Editor's notes: Quotes in this story were originally spoken in Spanish and come via a live translation provided by the conference.
MEXICO CITY — Hotel brand executives are fretting over how much runway they have left for growth in Mexico's resort markets, but following a prolonged period of strong improvement in leisure travel demand, they are generally optimistic about their hotel portfolios across the country.
Speaking at HVS' Mexico Hotel and Tourism Investment Conference 2023, Federico Moreno-Nickerson, vice president of development in Latin America for Hyatt's Inclusive Collection, said leisure-driven markets such as Mazatlan and Los Cabos have done a great job increasing inbound flights and marketing to guests in new source markets, which open up new avenues for growth.
Demand is coming from new markets such as Seoul in South Korea and Japan, he said during the "Drilling Down on Hotel Supply and Demand — Leisure Travel" panel.
Moreno-Nickerson said strong international airlift is "fundamental" to the long-term growth trends of any leisure-driven Mexican market, although domestic travel trends have been strong as well.
Brands across the board seem more invested in growing all-inclusive resorts in Mexican markets, and Germán Ongay, regional vice president of franchise sales and development in Mexico for IHG Hotels & Resorts, said it's likely to be the primary model for resorts going forward.
"I see a bunch of potential," he said. "I think demand increases day after day for this kind of product."
Guillermo Martínez, chief financial officer for Arriva Hospitality Group, said there continue to be opportunities across the board, with some markets more likely to support traditional European plan hotels, while others are more likely to sustain all-inclusives.
"It changes from destination to destination," he said.
Martínez noted guests at all-inclusive properties have different expectations, looking for a higher level of experience.
"We have more and more activities [at the hotels] and want to build that emotional connection with guests," he said.
Hilton is one of the brands that has grown its all-inclusive presence in Mexico significantly in recent years, and Mario Carbone, Hilton's managing director of development for Mexico and Central America, said in part that is due to an era in which traditional brands don't have to all be identical.
"What we chose to do is use our traditional brands and adapt them to the all-inclusive model to benefit from the recognition and presence they already have," he said. "Years ago it was all about consistency. ... Now if you travel to different parts of the world, travelers want some differences. Now they have to have more relevant design for the destination."
Moreno-Nickerson said the one cloud on the horizon for Mexico's leisure resorts is increasing costs from labor, but those cost increases have been surpassed by rate increases, so profit margins have continued to grow.
Martínez agreed that labor is the most significant issue, but said availability and quality are bigger problems than cost.
"The challenge is selection, training and retention," he said.
Moreno-Nickerson said many of the growing resort markets lack the infrastructure to support a growing labor base, which will be an issue as both demand and service expectations grow.
"We talk about infrastructure, but we never speak about housing near hotels and the need for social infrastructure like housing, public schools and daycares, even," he said. "It's a big problem, and a lot of people can't do it with the cost of transportation. It's a serious structural problem."
Overall, the panel was far more optimistic than pessimistic, though.
"The tourism potential here is huge," Martínez said. "It's a wonderful country with beautiful people working in the industry, and the resort sector will continue to be a big" driver of growth.