Mexico Hotel Market Strong, Led by Los Cabos and Mexico City

Exterior of the St. Regis Mexico City

Hotels in Mexico enjoyed a strong first quarter, according to numbers just released by lodging data provider STR. Compared with the first quarter of 2016, occupancy rose by 1.2 percent, to 64.7 percent, and the average daily rate climbed by a solid 5.7 percent, to 2,630.59 pesos (currently about US$139). That led to a sizable jump of 7 percent in revenue per available room.

"Performance growth continues in Mexico due to a strong dollar and reduction in fuel prices," said Fatima Thompson, STR's associate director of business development, hotels, referring to the primary drivers of visitation from north of the border. "These factors will continue to attract foreign travelers to Mexico's popular destinations, provided there is not a major shift in U.S. and Mexico diplomatic relations. That situation certainly warrants monitoring as to what impact it might have on tourism and hospitality."

The steepest increases in occupancy and RevPAR were experienced in Northwest Mexico, with year-over-year occupancy rising by a robust 4.7 percent and RevPAR skyrocketing by 15 percent. Much of that was thanks to the Los Cabos market, which is now nearly fully operational following the damage wrought by Hurricane Odile in September 2014. "Performance figures from the first quarter of 2017 are indicative of stability for that market," said Thompson. The region includes the states of Sonora and Chihuahua, as well as the Baja Peninsula, with the Los Cabos area having the highest density of high-end hotel rooms. The gains in Chihuahua, home to Ciudad Juarez and the Copper Canyon, were more modest than those realized on and closer to the peninsula.

Mexico City posted the only double-digit increase in average daily rate, shooting up by 10 percent to 2,643.24 pesos (currently about US$140). 

Nationwide performance was positive across the board, with both ADR and RevPAR increases noted in each of the five key markets as defined by STR. The only occupancy decrease was experienced in Central Mexico, which fell just a half of a percent. The upper-upscale chain-scale segment enjoyed the largest performance increases throughout the country.