Mexican Hotel Transaction Volumes to Reach $700 Million in 2014
Hotel investment vehicles continue strong run as economy recovers
The Caribbean-like beaches, desert vistas and mountain ranges in Mexico have earned the country a top spot among the 15 most-visited destinations worldwide, drawing more than 23 million visitors a year. Strong tourist demand and budding economic and political environments are creating a positive outlook for the lodging sector, driving institutional investment into the region.
From a low of less than US $100 million in hotel trades in 2009, transactions in 2013 topped US $600 million as investors bet big on the Mexico hospitality sector. Despite the new development activity, investors feel steady performance growth has resurged investment prospect. JLL expects deal flow to rise 15 percent in 2014 to the second-highest annual level on record of more than US $700 million in hotel transactions.
Newly formed investment vehicles such as FIBRAs and CKDs, which accounted for 25 percent and 50 percent of hotel acquisition volume in 2012 and 2013 respectively, fueled local investment activity. These newcomers to the market quickly ratcheted up to half of the hotel transaction volumes in the country.
"Mexican authorities are increasingly promoting the country in other important source markets like Europe, Latin America and Asia, including the largest potential market – China," said Fernando Garcia-Chacon, Executive Vice President of JLL's Hotels & Hospitality Group and leader of the advisory group in Mexico. "The country's increasing middle-class population, with its expanding purchasing power will continue to drive room demand and investor activity forward."
In addition to an uptick in investment activity, construction is also expected to increase throughout the next decade by a compound annual growth rate in room supply of 4.9 percent. This projected change would be more than three times the growth rate expected for the United States.
"Our bullish expectations for growth in hotel stock is based on two key factors – the country's shift to a more service-oriented economy due to the emerging middle class, and its significant investments in infrastructure and large-scale projects, which is currently estimated at US$134 billion.," said Garcia-Chacon.
"With more than ten years of experience in the hotel investment industry, and as a Mexican, I am excited to see all of the change and progress coming to the hotel and hospitality industry in my country," added Alfonso de Gortari. Recently hired in Mexico City, de Gortari serves as a Senior Vice President with JLL's Hotels & Hospitality Group, and offers strategic advisory expertise and strong local market knowledge to expand the company's presence in the market.
JLL's white paper analysis "Economic Transformation Drives Latin America's Lodging Industry," was prepared with the support of industry partners including Wyndham Hotel Group, DLA Piper, VOA Associates and RCI, Inc. More information on this and other Latin America reports can be found here: http://www.jll.com/hospitality-latam.
About JLL's Hotels & Hospitality Group
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. AFortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.co.uk