After a piece of the pie: States eye economic benefits of expanding the MICE segment

With Mexico regaining its spot among the world’s top 10 tourist destinations in 2014, it is no surprise that the meetings, incentives, conferences and exhibitions (MICE) segment is becoming increasingly dynamic. Recognising the segment’s importance, particularly for states that have traditionally been primarily sun and sand destinations, state authorities are now developing strategies to raise their competitiveness, with a view to attracting a bigger share of events. The current investment in MICE infrastructure is set to increase the country’s capacity and will also contribute to a diversification of MICE destinations across the country in the medium term.

By The Numbers

According to a study by Mexico’s Centre of Advanced Tourism Studies, released in 2013, the MICE segment generates total annual revenues of $32.5bn ($18.1bn directly and $14.3bn indirectly), accounts for more than 700,000 jobs, and represents around 1.4% of GDP. The segment registered impressive growth in 2014, expanding by 18%, following strong growth in activity in the last quarter of the year, according to SpeakersMexico.com, a consultancy and MICE professional pool base. The agency estimates segment revenues reached $20bn in 2014, with the country hosting some 20,000 international events.

Growth is expected to continue in the short term, with the Ministry of Tourism (Secretaría de Turismo, SECTUR) forecasting an expansion of 7% in 2015. The tourism industry is set to benefit from an expected rise in the number of events in various sectors, in particular in energy and telecommunications, following recent structural reforms, and the automotive and aerospace industries, both of which have registered dynamic growth in recent years. Armando de la Garza, president of the Mexico chapter of the International Association of Hispanic Meeting Professionals told local media that recent reforms are likely to drive growth in the number of industry events to at least 10% in the first three years. Mexico’s proximity to the US and 0% value-added tax on international congresses, conventions, fairs and exhibitions are additional elements that make the country a competitive destination in the global industry.

Top Contenders

Cancún, Mexico City and Guadalajara are the top contenders in the segment, attracting the highest number of events. Nonetheless, Puebla, Mérida and Querétaro are also emerging as important new destinations. According to SECTUR, in 2014 the capital attracted some 7300 events, generating around MXN5.5bn ($370.2m). As a whole, the state of Mexico aims to double MICE revenues in the next two years to MXN10bn ($673m). To raise its competitiveness, state authorities have mapped out four strategic clusters: Toluca, Valle de Bravo, Teotihuacán and Ixtapan de la Sal. One of the key measures being implemented will see the transfer of hotel tax to federal authorities rather than the state government. The funds, which in 2013 amounted to MXN60m ($4.04m), will be put towards promotional efforts to attract more events.

Authorities are also contemplating the construction of a new convention centre in the state of Mexico, with Toluca and Metepec as the most likely locations for the new venue. A new resort in Teotihuacán, meanwhile, is already under way, and will increase the cluster’s room capacity by some 500-700 rooms. With a hotel capacity of 4000 rooms and in close proximity to Toluca International Airport, the four clusters should be well positioned to attract more international events. Valle de Bravo already hosted the National MICE Tourism Congress in August 2015. Guadalajara was meanwhile chosen to host the 67th International Astronautical Congress in September 2016, an event that is expected to attract some 5000 visitors. Cancún and Guadalajara are likewise expected to remain among the top destinations in the country in the coming years.

Infrastructure

Authorities are keen to see the benefits of the growing segment spread to more parts of Mexico. To this end, significant amounts are being invested in infrastructure, as more states turn to the segment as a viable motor for economic development, particularly in sun and sand destinations where the segment has the potential to break the cyclical nature of this type of tourist activity.

The country’s National Infrastructure Programme 2014-18 allocates funds to build the first convention centre in Aguascalientes, which is to be located on the 44-ha San Marcos Island. With a price tag of MXN320m ($21.5m), the project is currently scheduled for completion by early 2016. The new venue will span 10,000 sq metres and accommodate some 8000 people. In addition, in August 2014 SECTUR and the state of Coahuila announced plans for construction of a new convention centre in Torreón, which will represent an investment of some MXN200m ($13.5m). The National Trust Fund for Tourism Development (Fondo Nacional de Fomento al Turismo, FONATUR) is in charge of developing the concept for the new venue, and the centre is scheduled for completion sometime in 2016.

Planning Ahead

In an effort to increase their competitiveness, Mexican states have begun planning MICE infrastructure in order to facilitate greater accessibility. León in Guanajuato, which in November 2014 hosted the World Footwear Conference, has concentrated its MICE infrastructure in a highly accessible area in the shape of a polygon. The area concentrates some 3000 hotel rooms, and is steps away from a theatre and parks. In addition, its relative proximity to Mexico’s automotive cluster could see it benefit from an expected increase in the number of events in the industry.

Puerto Vallarta, where tourism already accounts for the overwhelming majority of the state’s economic activity, is also in the process of developing a strategy to boost its MICE segment and become more competitive. The classic sun and beach destination is seeking to position itself as a prime destination for incentive trips and congresses, and is looking to attract an increasing number of sporting and cultural events. According to the Convention and Visitors Bureau of Puerto Vallarta, the MICE segment represents roughly 37% of total economic activity. Puerto Vallarta already features a convention centre, with capacity for 5000 people and hotel room stock in excess of 22,500 rooms.

Training

Efforts are also under way to improve training and staff qualifications. Puerto Vallarta, for instance, is strengthening ties with organisations like Professional Convention Management Association and Management Partnership International to learn from industry professionals operating in some of the most competitive MICE markets in the world. Nuevo León has done the same with its Convention and Visitors Bureau, which in 2015 began a staff exchange programme aimed at increasing the level of professionalisation among staff at the state level. As part of the programme, MICE professionals are given the opportunity to participate in 10 annual exchanges to destinations such as New York, Miami, Medellín, Bogotá and São Paulo to gain experience in highly professional environments.

Foreign Arrivals

Mexico’s potential in the MICE segment is also attracting a number of international companies specialised in MICE events looking to fill the projected increase in demand. Among the recent arrivals are Maritz from the US, Messe Frankfurt Exhibition from Germany, Reed Exhibitions, Tarsus Group and United Business Media (UBM), from the UK. To enter the market, these firms have formed alliances with local companies, sharing know-how in exchange for client portfolios, or establishing local branches and partially or totally purchasing events already established in Mexico. UBM, for instance, has recently acquired Expo Cihac, the most important event in the construction and housing industry in the country, for MXN190bn ($12.8bn), and the firm has announced plans to further invest $100m in Mexico by 2016.

Tough Competition

One factor that could have an impact on Mexico’s competitiveness is the fact that, unlike a large number of its competitors, Mexico does not subsidise the cost of its convention centres. Maria Antonieta Gamez, president of the Mexico chapter of the International Congress and Convention Association told local media that for this reason Mexico is not being considered for a significant share of international events; some 900 international congresses with an average duration of three days and 1200 visitors. The agency estimates these events could bring an additional $596m in annual revenues to the country.

Thus far, there is no indication that Mexican authorities are considering subsidising the cost of convention centres, a practice that has recently become more common in competitive MICE markets. Nonetheless, other efforts to attract more events are to be expected in the coming years as states strive to gain a stronger position in the global industry.