HOLLYWOOD, Florida — The investment strategy for Mexico's largest real estate investment trust FibraHotel is to grow while reducing the number of hotels in its portfolio.
The company currently owns 86 hotels in Mexico, but that number is likely to be lower over the next five years, Chief Investment Officer Guillermo Bravo said in an interview during the Hotel Opportunities Latin America conference.
"What we've tried to do is to recycle assets to get out of some of the smaller business hotels that have lower barriers to entry, and we've tried to focus more on larger, all-inclusive properties," he said.
Whereas before, the number of hotels was an important component of the company's growth, he said, "now we're focused on the growth of [earnings before interest, taxes, depreciation and amortization] per room."
He added that the change in focus is due in part to clarity brought by the COVID-19 pandemic.
"One of the learnings is that we should focus on where we add the most value," he said. "Where we add the most value is probably the more complex projects, larger projects, because you spend a similar amount of time managing a 200-room luxury hotel as you spend on a 100-room limited service, and the value you can extract from asset management in those two is substantially different."
Still, he said, FibraHotel knows the value of a diverse portfolio.
"It doesn't mean that we're going to go all into all-inclusive. We don't like the extremes. What we love about our portfolio is our diversification," Bravo said. "When you have all of your eggs in one basket, it's difficult."
Environmental, corporate and social governance is also a growing concern for the company, which has invested in several key sustainability initiatives, he said.
"It's not a choice, but it's a reality, and we've been trying to get ahead of the curve on that," he said. "We have our first green credit line that has a commitment to reduce electricity at our select-service hotels over the next few years. We've started down that path, and I think it's something that's going to be more important and relevant in the future. We have the strictest commitment to be very aggressive in reducing emissions and being more efficient."
Bravo said growing interest in all-inclusive resorts among the major hotel brand companies is confirmation for FibraHotel, which first became a stakeholder in the segment in 2017.
"It was a really good time because right now it's balancing our business hotel expansion. In that sense, we've continued to build those types of hotels. We opened an urban resort in San Miguel de Allende. We partnered with Playa Hotels to have a Hilton brand with a managed property in Playa del Carmen," he said.
He said he expects more acquisitions and consolidation in the all-inclusive space — like the deal announced Aug. 16 for Hyatt Hotels Corp. to buy Apple Leisure Group and its hotel management division AMResorts.
"There's been consolidation in the industry for probably a decade or even more, and I think that they probably have run out of places to consolidate. All-inclusive is one of the ones that haven't really started this sort of consolidation," he said.
"There's clearly benefits of scale in terms of systems, distribution, loyalty members and all of that. There's a lot of synergy to achieve in that sense. And I think [brands] also realize they've been slower to get in the boat. It's a different business — operating an all-inclusive hotel is very different from operating [a traditional hotel], a smaller hotel or a business hotel. So that expertise, that know-how is also important to them. In the end, the guys who will do it the best are the ones that have been doing it for 20 years. They understand there's value in that."
Bravo said scale has helped FibraHotel manage through the pandemic, allowing the company to consolidate some hotel operations in submarkets where it had more than one property. At the height of the pandemic, the company closed all but one of its 86 hotels; as of August, only two hotels remained temporarily closed.
"The pandemic is still new, to be honest. It's been a watershed moment for the industry, especially for Mexico and Latin America, because we haven't received as much support from the government. We've had to really organized between the private sector and some of the local government to be able to get the best of what [demand] there is," he said.
As a result of a lack of government aid, his hotels in Mexico haven't faced the same issues with labor as hotels have in the U.S. and other countries. It also helps that in Mexico, tourism and hospitality continue to represent highly regarded and sought-after careers.
"Fortunately or unfortunately, the government provided almost no support to people, so it's either you go to work ... or you're not going to get a paycheck and you might not eat. It wasn't optional. For us, it was very important to make sure that we had the right protective equipment for all of these people so they were comfortable they were going to be taken care of," he said. "But if you look at the employment in Mexico, tourism is still a very good opportunity. People see it as a career, as a way to move up."
Bravo said he continues to recognize great potential for Mexico as a tourist destination, and he's excited for the recovery of its hotel industry.
"I don't think we're through [the pandemic] yet. Even in the industry, there's a lot of hurdles that we need to cross, but I think the potential for the country is phenomenal," he said. "We have great people, great destinations in leisure and business. The best investments we can make are in our own country, our own people."