Mexico’s Hotel Real Estate Gets Strong Foreign Investment

Foreign investment in Mexico’s hotel real estate has boomed to achieve a 10-time multiple since 2000, as reported in a joint research initiative between Jones Lang LaSalle Hotels and Mexico’s National Trust for Tourism Development (FONATUR).

The total amount of foreign investment in Mexico totaled $640 million in 2006, representing an annual compound growth rate of 135 percent. This influx has transformed the hotel market into a more transparent and liquid investment environment, propelling further outside investment.

Spanish and American investors have dominated this level of foreign investment –totaling 99 percent over the last six years, with Spanish investors at 65 percent ($1.2 billion), and American investors at 34 percent ($609 million) between 2000 and 2006. U.S. investors that have made significant investments in Mexico include Strategic Hotel Capital, Host Hotels and Resorts, Orient Express Hotels and Ty Warner.

Over the last six years, Cancun and the Riviera Maya have attracted the greatest amount of foreign capital, which together captured $1 billion in investment, or 57 percent of the total in Mexico. OHL, the Spanish construction giant, for example, has made an investment of over $375 million in the development of Mayakoba, set to become a landmark luxury master-planned community in the Riviera Maya.

Los Cabos was the second most popular destination for foreign capital, taking in $206 million in investment, or 11 percent of the total. While Los Cabos is a more active market than this indicates, local Mexican developers and investors dominate much of this investment.