REAL ESTATE HOTELIER IN THE MAYAN RIVIERA
The Mayan Riviera gained special relevance for the real estate sector in recent years, triggering the so-called “real estate boom”, where investing in an internationally known tourist destination guarantees a safe investment. The money invested is tangible, you invest in a physical asset that generates high profitability based on hotel occupancy.
Hotel occupancy in the Mexican southeast have been sustainable after the second half of 2020, with a recovery of the tourism industry of more than 70% in the second quarter of 2021. A factor of great relevance for the real estate investment.
* Currently, operations are only 29% below the figures for 2019. However, there are other leading countries such as France and Spain that are still 80% below their usual tourist flow.
What is ROI?
The return on investment (ROI) is a metric to know the profit of any investment. With the ROI it is possible to set up plans and goals based on tangible results to understand whether or not it is worth investing.
The formula generally used to calculate the ROI subtracts the investment profit from the investment cost and divides it by the investment cost. The calculation will vary depending on the business model, either by leasing and / or selling after a period of appreciation of the property.
To calculate the “GROSS ROI on real estate rentals”, the estimated annual income must be divided by the amount of the initial investment and then multiplied by 100.
To calculate the “NET ROI” other aspects such as operating expenses, maintenance, repair, taxes, credits, among others, must be considered and subtracted.
Factors that affect ROI?
• LOCATION of the property.
The destination directly impacts the profitability of the real estate investment. The Mayan Riviera is a highly safe destination to invest as a world renowned tourist destination with a high degree of high occupancy of the properties throughout the year, influencing directly in your return on investment.
• INFRASTRUCTURE AND PUBLIC SERVICES
The “real estate boom in certain areas” can be profitable in the short term, but in the long term the profitability of the property is at risk as there are no public services such as drinking water, roads, sewers, garbage collection, etc., growing along the boom on construction.
When choosing to purchase a property, its proximity to an international airport and its connection by road are also relevant in order to guarantee accessibility for tourists or guests.
• CONVENTIONAL ADMINISTRATION THROUGH LOCAL PROPERTY MANAGERS.
The hotel real estate business model called “condo hotel” has generated a greater return on investment in properties that are managed by professionals with experienced operators at an international level.
However, many complexes under the condo-hotel model are small, less than 80 rooms, which has caused them to be operated directly by local property managers with guest recruitment mainly through AIRBNB, which has caused low hotel occupancies. especially in the low season months, and relatively low hotel rates per night. As a consequence, the conventional management model usually achieves an ROI of only 3-4% per year on the purchase price of the property, as occurs in most of the Playa del Carmen and Tulum developments.
ADMINISTRATION UNDER AN INTERNATIONAL HOTEL BRAND.
Undoubtedly, the brand and category of the hotel, especially if it is through a renowned international brand, are factors that trigger real estate profitability with a greater hotel occupancy and higher rates per night.
In a superior luxury complex it is possible to increase the occupancy of the rooms (your residence or apartment) throughout the year, even in low season months, by having amenities such as an Expo Center, facilities for weddings and a medical center where medical tourism is encouraged. This is how large international hotel brands under the condo hotel model achieve high profitability of hotel operation, above 10% per year, to which should be added the annual increase in the value of the property to bring it up to 20% per year!
In our next weekly blogs you can find more useful information for investors who are interested in the real estate market.
