LUXURY TOURISM DEVELOPMENT

Mexico 2019 | TOURISM | B2B

Great year-round weather, a beautiful coastline, and premier accomodations are some of the factors that make Mexico stand out as one of the best luxury tourism destinations.

Borja Escalada
BORJA ESCALADA
CEO
RLH Properties
Diego Laresgoiti
DIEGO LARESGOITI
Partner
BK Partners

Why do you believe Mexico is one of the most profitable areas in the world to invest in luxury tourism?

BORJA ESCALADA Mexico is one of the few countries that offers many opportunities to develop profitable and powerful tourism projects. Its location next to the US and Canada is a great advantage as well. Asian visitors are also becoming increasingly interested in visiting Mexico thanks to its climate and scenery. The beaches and the coast are well developed, and the culture is friendly, welcoming, and service oriented. Labor costs are reasonable, which means you have visitors that are willing to pay more for the extra services that we are providing them.

Why did you decide to focus on luxury tourism?

DIEGO LARESGOITI We identified an untapped opportunity in the Mexican Stock Exchange for luxury tourism; this segment represents a large part of GDP but it still wasn't represented in Bolsa. Mexico's tourism industry is highly competitive mainly due to its proximity to the US and outstanding service and infrastructure. Another important factor is connectivity: for example, Mexico's Cancún Airport handles around 25 million passengers yearly and is expanding to meet a capacity of 40 million. We are also optimistic about the Puerto Vallarta region, as the federal government is investing USD500 million in a highway to connect Guadalajara to the Puerto Vallarta region. This will reduce travel time from four to two hours. The highway is expected to be completed by the end of 2019.

What have been the main advancements of your developing projects?

BE Recently, we bought Mayakoba, where we have important investments lined up, such as the new Rosewood and One&Only developments. We have already completed the beach recovery, where we invested USD12 million and are now investing an additional USD17 million. We are expanding Banyan Tree with a new area for events. Also, we are working on beachfront rooms with an investment of around USD50 million; these will be opened by end-2020. Moving forward, we will be investing more than USD85 million in Mayakoba. On the Pacific coast, we are developing Mandarina, a 265-ha development. We are also building the One&Only hotel, which should open in 2Q2020. We are in the design process of the Rosewood Mandarina, a hotel with 90 to 120 rooms. A number of amenities, including an equestrian center, a polo center, and a beach club for residential space, will open by the end of 2019. In total, we are investing USD500 million in Mayakoba and Mandarina alone.

What is the key differentiator to your market offering?

DL There are several factors that in my opinion differentiate us from other investment alternatives. The first one is our team, which has a proven track record in hotels, financing, construction, and development. Another differentiator is our portfolio, which we consider as unique because of assets such as the Four Seasons and Rosewood Mayakoba, among others. Another differentiator is the sector we focus on; Mexico is one of the most profitable parts of the world to develop luxury hotels. We are confident in the luxury tourism segment as we generate USD and have strong barriers of entry. Each area has its selection of top brands and hotels, and in places like Punta Mita or Cancún, it would be difficult to create a new brand and compete. RLH owns the real estate and has long-term contracts with operators. RLH also mitigates risks by only investing in projects that are on their last mile of development. We do not take any development risks, but we do assume construction risks. A project such as Mandarina, around 45 minutes from Puerto Vallarta Airport, is unique and difficult to create. It is difficult to find such locations, which is another barrier of entry, and precisely why One&Only and Rosewood want to enter Mandarina.

How does the recent purchase of Villa Magna in Spain align with your international expansion plans?

BE As a Mexican company, we need to continue growing in Mexico, but also internationally in order to balance and diversify our portfolio. This was a part of the strategy when we decided to purchase Villa Magna. Before purchasing Villa Magna, we analyzed at least 20 opportunities in Spain, Portugal, and other countries. Villa Magna was the perfect match with our portfolio, as it is one of the best city hotels in Madrid with tremendous potential for rebranding. Notably, it was designed by a Mexican and 17% of the room nights are with Mexican customers. It is the most Mexican hotel in Europe.