Luxe Mex

Big investments have been pouring into the highest of high-end resorts and hotels south of the border. If that money indeed talks, will the burgeoning luxury landscape finally help fix Mexico’s tarnished image among U.S. travelers?

A rendering of a pool area at the One&Only Mandarina on the Riviera Nayarit

A rendering of a pool area at the One&Only Mandarina on the Riviera Nayarit

A rendering of a pool area at the One&Only Mandarina on the Riviera Nayarit

As we touched down in San Jose del Cabo one bright and sunny Tuesday morning, a mother sitting near me gave her young daughter a grave warning:

“Always look to see who is walking around you. Don’t leave the resort at night. Basically, just be careful.”

I clenched my teeth, fighting the urge to defend Mexico, which has become a second home to me. Fortunately, another woman was not as conflicted about speaking up.

“I live here,” said the second woman, a blonde American expat who sat between her two middle school-age, blonde, U.S.-born daughters. “I send my children to school here. I eat at all the street-food carts. It is no different than any other city. Please do not play into the perception.”

The perception of this country continues to be a hotly debated topic. How many times have travel advisors had to address questions arising from Mexico’s image in the media? But as much as it can be sworn up, down and sideways that Mexico is a rich and varied destination that is safe for tourists, sometimes words are not enough.

Unless, maybe, it’s money that is doing the talking.

Mexico has always had a strong luxury presence. It started decades ago in places like Acapulco and Puerto Vallarta, known for their old Hollywood glitz and glam.

From there, the industry saw new luxury arise on the Riviera Maya in the form of sprawling luxury resorts. There was the rebirth of luxury in Los Cabos after Hurricane Odile in 2014 and the explosive expansion of millennial-driven, boho luxury in Tulum and Sayulita.

The list goes on.

There is no sign of it slowing. In fact, luxury development in Mexico is speeding up faster than ever.

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A suite at the Nobu Hotel Los Cabos, which opened in November.

A suite at the Nobu Hotel Los Cabos, which opened in November.

A suite at the Nobu Hotel Los Cabos, which opened in November.

New satellites of luxury

Investors are pouring dollars into Mexico by the billions, as one luxury resort after another opens (or plans to open). Destinations long known for their high-end offerings are getting new infusions of even more incredible luxury. Meanwhile, destinations that were previously considered “under the radar” are erupting onto the scene with announcements and openings of new “beyond-five-star” resorts.

According to STR, there currently are 5,580 luxury rooms in Mexico’s pipeline at various stages of completion. That is both a sign of intense investor interest and a possible cause for concern about potential oversupply.

The Andaz Mayakoba Resort Riviera Maya, part of the Mayakoba master-planned community with residences, hotels, golf courses, marinas and shops.

The Andaz Mayakoba Resort Riviera Maya, part of the Mayakoba master-planned community with residences, hotels, golf courses, marinas and shops.

The Andaz Mayakoba Resort Riviera Maya, part of the Mayakoba master-planned community with residences, hotels, golf courses, marinas and shops.

“The luxury development has always been there in Mexico, but now I think the most development you’ll see [in the luxury market] will be these complexes made of two or three hotels,” said Pascal Dupuis, general manager of the Andaz Mayakoba Resort Riviera Maya. The resort is part of the Mayakoba master-planned community, with residences, hotels and recreational amenities like golf courses and tennis courts, marinas, stores and restaurants.

The Mayakoba complex, which is home to Banyan Tree, Rosewood, Fairmont and Andaz hotels, is one of the most famous and original master plan designs in Mexico.

Los Cabos’ underdeveloped East Cape, on the side of the peninsula facing the Sea of Cortes, has just opened the Costa Palmas Community Masterplan, a luxury community that is home to the Four Seasons Resort, a beach club, a marina, a yacht club, a golf club and residences.

A guestroom at the Four Seasons Costa Palma, part of the Costa Palmas Community Masterplan, a luxury community on Los Cabos’ underdeveloped East Cape with a beach club, a marina, a yacht club, a golf club and residences.

A guestroom at the Four Seasons Costa Palma, part of the Costa Palmas Community Masterplan, a luxury community on Los Cabos’ underdeveloped East Cape with a beach club, a marina, a yacht club, a golf club and residences.

