Mexico City Hotels Rebound with Double-Digit Growth Forecast
City’s upper-tier hotels to post 10 percent RevPAR increases in 2012 and 2013
Mexico City is not only one of the five largest cities in the world, it’s also one of the most significant economic centers in Latin America and its hotel market is showing strong growth. Following a steep decline in 2009 and lacklustre performance for part of 2010, Mexico City’s hotel market has swung to recovery mode over the past 18 months, according to Jones Lang LaSalle Hotels’ new research report, Hotel Intelligence: Mexico City.
“Mexico City’s average daily rate (ADR) is expected to grow and accelerate further in 2012 and beyond. This will, in turn, lead to a continued increase in RevPAR growth of approximately 10 percent in 2012 and 2013,” said 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. The continued uplift in hotel performance is also underscored by the limited lodging supply pipeline resulting from the scarcity of available land in prime locations, a lack of development financing and a focus on the development of other commercial property types.
The city’s stock of four- and five-star properties is comprised of approximately 24,600 rooms. “Our study found that this hotel segment is expected to grow in the aggregate by only four to five percent over the next three years. 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,” said 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. International investors’ perception of the country’s security challenges has resulted in some hesitation toward hotel real estate investment, and the city’s hotel investment market has been relatively illiquid over the past several years.
“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,” said Dickinson. ”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.”
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Jones Lang LaSalle Hotels is a global real estate services firm focused exclusively on hotels & hospitality. We provide acquisition and financing advice, valuations, investment sales and asset management for luxury hotels, select service and budget hotels, smaller hotels and pubs, from single assets to large portfolios and mixed-use developments. In the last five years we completed nearly 4,000 advisory and valuation assignments and more sale, purchase and financing transactions than any other hotels real estate firm in the world…worth over $30 billion. With 42 offices in 20 countries, no other firm is better connected. Through our depth and breadth of research and experience we know the market at every level, we know the players and we know how to get results.
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