April, 1999 - It's been five years since the peso devaluation and the resultant economic fallout began. It appears that the hospitality picture for Mexico has stabilized and shows signs of real recovery. The Global Hospitality Advisor asked Bruce Goodwin, partner, Goodwin & Associates Hospitality Services, Inc. and Mexico lodging expert, to share his current thoughts.

Mexican Resort Destinations: 

For the first time since 1994, demand growth for Mexican resort locations has retreated From the peaks of the previous year Occupancies were negatively impacted by a combination of factors, including "El Nino," overbuilding of some lodging markets, economic crises in Europe, Asia and Brazil, as well as nagging economic problems in Mexico. As presented in
the table, 1998 occupancies for many resort locations were below 1994 levels, the year before the peso devaluation. Average daily room rates, expressed in U.S. dollars, remained above 1997 and pre-crisis levels.

Cancun, Acapulco, Puerto Vallarta and Los Cabos all recorded lower occupancies compared to 1997. Also, while average daily rates for these resorts increased in pesos compared to 1997, many lost ground in dollar terms.

Main Industrial and Commercial Cities: Despite global economic adversities, occupancy and average daily rate levels in the main industrial and commercial cities (Mexico, Guadalajara and Monterrey) continued their recovery. Although still under the pre-crisis levels, the three cities registered occupancies and average daily rates above those for '95, '96 and '97.

Smaller Interior Cities: Suffering the greatest effects of the economic crisis, these cities have shown more resistance to recent downward pressures. RevPAR for the year-end 1998 is slightly above the '97 RevPAR, i.e., $33.64 and $33.19, respectively.

Some interior city destinations merit special attention with their growing importance and strength. These include several cities located along the "Corredor del Bajio" which includes cities of the states of Queretaro, Guanajuato, San Luis Potosi, Aguascalientes and
Zacatecas, where important industrial and manufacturing developments are occurring.

Border Cities: In spite of the Asian crisis, and considering that many border cities are directly related with Asian companies, RevPAR and average daily rate levels registered by the hotels in the border cities achieved higher levels for year-end 1998 than in the previous three years and even above those for 1994, before the crisis began. We believe that this is very significant considering the downward pressure applied to these markets by global economic problems.