A guestroom at the Four Seasons Costa Palma, part of the Costa Palmas Community Masterplan, a luxury community on Los Cabos’ underdeveloped East Cape with a beach club, a marina, a yacht club, a golf club and residences.

It will also be the site of an Aman resort, the Amanvari, in 2021.

“There is more luxury investment [in Los Cabos] in the last three years,” said Rodrigo Esponda, managing director of Los Cabos Tourism. “It’s not just about the Four Seasons or the Aman. It’s a whole new area in the destination to complement what Los Cabos is offering.”

The Nobu Hotel Los Cabos and the Zadun, a Ritz-Carlton Reserve, opened in November.

Similarly, the Riviera Maya, long Caribbean Mexico’s luxury hot spot, is preparing to welcome another master plan: the Kanai Resort. To be located between Cancun and Playa del Carmen, the Kanai Resort will include four hotels, two of which — a W Hotel and a St. Regis — are slated to open this year.

Dario Flota Ocampo, director of the Quintana Roo Tourism Board, said the destination “is increasing the number of rooms, and almost all are in the Five Diamond category. Cancun was rated by AAA as the No. 2 top international travel destination. … Hoteliers know that nowadays, the luxury sector is one of the most important for us.”

The boho luxury vibe made famous in Tulum is going to continue down the coast of Quintana Roo, as well.

“The boutique luxury style is a must from Tulum down to Mahahual because they are ready to welcome a refined and demanding clientele in a discreet and personalized way,” Flota Ocampo said.

He added that to the north, “Costa Mujeres has recently opened a new luxury all-inclusive resort, so we think this destination is growing by leaps and bounds.”

And then there are destinations about to be completely transformed because of luxury developments.

The first is the coast of Nayarit beyond Sayulita. Right now, the stretch of jungle road winds in and out of sleepy beach towns and fishing villages like San Pancho and Chacala.

But a nearly $2 billion master-planned community, Costa Canuva, announced in 2016, is on track to open with two confirmed hotels — a Fairmont and a Ritz-Carlton Reserve — and three others to be announced. The Ritz-Carlton is slated to open at the end of 2021, and the Fairmont will open in 2023.

Just down the beach from Costa Canuva will be the One&Only Mandarina, home to One&Only Mandarina Private Homes, the world’s first One&Only residence collection, as well as the new Rosewood Mandarina. They are scheduled to open in 2020 and 2022, respectively.

The stretch of coast south of Puerto Vallarta, between the southern tip of the Bay of Banderas and the city of Manzanillo, is a rugged and wildly beautiful stretch of Pacific coast known as the Costalegre. For decades, this untouched part of Jalisco has had a few high-end boutique offerings, such as Careyes, Cuixmala and Las Alamandas.
But just on the horizon is another master plan as well as a new commercial airport, positioning the place to become one of Mexico’s most important luxury destinations.

The anticipated 3.4-square-mile Tamarindo master-planned community will have the Four Seasons Resort Tamarindo as well as Four Seasons Residences and other services and amenities yet to be announced. The airport is scheduled to begin receiving flights this year.

Looking to the future, experts believe there is much more to come.

“You will see the coastline fill out,” predicted Zach Rabinor, CEO of Journey Mexico. “There is added interest and excitement. The rest of Nayarit [will fill out]: Punta Mita, the south side of the bay in Puerto Vallarta as well as the top of Cabo Corrientes. With Costa Palma [in Los Cabos] you’ll see the whole East Cape be developed, as well.”

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Why now?

While Mexico has always had a share of the luxury travel market, there are a variety of reasons that so many luxury hotels are being invested in and are opening right now.

Despite media reports portraying Mexico as unsafe and unstable, evidence shows that the country is experiencing more financial success than ever. Earlier this year in its annual World Development Indicators report, the World Bank categorized Mexico as one of 60 countries with upper-middle gross national income, an indication of the country’s rapidly expanding middle class.

Meanwhile, GlobalData’s June 2019 report, “Tourism Source Market Insight: Mexico,” revealed that Mexicans are spending more on travel, and this growth is driven by increasing employment opportunities and rising standards of education. According to the U.S. Department of Commerce’s National Travel and Tourism Office, spending by Mexican travelers in 2018 totaled $20.9 billion.

The world as a whole is getting wealthier, too: According to UBS, there were 631 billionaires in North America in 2018, up from 425 as recently as 2012.

