Domestic travel boom sparks Mexico hotel development

AC Hotel by Marriott Guadalajara, Mexico
The AC Hotel in Guadalajara, Mexico, is part of Marriott International's growing Latin American footprint. Photo credit: Marriott International

The latest figures from analytics firm GlobalData suggest that the number of Mexican travelers spending on outbound travel is set to increase at a compound annual growth rate of 4.43 percent from $13.6 billion in 2018 to $16.9 billion in 2023.

According to GlobalData’s latest report, "Tourism Source Market Insight: Mexico," this growth is driven by increasing employment opportunities and rising standards within healthcare and education.

But those outbound travelers may not all be headed due north ... at least not directly north. The report notes that Mexican travelers have been looking beyond the United States, which it credits to Donald Trump’s 2016 electoral campaign and its perceived hostility. Canada experienced a growth in inbound travelers from Mexico with a 35 percent increase between 2016 and 2017 and a further 20 percent in 2018 for a total of 342,000 inbound Mexican travelers that year. 

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Still, the report suggests that the U.S. will continue to be the main destination for outbound Mexican travelers mainly due to accessibility and proximity.

“Established destinations throughout Europe such as Italy, Spain and France have also received an influx of Mexican travelers over previous years,” Johanna Bonhill-Smith, travel and tourism analyst at GlobalData, said in a statement. “Marketing bodies should tap into this traveler market as [Mexican] spending power develops and connectivity between destinations continues to rise.”

Domestic Growth

Domestic travel in Mexico has surged ahead of outbound trips with 267 million domestic trips in 2018 compared to only 20.3 million outbound trips. However, the report expects all tourism to face a slowdown in growth during the coming years. 

On the other hand, total expenditure alongside the average length of stay is increasing. “As the education system has improved, the spending power of the Mexican traveler has advanced, enabling travelers to not only spend more but increase the length of their stay,” said Bonhill-Smith.

Transport for both domestic ($32.9 billion) and outbound ($5.1 billion) dominated expenditure patterns in 2018. However, the report found that retail and foodservice are higher spending priorities over entertainment and sightseeing for all forms of travel. As such, destination management organizations and local authorities should promote experiences related to both gastronomy and retail opportunities when appealing to Mexican travelers. 

Mexican Development

Spending growth could encourage more development in the upper-upscale and luxury sectors, especially when catering to the strong domestic segment. According to research commissioned by RoomIt by CWT, the hotel distribution division of CWT, 35 percent of business travelers from Mexico plan to stay in upper-midscale properties.

Earlier this month, Hilton announced that its luxury brand, Waldorf Astoria Hotels & Resorts, would make its debut in Mexico later this year when the Resort at Pedregal is rebranded as the Waldorf Astoria Los Cabos Pedregal. Hilton has 30 projects in the pipeline for Mexico.

In April, Apple Leisure Group's AMResorts brand announced plans to open five new resorts across Mexico this year, with more in the pipeline for 2020 and beyond. 

Marriott International, meanwhile, expects to expand its footprint in Mexico more than 50 percent by the end of 2023. As of April, the company's total Mexico pipeline now has nearly 50 properties with 8,000 rooms across the country, including key gateway cities such as Mexico City, Guadalajara and Monterrey and resort markets like Cancun, Los Cabos and Puerto Vallarta.

According to Lodging Econometrics, Mexico leads Latin America’s construction pipeline with a record-setting 205 hotels and 34,426 rooms. Of that, Mexico City has 25 hotels with 4,309 rooms on the way, while Cancun's pipeline has 19 hotels and 6,379 rooms. This means, of course, that approximately 160 hotels are in development beyond these tourism hubs, and as last year's opening of the Homewood Suites in Silao indicates, manufacturing hubs are also attracting development for business travelers.