While developers are primarily focused on high-end beachfront resorts, there is also significant building of mid-scale brands, particularly in Mexico's secondary cities, says Patrick Ford, Lodging Econometrics president. Examples range from the suburbs of Mexico City to towns along the Rio Grande border such as Chihuahua, Juarez and Monterrey.
"There are two levels of development in Mexico," Ford tells GlobeSt.com. "A lot of other inland cities are doing a lot of commerce and lend themselves to a lot of mid-market development."
Hotel projects under construction reached a new high for the cycle in this year's second quarter, with 169 projects totaling 36,139 rooms, based on Lodging Econometrics data. Ford points to the possibility of another peak occurring in the third quarter, though it might not top last quarter by much.
"We are at or near the top of the Mexican pipeline," he says, noting that tighter capital markets are taking a toll on future hotel plans. While those projects now underway have had financing in place for a year or two, those not yet started could be halted if they cannot line up lending.
Some developers are resorting to mezzanine financing in cases where loan-to-value ratios are being set too low, Ford says. He counts 14 project cancellations totaling just more than 3,000 rooms for the second quarter within the region, noting that guestroom counts were up slightly, while the project count decreased by only two from the previous two quarters.
"Banks will lend to highly qualified developers with deep track records and high-profile projects with recognized franchise names," Ford says. But, as is usually the case in other commercial real estate development forms, projects won't move forward without proper leverage, he says.
Nearly a third of the regional hotel pipeline consists of luxury and upper-upscale projects, with most located in the Caribbean island nations and beachfront resort areas of Mexico, Costa Rica and Panama, Ford says. Mid-scale development represents another third of the pipeline, with roughly seven out of every 10 projects going into Mexico's secondary cities.
Lodging Econometrics cites 27 new hotels with 4,688 rooms having opened through the first half of this year. Its forecast for new openings in 2008 is revised slightly downward, to 79 hotels with nearly 14,000 rooms.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
