7 August 2008 742 views One Comment

If you want the best Mexico can offer, than Cancun is the premier location in the country. Cancun is the destination of choice for millions of travelers each year, and has grown to the number one destination for international travelers in all of Latin America [1]. This is a reflection of the tremendous demand and growth since 1974 when Fonatur, Mexico’s tourism agency, targeted Cancun as a potential top tourism destinations. Since that time Cancun has outgrown all other areas to become the tourism capital of Mexico with a population of roughly 800,000, approximately 27,000 hotel rooms and billions of dollars of property.

The critics have been saying Cancun is peaked out for years, and yet it continues to grow. Demand has been sustained and development has expanded south where property values have been positively affected by the Cancun effect. Hotel occupancy hovers around 80% in the spring and summer months according to the Hotel Association of Cancun, which is remarkable given that the hotel zone stretches for 18 miles of coastline. If you think there’s no room left for growth, you have to look no further than Hawaii which sits on roughly the same latitude line as Cancun. Just because an area is crowed does not mean property values can not grow - actually the opposite is true because of the scarcity of real estate. Cancun has several geographic advantages such as proximity to the east coast of the US, its location in a tropical region on the Caribbean sea, the proximity to Mayan ruins, and remarkable geologic formations like the lagoons and caverns.

Data from Association of Hotels in Cancun

Lifestyle

If your ideal lifestyle includes tropical weather, a beautiful environment, and a lively social atmosphere than few places on earth can compete with Cancun, Mexico. Cancun is built around tourists, so there are opportunities to do everything you can associate with a tropical vacation – snorkeling, fiestas, excursions to Mayan ruins, shopping, world class golfing, etc. The 18 mile hotel strip was designed so that tourists would never have to leave. Cancun is a world-renown culinary center with many renown chefs according to Fonatur. You can taste food from a different restaurant every day for over a year, with over 500 restaurants along the hotel strip. There are thousands of species of marine life that you can observe, or just go to the aquarium to swim with the sharks. If a permanent tourist lifestyle does not appeal to you, you can find beachfront properties south of Cancun that are quieter and less expensive.

If you wish to travel back to the states it is takes only about 2 ½ hours to fly direct from Cancun to Atlanta or just over an hour and a half from Cancun to Miami. Cancun is a great basecamp for all kinds of adventures in the Yucatan region which can include archeology excursions to the Mayan ruins, spelunking in the lagoons and scuba diving at the nearby Great coral reef. The Yucatan peninsula offers some of the most diverse land features from lagoons to coral reefs, and a wide range of sea creatures that inhabit the Caribbean. It is just a short 42 mile car ride south to the quiet fishing town Playa del Carmen, and a short ferry ride across the Caribbean to Isla Mujeres. Golfers can get their game on at the Pok-Ta-Pok course, Hilton Cancun Golf Club , The Golf Club at Moon Palace , The Golf Club at Playacar in Playa del Carmen, and there are two new golf courses on the way. If you like to be active and explore, it will take you a while to run out of new things to do.

Infrastructure

With $3 billion spent in 2007 by tourists in Cancun, the government can afford to maintain a quality infrastructure to include water, police, sanitation, electricity, and roads. Ongoing infrastructure improvements should occur as Mexico seeks to highlight it’s prized jewel. Moody’s gave the Yucatan peninsula an investment grade of A2, which will help attract more foreign direct investment into infrastructure improvements. Cancun should resemble world class cities such as Dubai, in which the city far outpaces the rest of the region in infrastructure advancements.

The tap water is generally not safe in Mexico due to the water source being near the ground where it is easily contaminated, however purification facilities can eliminate this problem for those lucky enough to have this feature. Fresh water is a scarce resource in Mexico is a concern for high density locations. The quality of the sewer system is heavily tested by the huge population and proximity to the beach and it worsens as you leave the hotel zone.

Cancun has a very busy international airport with flights taking off for the US several times each hour. In 2007, 100 million dollars was invested into adding a third terminal and a record 11 million passengers passed through. You can take Highway 307 down the cost to less populated and less expensive locations like Playa del Carmen and Tulum. Highway 307 stretches all the way down the Yucatan peninsula to the southern border of Belize. Due to the large tourist population, the bus system is extensive and can get you almost anywhere you want to go. There are several supermarkets throughout Cancun, including American chains like Costco and Walmart. Walmart is the dominant retailer in Mexico, and with almost 900 stores, and since they are known for their top-notch logistics systems, you have no worries of being without any goods that you want or need.

Outlook/Projections

As the tourism capital of Latin America, Cancun will generate significant returns on your investment for the following reasons. According to United Nations World Tourism Organization, international tourism is expected to double from 800 million in 2008 to 1.6 billion in 2020. This will lead to continued increases in the price of rental units in Cancun but with the consequence of more crowding. Even with an 18 mile hotel zone, occupation rates exceed 80% in some months, and as available beach real estate supply reaches its limit, values could skyrocket. As the tourism capital of Latin America, Cancun will continue to receive volumes of foreign direct investment, which will also favor appreciation. Cancun does require a higher level of investment because of the current market values and because Cancun is more mature than most other markets in Mexico. But Cancun also provides the benefit of strong infrastructure that developers would look for in a new development. Investment in immature markets, have the potential to grow at a faster rate, but they also have the potential to die if the government stops investing in development of their infrastructure. Cancun is a safe bet because it is an established destination with dependable cash flows for rentals.

This could also mean tremendous opportunities in the surrounding areas such as Carmen del Playa, that may benefit from overflows from Cancun. If you own a condo near the beach you should be able to generate good revenues by having a property management company rent it out for you while it continues to appreciate. According to Fonatur, they intend to further invest in tourism facilities that will complement the already existing offerings to include additional golf courses and marinas in Puerto Cancun and Cozumel.

Several variables such as baby boomer retirement, growth of upper class in Mexico and other emerging countries, and global demand for tourism are favorable to a strong market in the future. Cancun is considered an international tourist destination, and home prices are lower relative to alternatives in this class such as Hawaii and Dubai. A good segment of the 76 million US baby boomer retirees will be attracted to living in an established destination with an abundance of activities to keep them busy. The main Cancun beachfront is not likely to appreciate as strongly as less developed areas of Mexico, but for many retirees, the benefits of living in an established vacation spot may outweigh the lower return on investment from property appreciation. There is a lot of room for development along the coast to the south of Cancun in areas such as Playa del Carmen and Tulum for those interested in stronger opportunity for investment growth and more affordable real estate.

Sources:

1. http://www.ahqr.com.mx/ingles/bien.php

2. http://www.asur.com.mx/asur/ingles/aeropuertos/cancun/cancun.asp

3. http://www.fonatur.gob.mx/es/Des_cancun/des-cancun.asp

4. http://www.visitmexico.com/wb/Visitmexico/Visi_Cancun

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