IL Postcard

How the Experts Gauge if a Town Has What It Takes to Be a Resort

Date: 08/20/2008

Aug. 21, 2008
Campeche, Mexico

Hola Mexico Insiders,

I’ve been in touch recently with a reader who lives in a Mexican beach town that has the potential to become a major resort. Whether it will fulfill that potential, of course, is the multimillion-dollar question.

There’s no denying the appeal of major resorts like Los Cabos, Ixtapa, and Puerto Vallarta, which offer world-class restaurants, luxury shopping, and all-amenities hotels, condos, and homes. These places will always have their audience. For investors, of course, finding—and buying in—the “next” Los Cabos before it’s big means major property appreciation.

Over recent months we’ve talked about some of the ways to tell if an area may be poised to appreciate. One of these is whether the government is investing heavily in infrastructure improvements. Here, courtesy of FONATUR, is a related measure: the number of hotel rooms in an area.

FONATUR, Mexico’s tourism development agency, makes its living finding and developing the Next Big Thing. It guides the government investment in roads, airports, and other infrastructure that make a destination attractive to private investors—who in turn bring all those amenities that tourists and expats love.

FONATUR has had some spectacular successes, including Cancún, Los Cabos, and Ixtapa. And with those resorts it has found that the magic number—the point at which a tourist area is self-sustaining—is about 5,000 hotel rooms. At that point, private investors have enough at stake that they’ll keep development going.

So if you see that the Mexican government is improving infrastructure in a potential tourist area, also check to see how many quality hotels there are—and whether others are planned. It’s no guarantee that the area will take off, of course, but it’s a healthy sign.

My reader thinks that his town is poised for major resort status (we’ll cover it in an upcoming issue of Mexico Insider), but he’s fine whatever happens. He’s happy living in his beachfront home, which he bought at an excellent price. He enjoys the amenities his town offers now—though he probably wouldn’t mind a few high-end shops if they opened. And he can expect his property to appreciate even if his town never becomes a major resort. If it does, and his property values skyrocket, that’s just icing on the cake.

It’s not a bad position to be in.

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Best Regards,

Glynna Prentice
Editor, Mexico Insider

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