Tourists too scared to visit Mexico

The famous resort of Cancun, Mexico's top destination for tourists, is "saturated" with hotels

The famous resort of Cancun, Mexico's top destination for tourists, is "saturated" with hotels

Published Mar 11, 2011

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Mexico's brutal drugs war has scared off many tourists but investors in the multi-billion dollar industry are pouring funds into the country, believing the violence will ease off in a few years.

Killing sprees in resort cities like Acapulco lead to cancelled flights and empty hotel rooms within days, executives say, and cruise operators have cut back on some stops in Mexican resorts.

Fewer US college revellers are expected in Mexico for this year's Spring Break after Texas officials last week warned co-eds to stay away from beach destinations like Cancun.

“Our safety message is simple: avoid travelling to Mexico during Spring Break, and stay alive,” the state's public safety agency said in a message that captured the prevailing anxiety.

Foreign visitors spent $11.9 billion last year, up just 5 percent from 2009 when the global economic crisis took its toll and down more than 10 percent from $13.3 billion in 2008.

Still, investors continue to make long-term bets on Mexico's famed beaches, picturesque colonial towns and other tourist attractions.

They point out that the violence is usually far away from tourist areas even when it hits cities like Acapulco or Cancun, and many expect an end to the drugs war at some stage, or at least a sharp decline in the death toll.

“There is not a single owner in our system that thinks this is going to drag on for the long haul,” said Jim Anhut, Americas development chief for InterContinental Hotel Group, the world's top hotelier.

IHG's franchisees have committed to invest $500 million in 47 new Mexican hotels with 5,000 rooms in the next few years.

Private sector investment in tourism hit $3.5 billion last year, a 19 percent bump from 2009.

More than 36,000 people have been killed since President Felipe Calderon launched his army-led drive to crush the drug cartels in late 2006.

Fierce shoot-outs and tortured and headless bodies dumped on streets or left hanging from bridges have brought terrible headlines for an industry that is Mexico's No. 3 source of foreign currency after migrants' remittances and oil exports.

Even if foreigners are rarely caught up in the violence, hotel executives acknowledge it is hurting business.

“It definitely has been impacted,” said Alinio Azevedo, development director for Four Seasons in Latin America. “We know that because people that cancel mention it. It's pretty much what you would hear from all properties that are for leisure.”

The search for popular resorts of the future continues, however.

Even in the northern state of Sinaloa, which is home to the most powerful cartel and has been scarred by years of turf wars, a new mega-resort is under construction. It lies about 120km south of the port city of Mazatlan and will feature golf courses, marinas and over 44,000 hotel rooms.

That kind of long-term planning has investors looking past the gruesome bloodshed of the last four years to develop a new generation of tourism spots.

Michel Montant, vice-president for operations at Mexican hotel chain Grupo Posadas, says occupancy rates were down by 1 percent last year and that much of the drop can be chalked up to the drugs war, but he thinks the conflict will lose some of its intensity.

“I am expecting things to start getting under control in no more than three years,” said Montant, whose group includes 96 hotels in Mexico.

“If you decide to develop a hotel, you don't start tomorrow,” IHG's Anhut said. “The development process is a two to three year process from the day that you say you want to do something. By the time you build it, it's another year or so.”

Calderon's government says tourism supports 9 percent of gross domestic product and provides about 7.5 million jobs, directly and indirectly.

The bloodletting has hurt his conservative National Action Party, or PAN, and it is lagging the opposition in opinion polls ahead of a presidential election next year.

If the PAN loses the 2012 vote, the next government could pursue a less confrontational line with the cartels in the hope of reducing the violence, analysts say.

While investors are confident of the tourism industry's future health, near-term safety fears must still be allayed.

Carnival, the world's largest cruise operator, recently announced that security worries were prompting it to end stops in Mazatlan, on the Pacific coast.

“Although there have been no incidents involving cruise passengers, the safety of our guests and crew is our number one priority,” the company said in a statement last week. - Reuters

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