surveyed hospitality sector leaders in Mexico City and invited these individuals to a roundtable on 3 May 2017 to discuss the survey results and industry trends. Discussions focused on investments, transactions, capital markets, development and brand trends affecting Mexico’s hotel markets in 2017 and beyond.

The following were some of our discussion highlights.

  • Competition for assets, especially in gateway cities, is driven most heavily by foreign capital.
  • Many industry players are turning to development as an alternative to acquisitions to enter new markets without overpaying for assets.
  • Given a shift to development-focused strategies, many view oversupply as a threat to their own portfolios and the Mexico lodging industry alike.
  • While Millennial travelers and their expectations are top-of-mind for many in the hotel industry, the importance of Generation X-generated travel demand should remain in focus.
  • Despite market expectations that the Mexican Central Bank will further increase interest rates in 2017, valuation metrics are anticipated to remain constant, narrowing spreads to debt and equity alike.
  • Banks are not issuing debt as readily as they did in the last lodging cycle. As such, equity is the preferred source of alternate financing among investors.

The economy

Mexico experienced 2.1% GDP growth in 2016, and 2017 GDP growth is projected by Oxford Economics to be slightly slower (at 1.9%). A lower GDP forecast is influenced by higher anticipated inflation levels weighing on personal consumption. Based on survey responses, this lower GDP growth forecast is corroborated, with more than 60% of respondents anticipating growth between 1.0% and 2.0%. Oxford Economic expects GDP to grow between 2.0% to 3.0% between 2018 and 2020.


Survey respondents feel bullish on the market, with 35% explaining they intend to develop, followed by 29% planning to buy and 18% planning to hold. Only 12% of respondents feel that selling today would be the optimal investment strategy, suggesting a long-term outlook for Mexico where market optimism, along with high acquisition costs, are spurring development interest.

EY - Mexican hospitality trends

Capital markets

Fifty-five percent of survey respondents believe loans and/or capital from banking institutions has been insufficient to develop projects. This dearth of debt availability may explain why the preferred source of alternate financing among investors is equity, a costlier substitute.


Survey respondents are most preoccupied with the effect that new supply will have on operating performance. Supply concerns appear particularly high in resort markets such as Cancun and Riviera Maya. Rising costs are the second most noted concern among investors.


According to STR, year-end 2016 data indicates that Mexico’s year-over-year occupancy rose 0.1% and the average daily rate (ADR) (USD) declined by 0.4% — leading to a revenue per available room (RevPAR) decrease of 0.3%. However, in local currency terms, Mexico’s ADR rose 17.0% and RevPAR increased 17.1%, indicating hotels successfully maintaining rates amid a weakened peso.

Industry focus

Approximately half of survey respondents believe that the most effective method for attracting Millennials is through the targeted use of technology to create a high-tech experience (e.g., branded apps, keyless entry via guests’ smart phone or watch).

Hosting social experiences, a particular type of programming that lifestyle hotels focus on, comes in as the second most effective method for attracting travelers of approximately 18–35 years old, just following the use of technology.