How to Identify New Markets for Hotel Development

Celestun Yucatan

Thanks to the global growth of the local product and the stable expansion of tourism to new and emerging markets, it is possible to maintain an extended cycle of hotel investment performance extremely positive. While hotel investors focus their development projects on waterfront destinations in high demand in the Western Hemisphere, such as the Caribbean and Mexico, the All-Inclusive sector also continues to grow in popularity around the world.

Following this model, some resorts have already started operating in destinations such as Korea and Japan, and Apple Leisure Group CEO Alex Zozaya recently shared that the company is considering expanding its presence to Thailand, as part of its growth strategy to long term.

The existing opportunities invite hoteliers to consider the possibility of leaving their comfort zone or current geographical portfolio, and identify new markets in which to invest in two ways: acquisition of land facing the sea, ready to build; or existing properties – and with cash flow – that require a brand conversion / new hotel management.

Before investing, it is essential that both parties fully understand the current situation of the destination, its attributes, limitations, prospects, and potential risks.

To prevent the impact of any of these elements, it is important to analyze the macroeconomic environment, possible operational and labor challenges, potential investment risk-reward index of the project, key tourism and hospitality indicators, as well as any new hotel development (s) in the region.

There are several factors that affect the viability of a new market. That is why it is key to partner with a company capable of accurately performing this market analysis.

On the other hand, when you invest in this type of project/resort, an integral part of the acquisition decision process is based on the investor’s experience, which ultimately determines your risk tolerance and eliminates, or increases, the potential options in New markets.

It is important to understand that the level of capital required in the hotel segment is significant; Therefore, investors should also evaluate a comparative analysis of the destination where they consider investing vs. destinations already established in the All Inclusive segment, such as Mexico, Dominican Republic or Jamaica.

At Apple Leisure Group, every investment opportunity in new markets is evaluated, measured and qualified using existing and well-established destinations as a reference.

We use an investment matrix developed by us, consisting of several categories, within which dozens of individual key market attributes are analyzed.

In addition to generating a quantitative analysis, our intention is to provide our investors with a qualitative analysis that includes a clear assessment of each market attribute, a detailed interpretation of how these unique attributes are quantitatively compared and, above all, explain why these attributes make Destiny is more or less attractive.

To explain the above more clearly, we will use as an example the analysis of one of the main categories, Flights, and Connectivity, which describes the key factors analyzed during the Apple Leisure Group’s patented market evaluation process.

Flights and Connectivity

Foreign travelers interested in beach destinations today have access to a wider range of options. ALG distribution companies (Apple Vacations, Travel Impressions, and tend to focus on the American traveler as it represents about 50 percent of visits to the country and 58 percent of international visits to Mexico (Source: Caribbean Tourism Organization).

According to a national survey of adult travelers conducted by AARP (2018 Travel Trends), the Baby Boomers segment anticipates making four or five leisure trips, and almost $ 6,400 in travel expenses. On the other hand, it is estimated that the Millennial generation will spend about $ 6,800 on vacations.

Our research also shows that today, factors such as previous experience, price and proximity are more likely to influence the selection of the destination, above cultural attractions and community attractions. Through this analysis of traveler behavior, we know that very few begin the planning process with a blank list; They usually have some destinations in mind before beginning the planning process.

It is also important to consider the following factors:

Operators and Cost

Airlines (current and past) with flights to the destination, including a possible increase in existing frequencies, either by increasing flights in high season, assigning larger aircraft, or changes in airfares.

The viability and future strength of a destination depend on the trends that affect the factor of occupation of places.

Connectivity and flight time

Is the traveler willing to travel long distances to enjoy the destination and, if so, are there direct flights or only flights with connection? Is air transportation sufficient to reach the destination or is another type of transportation required? The reason why some travelers will choose another destination.

Travel restrictions

The need for a tourist visa, its cost, and ease of processing constitute a great inconvenience and possible limitation for the development of a new destination.

Intelligence Forecast and Trends

What type of information is available to understand the size and scale of available air connectivity? For example, in the Caribbean, the air service landscape is extremely competitive, leading to destinations to compete for flight and passenger service.

In the last 24 months, the Caribbean and the Mexican Caribbean have been negatively impacted by a series of weather events, including two consecutive hurricanes that caused much physical damage to specific islands, creating the misconception that the entire Caribbean region had been affected.

While some believe that the road to recovery is long, it is important to keep in mind that, regardless of what has happened, these two regions have remained resilient despite natural disasters and other events.

Opportunities exist, and the key is to have the right partner to serve as a guide during the process. As our Executive Vice President and Director of Strategy, Javier Coll, says “through the inevitable economic and geopolitical fluctuations that regularly affect travel and tourism, the most profitable and enduring properties have been those guided by owners and management teams with knowledge real market. ”

Source: blog.algdesarrollo

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