
Report
Mexico Hospitality Market Update H2 2020
Mexico's hotel industry, a significant component of its economy, experienced notable challenges in 2020 due to the COVID-19 pandemic.
This report provides an overview of the market performance, key metrics, and recovery outlook, highlighting the pandemic's impact on the industry and the strategic measures adopted to navigate the crisis.
Economic Importance of Tourism
Tourism is a vital sector for Mexico, accounting for 8.7% of GDP and providing employment for 2.3 million people as of 2018. In 2019, Mexico welcomed 44.7 million foreign tourists, generating $24.6 billion in revenue, ranking it 7th globally for international tourist arrivals. The country’s diverse landscapes, rich cultural heritage, and strategic location make it a prime destination for North American travellers.
Hotel Industry Overview
Mexico boasts the largest number of hotel rooms in Central and South America, with 808,139 rooms. The country saw a 2.4% growth in room supply in 2019, outpacing Canada (1.5%) and the United States (2.0%).
Top Markets for New Rooms (Before COVID-19)
- Cancun: 4,750 rooms
- Riviera Maya: 2,458 rooms
- Mexico City: 1,814 rooms
- Monterrey: 1,645 rooms
Performance Metrics (2019)
Mexico faced a decline in key performance indicators in 2019, influenced by reduced tourism promotion budgets, environmental challenges, and increased perceptions of insecurity:
- Occupancy: -2.6%
- ADR (Average Daily Rate): -2.5%
- RevPAR (Revenue per Available Room): -5.0%
Beach Destinations
- Los Cabos: Highest ADR at $315.80
- Puerto Vallarta: Highest occupancy at 70%
- Cancun: ADR $185.70, Occupancy 68%
Urban Destinations
- Mexico City: Highest ADR at $120.31, Occupancy 66%
- Tijuana: Highest occupancy at 67%
COVID-19 Impact
The pandemic significantly disrupted the hotel industry, with international tourist arrivals plummeting by up to 78%. Hotels were restricted to 25% occupancy for essential activities, leading to severe revenue losses. The cruise industry also saw an 8% growth rate in 2019 but faced drastic declines in 2020 due to travel restrictions.
Recovery and Strategic Measures
The recovery is anticipated to be gradual, with full rebound expected by the end of 2022. Key recovery strategies include:
- Marketing campaigns targeting U.S. and Canadian travellers.
- Enhanced health protocols: Implementation of sanitation departments, digital check-in/out processes, and contactless services.
- Road tourism: Expected to recover first, with travellers preferring personal vehicles over flights.
- Corporate travel: Predicted to recover slowly due to the rise of remote working.
Economic Forecast
The Mexican economy is projected to contract by -9.94% in 2020, with a recovery growth of 3.44% in 2021. The forecast reflects a V-shaped recession, with a significant decline followed by gradual recovery. Economic concerns include high monopolization, low wages, underemployment, and regional inequalities.
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