“People are getting richer and richer,” Rabinor said. “Overall, the luxury travel inventory continues to grow worldwide. Mexico is such a compelling destination, with the largest luxury traveler market in the world as its neighbor.”

"Mexico is such a compelling destination, with the largest luxury traveler market in the world as its neighbor."
– Zach Rabinor, Journey Mexico

The profile and demands from travelers are changing, as well. Esponda said that today’s travelers are “coming and requesting a more sophisticated experience. They are requesting original ingredients from the region. There are more requests for learning experiences. They want to go to villages or try a particular type of coffee and visit the organic farms.”

The demand for luxury is there, and even travelers in the upper-upscale and all-inclusive market are demanding better services and amenities.

Rocio Lancaster, tourism undersecretary for the state of Jalisco, said, “The government and private industry both have to be on board. There have always been inconsistencies, or the environment of the country was not the ideal moment to invest. Now, everything is getting aligned, and everyone is willing to make it happen.”

“Now more than ever, vacationers are eager for an experience that is authentic to the destination, and the new resorts are doing a fabulous job of giving them just that.”
–Terrah Van Meter, Legacy Travel

Terrah Van Meter, a Mexico specialist with Legacy Travel in Plano, Texas, said, “Now more than ever, vacationers are eager for an experience that is authentic to the destination, and the new resorts are doing a fabulous job of giving them just that.”

Hotels like the Unico 20º87º, Haven Riviera Cancun, Le Blanc Spa Resorts and even the new Hard Rock Hotel in Los Cabos all reflect rising consumer demand for a product that bridges the gap between traditional resorts and luxury. The Unico and the new TRS Coral Hotel in Costa Mujeres are both members of Leading Hotels of the World.

Flota Ocampo said the logic behind all the investment is clear.

“Tourism is evolving, and travelers have been changing,” Flota Ocampo said. “And their preferences in the luxury accommodation sector are projected to reach $95 billion globally by 2025. A huge example of why hotel developers are looking for projects that are considered luxury is the eighth edition of the International Luxury Travel Market, where it was mentioned that luxury travelers spend three times more than others on sustainability-focused, high-end products.”

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A rendering of the Majahua Beach Club, part of the One&Only Mandarina complex opening this year.

A rendering of the Majahua Beach Club, part of the One&Only Mandarina complex opening this year.

A rendering of the Majahua Beach Club, part of the One&Only Mandarina complex opening this year.

A question of oversaturation

The development of so many hotels begs the question of whether or not supply is outweighing or will soon outweigh demand. According to STR’s third-quarter data on Mexico hotel performance, occupancy across the country is down 3% versus the third quarter last year, the lowest occupancy in the country since 2013, and STR attributes that to the influx of new supply outweighing current demand.

This, however, is looking at all segments, not specifically at luxury.

Occupancy also was greatly affected by the decreased tourism to the Yucatan Peninsula from earlier this year. Los Cabos, one of the driving destinations of luxury in the country, saw a 21% visitor rebound, making 2019 its strongest tourism year since 2010.

The large-scale investment in and planning for such high-end properties speaks to the confidence investors have in Mexico. That makes a reassuring statement against the backdrop of the political climate on both sides of the border. It’s no secret that Mexico had its challenges in 2019, including the sargassum issue in the east, concerns about cartel violence, the dissolution of the Mexico Tourism Board and the Trump administration’s border plans.

"People are more likely to invest if the atmosphere is steady. For sure, luxury investment helps the image of Mexico. If people see a multimillion-dollar investment, it provides a good face for Mexico."
– Rocio Lancaster, Jalisco Tourism

But with so many luxury offerings on the horizon, an investment in luxury is certainly an investment in Mexico’s image as well as in its longevity as a destination for high-end travelers.

Legacy Travel’s Van Meter said, “Overall, I think the level of luxury is definitely a surprise to most American travelers, especially those who are visiting for the first time. It makes sense for Americans to [judge] the safety of a destination by the quality of the area’s accommodations.”

Lancaster added: “People are more likely to invest if the atmosphere is steady. People would not invest if they didn’t see a [return on investment] in the following years. For sure, this helps the image of Mexico. If people see a multimillion-dollar investment, it provides a good face for Mexico.”

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