Mexico Continues to Grow as a Tourist Destination

Mexico's Ministry of Tourism recently reported increases in hotel occupancy in three key regions. Riviera May occupancy grew by 3.1 percent, which was dwarfed by Cancun's 8.7 percent growth. And overshadowing both was Puerto Vallarta's 10.6 percent rise. The largest number of guests came from the United States, with Canada second. Perhaps the most instructive bit of news is that it is not just this hemisphere that has contributed in the expansion. Visitor growth was also seen coming out of Russia, the UK, China, France, Germany, Italy, Australia and Japan. To better make the point, consider this: The 2012 Conde Nast Gold List includes 33 properties in Mexico, the most ever for the country.

We've witnessed this ourselves at Greenberg Traurig. Last year, our hospitality and gaming teams had an opportunity to advise Hard Rock in multiple transactions that resulted in a new "brand" within the Hard Rock universe: The Hard Rock All Inclusive Resort. Having previously assisted with the Hard Rock Hotel & Casino Punta Cana, we went on to document the agreements with Palace Resorts LLC to re-imagine Palace Resorts properties in Cancun, Puerto Vallarta and Riviera Maya into Hard Rock Hotels. To offer some idea of magnitude and scope, Hard Rock Cancun will feature 601 guestrooms, numerous restaurants, bars and lounges, a spa, and meeting facilities including a 16,408-sq.-ft. convention center. The Puerto Vallarta property will have 348 guestrooms and a full range of amenities. And the Riviera Maya destination, which combines two adjacent properties, will offer nearly 1,300 rooms.

Mexico remains a leading destination for travelers. The country's rich history, culture and reputation for quality hospitality -- i.e., its brand -- have proved vital in this time of social and economic unrest. We expect that hotel owners and operators will keep a keen eye on Mexican riches yet to be explored.

Something's Gotta Give - Hotel Management Agreements Continue to Spark Interest

My unofficial assessment is that one of the best  breakout sessions, as to both content and attendance, at the 34th Annual New York University International Hospitality Industry Investment Conference was the Hotel Management Agreement panel. The panel offered an honest and in-depth assessment of most of the key hotel management agreement issues confronted in the owner-operator negotiation process. The panel provided a clear point and counterpoint from the perspective of the brands on the panel (Allison Reid of Starwood and Noah Silverman of Marriott), as well as from the owner’s point of view, provided by Greenberg Traurig’s Michael Sullivan.  

There was no big surprise or bombshell.  But there was an interesting conversation indicating that the brands are aware that hotel owners today include private equity and similar concerns.  These entities might own the hotel for a period of 5 to 7 years, which is much shorter than the term of the typical full service hotel management agreement.  Brands are now aware that something might have to "give" to keep those deals going. That "something" might include an owner’s right to terminate the management agreement upon a sale of the hotel following the expiration of a lockout period and payment of a termination fee. Certainly, the price of the right to terminate upon sale might be high, but the thought that any of the major brands might consider the concept is something to note.

What's in a (Brand) Name?

HospBlog_brand_060911.jpgProfit? The ultimate question faced by hotel owners is location and brand. The financial “bottom line” can often be directly affected by the name recognition and customer loyalty associated with certain hotel brands. The costs associated with branding need to be considered in light of what the brand name can provide directly to the property.

One of our lessons learned is that a primary driver of economic stability for many properties, particularly in difficult times, is customer loyalty to a brand. While statistics showed that both business and leisure travel suffered greatly during the recent economic downturn, we also saw that customers were often willing to go the extra mile to frequent branded properties at greater costs. Many owners and operators were creative and maintained customer loyalty and brand consistency.

Although brand standards must be preserved even in a depressed economy, the right brand can bring a ready-made customer base and sophisticated distribution systems to bear and take advantage of whatever can be gained in the market. While there are many brands to choose from within many target market segments, each brand, whether full or limited service, offers variations within most segment areas. This appeals to both owners and the guests.

As the economy rebounds, the relevance of a brand will make itself known as a potential catalyst of increased revenues for the property. Branding is definitely not a one size fits all, but branding or simply rebranding has proven power when one chooses wisely.