Hospitality Lawyer -- Mexico gets hotter as baby boomers approach retirement
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By Jim Butler, Hotel Lawyer | Author of www.HotelLawBlog.com
26 October 2006
Hotel mixed-use is catching on in developing markets -- particularly Mexico, as I mentioned in a recent posting about Donald Trump building the $200 million Trump Ocean Resort in Baja, Mexico. (See "Mexico is white hot") Some recent statistics confirm that Trump is on to something. More and more Americans are buying or considering second-homes in Mexico, with important implications for the hotel industry.
What fuels the hot Mexico market? How hot is it?
Low costs and improving health care are fueling this growth. Living costs are far less throughout Mexico than in the U.S., and Americans can buy an oceanfront second-home in Baja, about 30 minutes south of San Diego, for about one-third of what it would cost north of the border. Already 1.5 million Americans own homes in Mexico, according to the Mexico Association of Real Estate Professionals. This number will skyrocket to 12 million by 2025, the group predicts, as more baby boomers retire south of the border. And a study last year by the American Association of Retired Professionals ranked Mexico number four among places in the world Americans are moving to retire.
And in case you think that Baja, Mexico is the only hot spot, La Paz was listed among the top 10 retirement destinations in the world by Money magazine in 2003. Mexico's desirability can only improve as seniors become more comfortable with the level of Mexico's healthcare.
What are some of the resorts being developed?
Besides the Trump resort, here are a few others to keep an eye on:
- In Cabo San Lucas, the high-end Capella Pedregal (www.capellacabo.com) will have a 66-room boutique hotel; 31 fractional-ownership units, and 20 single-family homes that are selling for $2.8 million and up. All buyers will share common ownership of a fleet of 61-foot Viking yachts. The units each have two private plunge pools and include the full-time services of a helper who can cook of take care of children.
- In La Paz, a new mixed-use complex is being built by John Fair and Luis Cano, who developed the high-end Esperanza resort in Cabo San Lucas. The complex, still to be named, is expected to include a boutique hotel, several restaurants, a boat club and marina, an 18-hole golf course and a country club with tennis courts and a spa.
- In Rosarito Beach, a new four-lane toll road south from the border provides a fairly safe and direct route to several developments. Look for more details on these projects to be released soon.
What does it mean?
What does all this mean for the hotel industry? This massive population and investment shift creates big "demand generators" for hotel rooms. Where people live, work, retire and build, there is a steady need for hotel rooms, spas, and the kind of amenities I have been discussing recently in my postings on hotel-enhanced mixed-use. (See for example the stories on Hotel Mixed Use, and the hotel mixed-use projects being done by Andre Agassi and Shaquille O'Neal.
Besides the obvious great opportunity for growth just south of the border, there may be many interesting features that will separate the most successful players from the rest of the pack. Only time will tell what the exact mix of amenities will be and who will best employ them. For example, will lifestyle hotel mixed-use become as important in Mexico as it has in the U.S.?
As developers plan hotel mixed-use developments, how well will they identify and meet the key concerns of their target market? How important will onsite health clinics staffed by Western doctors be, or emergency evacuation services to U.S. hospitals? Is there any other way to better satisfy the expectations of this potentially huge market?
I don't know for sure. What if there were a way to encourage more U.S. banks and insurance companies to offer services in Mexico? Would that facilitate sales of residential units in hotel mixed use developments? For example, because many buyers pay cash for their Mexico properties, title and title insurance had been a concern. Buyers felt more comfortable when U.S. companies began offering title insurance in Mexico about a decade ago. (First American and Fidelity are among those that write title insurance in Mexico -- governed by US law and enforceable in US courts.)
What else will add to success for this unique market, both geographically and demographically? We will continue to experiment and find out the answer to that question.
Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than $50 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at firstname.lastname@example.org or 310.201.3526.
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