;

Huatulco - Mexico’s Next Hot Spot?

Enticing beaches, tropical forests, and a laid-back atmosphere make Huatulco a paradise, but one where hotel occupancy has been only modest. Improvements to access by land, sea, and air aim to make it easier for tourists to arrive.

Founded in 1985, Huatulco is one of the original Integrally Planned Resorts created by Mexico’s National Trust for Tourism Promotion (FONATUR). The resort development is situated on the Pacific Coast, approximately 172 miles from the state capital Oaxaca and 474 miles southeast of Mexico City. The site was originally chosen based on the natural beauty of its nine bays (the Bahias de Huatulco) and numerous small coves that stretch along 16 miles of coastline, inclusive of 36 white sandy beaches. The area also boasts mountains and valleys irrigated by the Coyula, San Agustín, and Copalita Rivers, as well as the Bahias de Huatulco National Park, a protected area covering 29,368 acres and nurturing some 9,000 plant species of the lowland tropical forest.

Despite its abundant charms, Huatulco has yet to reach its full potential, unlike Cancún, FONATUR’s first and by far most successful Integrally Planned Resort. Huatulco’s lodging options currently comprise approximately 2,600 rooms in various categories, a relatively low rooms supply that is set to expand dramatically in the next decade. While there are a handful of branded properties affiliated with very well-respected chains based in the United States, Spain, and Mexico, most of Huatulco’s hotels are small independently owned-and-operated properties.

The following table illustrates the market-wide occupancy levels attained in each of the five original FONATUR resorts since 2004.

Table 1: Occupancy Trends of the Integrally Planned Resorts

Occupancy
YTD - November
Resort 2004 2005 2006 2007 2007 2008
Huatulco 43.1 48.5 51.5 51.1 50.7 50.3
Cancún 77.2 77.3 75.1 71.9 71.9 72.3
Ixtapa/Zihuatanejo 60.2 62.2 67.7 64.8 64.7 56.2
Loreto 37.6 42.0 54.8 65.6 66.5 56.9
Los Cabos 56.1 64.0 69.3 65.2 66.0 58.9

Source: Secretaria de Turismo de Mexico (SECTUR)


These figures show that throughout most of the illustrated period, Huatulco’s occupancy level was significantly lower than that of the other resorts. What’s behind this discrepancy? It’s not that Huatulco lacks any inherent advantages; the answer rather lies in a corollary to the old real estate axiom regarding location, namely access, access, access. Huatulco has struggled with a Catch-22 common to many nascent destinations. Without good airlift, it is difficult to attract demand. Without demand, it is difficult to attract more airlift.

The following table shows the number of passengers arriving in Huatulco on international, domestic, and charter flights since 1997.

Table 2: Airport Passenger Arrivals

Year Int'l Flight Arrivals % Change Avg. Annual Change* Domestic Flight Arrivals % Change Avg. Annual Change* Charter Passengers % Change Avg. Annual Change*
1997 4,795 —   —   96,028 —   —   51,545 —   —  
1998 5,603 16.9 16.9 95,374 (0.7) (0.7) 49,686 (3.6) (3.6)
1999 6,894 23.0 19.9 104,429 9.5 4.3 46,397 (6.6) (5.1)
2000 0 (100.0) (100.0) 96,781 (7.3) 0.3 66,722 43.8 9.0
2001 0 —   (100.0) 120,737 24.8 5.9 34,087 (48.9) (9.8)
2002 228 —   (45.6) 108,132 (10.4) 2.4 22,858 (32.9) (15.0)
2003 321 40.8 (36.3) 93,142 (13.9) (0.5) 29,341 28.4 (9.0)
2004 0 (100.0) (100.0) 87,173 (6.4) (1.4) 41,305 40.8 (3.1)
2005 3,315 —   (4.5) 106,811 22.5 1.3 38,425 (7.0) (3.6)
2006 4,513 36.1 (0.7) 123,838 15.9 2.9 51,713 34.6 0.0
2007 5,530 22.5 1.4 131,120 5.9 3.2 44,864 (13.2) (1.4)
Year-to-Date through October
2007 4,513 —   —   112,952 —   —   31,381 —   —  
2008 4,781 5.9 —   95,703 (15.3) —   40,616 29.4 —  

* Average annual compounded change since 1997
Source: Secretaria de Turismo de Mexico (SECTUR)


While Huatulco is well served by a number of Mexico-based carriers with flights from Mexico City, Toluca, and Oaxaca, Continental Airlines is currently the only major U.S.-based carrier that offers regularly scheduled service year-round, with a non-stop flight from Houston. Other international carriers operate flights on a seasonal basis. However, air service to Huatulco may soon improve, as FONATUR and other governmental and private agencies have initiated a program to re-launch the destination and promote Huatulco as a world-class beach resort.

At the forefront of this initiative is Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASUR), the first privatized airport group in Mexico. ASUR operates Cancun Airport and eight others in the southeast of Mexico, including the Huatulco Airport. In October of 2008, ASUR announced that it had purchased 321 acres of land from FONATUR for $21 million, with the mandate to create at least 1,300 additional hotel rooms in Huatulco within the next four years. FONATUR’s master plan calls for an eventual 5,000 rooms, as well as a variety of residential projects, all developed with the goal of maintaining the integrity of Huatulco’s natural environment. For four consecutive years, Huatulco has received the Destination Sustainability Certificate granted by the international company Green Globe.

To further improve access to Huatulco, there are plans to widen the Puerto Escondido-Huatulco highway, thereby reducing the driving time between Oaxaca and Huatulco from 6 ½ hours to 3 ½ hours. Other area roadway improvements are also in the works. The Santa Cruz cruise ship pier began operations in 2003 and now receives over 50 ships per year. Additional plans to improve the tourism infrastructure include enhancements to the Marina Chahué district; the construction of new golf courses, shopping centers, and nightlife zones; and the development of ecological parks and archaeological sites.

Huatulco already benefits from spectacular natural beauty, a rich cultural heritage, and a solid infrastructure base. With the anticipated improvements to access and enhanced tourism attractions, it could soon become one of Mexico’s hottest destinations.

HVS Mexico City provides consulting and appraisals for hotel and resort projects throughout Mexico, Central America, and the Caribbean. Please visit us at www.hvs.com/Offices/Mexico to learn what we can do for you.

0 Comments

Submit a Question or Comment