by HVS Miami
Tourism plays a vital role in Mexico's economic development. In 1992, according to figures generated by Mexico's Secretary of Tourism, the tourism sector accounted for an estimated 6.3 percent of the country's Gross Domestic Product (GDP). Tourism now represents one of the largest sources of foreign exchange in Mexico and the employer of close to 2 million people, or approximately 9.0 percent of the total labor force.
The Mexican tourism industry is the country's second-largest industry after petroleum, representing approximately $3.9 billion in tourism receipts in 1992, an increase of 2.6% over the $3.8 billion generated in 1991. The 1991 figure represents an increase of 11.3 percent over 1990, which is partially attributable to the average tourist expenditure which increased by 11.6 percent from 1990 to the 1991 level of $594 and $609 in 1992. The Mexican government is committed to achieving the aggressive goals it set forth in 1989 for the tourism sector which include $5 billion in tourism receipts and approximately 10 billion visitors by 1994. In 1991, however, due to the Persian Gulf War and the U.S. recession that followed, the number of visitors remained steady at approximately 6 million (the same as 1990), which is considerably lower than the goal for this year of 7.5 million. However, since the number of visitors remained at 6 million in 1992, reaching the 1994 goal now seems unlikely.
The Mexican administration under Carlos Salinas de Gortari (1988 to 1994) has implemented high impact policy changes in an attempt to rebuild the country's suffering economy. For the tourism sector the following strategies focused at generating revenue and creating employment opportunities were established.
The Mexican government has established very specific goals for the continued growth of the country's tourism industry. The basic target is the construction of 50,000 units of international standard lodging facilities, in addition to the 1994 visitors and tourism receipts goals.
Mexico's tourism sector has achieved significant growth in the late 1980s until the present in areas such as tourist arrivals, revenue generated by tourism, and domestic and international investment in tourism infrastructure development. Until 1990, growth in these areas exceeded world figures and overall figures for the Americas (North, South and Central). However, events such as the Persian Gulf War and the U.S. recession, greatly affected Mexico's travel industry in 1991, due to its high level of dependence on U.S. tourists. From 1988 to 1992, travelers to Mexico increased at an annual average compounded rate of 2.2 percent, which is significantly below the increase of 7.9 percent achieved by the Americas as a whole and 5.6 percent achieved by the world.
The conservative increase in the volume of tourists to Mexico however was coupled with very strong increases in the receipts generated from tourism. From 1988 to 1992, these receipts grew at an annual average compounded rate of 15.8 percent. In 1992, 6.4 million tourists traveled to Mexico, generating receipts of approximately $3.9 billion, with average expenditures of $609 per visit. The rapid growth of Mexico's tourism sector has enabled the country to sustain its international tourism market share in the midst of increasing competition from other Latin American countries and more importantly, the Caribbean.
With the extensive common border between Mexico and the United States, it is not surprising that North American tourists are of great importance to Mexico's tourist destinations. Currently, the U.S. represents 83.8 percent of the Mexican tourism market. Since 1991, Europe and Latin America have become increasingly more important, with both countries beating Canada out of the second spot it has held since before 1988. Europe and Latin America each comprised approximately 5.7 percent of the total market share, with Latin America having a slight edge.
While the growth of U.S. tourism demand was conservative at 1.5 percent from 1988 to 1992, and Canadian demand has actually declined by 3.1 percent during this same period, Europe and Latin America's healthy growth trends of 34 percent and 12.6 percent, respectively, during the same period have served to offset the decreases. In addition, this shifting in the origin of the demand serves to somewhat diversify Mexico's tourism composition, although overall, this sector is still heavily dependent on U.S. tourists. This table, summarizes the historical national origin of Mexico's international visitors.
Domestic tourism in Mexico is an important and growing segment of the Mexican travel industry. Over the last four years, this segment has increased at an average annual compounded rate of 2.9 percent.
Hotel development has kept pace with the increasing demand for accommodations from both national and international tourists. The total supply of hotel rooms and similar lodging facilities increased to 355,189 in 1992 from 321,765 in 1989. This represents an annual average compounded growth rate of 3A percent, or 33,424 total new rooms.
International hotel companies such as Marriott, Hyatt, Camino Real Hilton, Club Med, Grupo Sol's Melia Hotels, Sheraton, Radisson and very recently Holiday Inn through Grupo Situr, have or are planning to establish their full-service brands in various Mexican projects.
As part of its program to encourage domestic and international private sector investment in the tourism industry, the government has created the "megaprojects" concept. Coordinated by the National Fund for the Development of Tourism (FONATUR), these projecsts are totally planned, self-contained and located in key destinations. The government supports the develop ment of the infrastructure and then works with the private sector to carry out the development of the overall tourism facilities. During 1990, four megaproject locations received commitments of major investments to be made by Mexican companies which included: the Sidek Group's investment in Marina Ixtapa; DESC Group's investment in Punta Ixtapa; SEC Group and FONATUR's joint venture investment in Puerto Cancun; and RCO Group's investment in Puerto Chahue.
Recently created megaprojects are El Soldado de Cortez, and La Pesca y La Presa de la Amistad which encourage tourism to the lesser developed areas, and Santa Maria de Oraje y Prensa de la Colina, developments which have a cultural and ecological focus. Click here for a summary of the megaproject sites.
The government of Mexico has also invested in large promotional campaigns aimed at increasing the level of visitation. In 1991, the Mixed Promotional Funds (Fondos Mixtos de Promodon) were created in which the federal government and the private sector (i.e., hotels, restaurants and other) work together and contribute capital to promote locations, cities and/or the country.
Prominent among the many institutions lending financial support to the tourism sector is FONATUR, which, in 1990, provided financing for construction of 3,479 new rooms in tourist destinations throughout Mexico. The tourism sector is also supported by BANCOMEXT, Mexico's foreign trade bank, which has provided financial support for the construction of 2,735 lodging units. In 1991, it financed the construction of an additional 3,000 lodging units. In 1992, FONATUR reported $26 million in total investment in the tourism sector and BACOMEXT reported $258 million in investment.
As demonstrated in Table 1, the strongest occupancy levels are achieved in the larger urban cities of Mexico City and Monterrey. In 1992, these cities combined experienced an occupancy rate of 56.6 percent, which is 3.3 percentage points higher than the beach centers, and 6 percentage points higher than the interior tourist cities. However, this 56.6 percent occupancy rate represents a 2A percent decline over 1991. The highest occupancy and percentage increase over 1991 was achieved by Cancun at 74.4 percent occupancy, representing a 5 percent increase over 1991.
Mexico's economic and political policies have been under reform in the past few years. The disposition of state-owned enterprises (SOE's) has played a key role in these reforms. The eight-year program known as "desincorpoarcion", was part of a plan to help the country with its debt burden. Through liquidations, mergers, transfers and sales to the private sector, the government has managed to reduce its governmentheld companies from 1,555 to approximately 280. Sales to the private sector have amounted to approximately 300 companies. A fundamental aspect of Mexico's tourism development strategy is an on-going and extensive sector de-regulation and opening that complements the larger liberalization effort.
The government's commitment to tourism development coupled with the country's natural beauty and his toric attractions, offers a unique blending of ancient cultures, settings and modern conveniences.
While the U.S. remains the largest source of tourists to Mexico, other markets including Europe and Latin America, are becoming increasingly important, and the on-going growth in international arrivals is being encouraged through aggressive promotional programs funded by both the government and the private sector.
The Hotel Valuation Journal