José Carlos Azcárraga Andrade, CEO, Grupo Posadas: Interview

Interview: José Carlos Azcárraga Andrade

In addition to beaches and culture, what other areas can be leveraged to boost sector growth?

JOSE CARLOS AZCÁRRAGA ANDRADE: Mexico´s tourism sector is much more than just Cancún and Los Cabos. Actually, two-thirds of tourism is business related. This segment is closely linked to Mexican economic activity, and that is why in the last few years tourism has grown significantly. A large part of this is the result of significant investments in the automotive sector in the Bajío region that have consequently boosted hotel activities in the area. Also, Mexico has a very strong growth potential in corporate meetings and incentives that represent a substantial share of business travel worldwide. In leisure tourism, which represents the other third, about 60% of the market is local tourism and the rest is heavily concentrated in the US and Canadian markets, especially in leisure destinations such as Cancún, Riviera Maya, Los Cabos and Puerto Vallarta. Undoubtedly, Mexico has the possibility of doubling this segment during the next five years due to the many appealing attributes of the country and its people...

It is becoming more common to see business travellers taking advantage of their trip and extending their stay in order to enjoy the region for leisure purposes. Thus, states such as Guanajuato, Querétaro and Oaxaca have recorded an increase in the number of leisure tourists who have realised that Mexico has much more to offer than what is commonly thought. Since 2008 those three states have recorded annual average growth of 7.1%, 7.1% and 3.3%, respectively.

What types of financing opportunities are available in the tourism sector?

AZCÁRRAGA: The hotel industry requires long-term investment to generate returns for the next 30-40 years. The participation of financial institutions has been crucial for the growth of the sector. For example, real estate investment trusts, known locally as FIBRAs, are probably the most common, since they look for strategic alliances with stable management companies, providing an efficient cost of capital but also development capacity. Nevertheless, institutional investors are not the only ones showing interest in the sector; many family offices and general investors want to diversify their portfolio by investing in hotels, since this type of business generates very good returns, and the intrinsic value of real estate is very attractive.

To what extent could new technologies be incorporated by hotel chains?

AZCÁRRAGA: Customer habits have changed at a much higher rate than ever before in the past few years. New generations are looking for an experience and that starts from the moment a visitor books a trip until being hosted at the hotel. Thus, the challenge is to be able to use technology in order to cater to these new types of needs. The industry is also witnessing growing experience customisation. Hotel management are using social media to collect information about customers and their needs. Thanks to this, hotels can offer potential visitors online promotions and services tailored to their expectations. This represents both the next challenge and the next opportunity.

How can public and private actors cooperate to better ensure safety?

AZCÁRRAGA: First of all, it is important to separate reality from perception. In the tourist areas, destinations in Mexico are as safe as any other tourist destination around the world. Nonetheless, the country can be affected by a negative perception fed by certain types of information. Therefore, it is important for the country to spread a positive image using campaigns such as the ones led by the Tourism Board of Mexico.

Private and public actors should continue to cooperate closely with a clear understanding that tourism is, and will continue to be, one of the best strategies that Mexico can rely upon to develop its economy.