Apple Leisure Group postpones up to US $600 million in hotel investments

The travel and hospitality conglomerate Apple Leisure Group announced on Friday that it has put investments worth between US $500 and $600 million on hold due to a range of factors, including a lack of tourism promotion by the federal government and lower visitor numbers from the United States.

CEO Alejandro Zozaya told a press conference that four or five projects have been “put on pause,” explaining that the company has the land and necessary permits to build new hotels but for now construction won’t go ahead.

He said the government’s decision to disband the Tourism Promotion Council (CPTM) and the consequent lack of marketing of Mexico abroad resulted in lower profits for the hotel industry this year.

“Hotels weren’t as profitable in 2019 as in 2018 and 2017,” Zozaya said.

“. . . The closure of the CPTM has hit us, it’s one of the factors that has hurt Mexico. Tourism from the United States has decreased,” Zozaya said.

He said that another factor in Apple’s decision was that the supply of hotel rooms is growing faster than demand.

“When demand doesn’t grow at the same pace as supply, [room] rates go down, but operational costs haven’t fallen,” Zozaya said.

The strength of the US dollar and higher electricity rates have in fact caused them to rise, he said.

The CEO charged that tourism hasn’t been a priority for federal governments for many years even though the industry contributes to 8% of GDP. However, Zozaya added that the private sector needs to do a better job of informing the government about the importance of tourism to the economy.

To that end, representatives of the sector have met with officials from the Tourism and Foreign Affairs secretariats as well as the president’s chief of staff, Alfonso Romo.

“We’re looking for a joint effort to promote tourism in Mexico and we see some strong potential in the collection of taxes that we’re [currently] missing out on . . . We see opportunities in cruise ships and taxes should be placed on digital platforms such as Airbnb,” Zozaya said.

Although Apple is putting some of its projects on hold, the CEO said the company will still open six new hotels in Mexico by the end of next year.

The conglomerate currently has 33 hotels in 15 Mexican destinations, most of which are AM resorts in Cancún, the Riviera Maya and Cozumel. It is also a large provider of charter flights, transporting one million international passengers a year to Mexico.
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Some tourism investors have big plans for Mexico, although the 100 billion pesos (US $5.1 billion) that has been earmarked for tourism infrastructure spending in the government’s National Infrastructure Plan is not scheduled to be spent until 2021-2022.