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Mexico Roundtable: Key Hotel and Investment InsightsJuly 8, 2014 By: Ruthanne Terrero Travel Agent
|Front row: Mitch Toren, Trip Guy; Robert Whorral, Beach Bum Vacation; Hope Smith, Born to Travel; Mandy Chomat, Karisma Hotels & Resorts. Back row: David Hu, Classic Vacations; Tim Mullen, Travel Impressions and American Express Vacations; Jack Richards, Pleasant Holidays and Journese; Jeff Mullen, Apple Vacations and John Caldwell, MLT Vacations.|
We wanted to get the pulse on travel to Mexico, and so Travel Agent magazine hosted a roundtable of top executives at the Tianguis Turistico conference on the Riviera Maya in May. Participating were John Caldwell, president, MLT Vacations; Mandy Chomat, vice president, sales & marketing, Karisma Hotels & Resorts; David Hu, president, Classic Vacations; Gerardo Llanes, chief marketing officer, Mexico Tourism Board; Jeff Mullen, president, Apple Vacations; Tim Mullen, president & CEO, Travel Impressions and American Express Vacations; and Jack Richards, president & CEO, Pleasant Holidays and Journese. Providing the travel agent perspective were Hope Smith, owner, Born to Travel; Mitch Toren, chief vacation engineer, Trip Guy; and Robert Whorral, vice president of marketing & sales, Beach Bum Vacation.
Ruthanne Terrero, vice president and editorial director of Travel Agent magazine, moderated the panel. Following is a condensed version of our discussion.
Ruthanne Terrero: How is business faring overall in 2014?
David Hu, Classic Vacations: From a business demand perspective, we haven’t seen much change from last year. Overall, demand is good. We’re seeing the consumer really wants to be out there more. They’re quite happy to spend. From a destination perspective, Europe, the Caribbean and Mexico are doing very well. What’s challenging right now is our Hawaii and our South Pacific business.
Mandy Chomat, Karisma: From the hotel side, our business this year has grown nationally. The good thing is that we’re seeing bookings for 2015 come in. We have a loyalty program for travel agents – their business is seeing double-digit growth.
|Mandy Chomat, Karisma Hotels & Reosrts and David Hu, Classic Vacations|
Jeff Mullen, Apple Vacations: Overall business is doing very well, particularly to Mexico and the Caribbean. Two things stand out: One is the all-inclusive hotels; particularly in the Caribbean and Mexico, the number of all-inclusives continues to grow. Group business (leisure travel of 20 to 30 people) was tremendous last year and we expect to see it grow again this year.
John Caldwell, MLT Vacations: We came off a record year last year and bookings remain solid for us. Europe is growing in double digits for us and Mexico and the Caribbean are solid. Like David’s comments about Hawaii, it’s slowing a little bit, but we’re seeing some good margins there as well.
Hope Smith, Born to Travel: What is different between the last few years and this year is that people are booking more in advance. They’re not waiting until the last minute. We have requests for people traveling in 2016 and 2017 – these are for big FIT programs. I’ve also noticed that when people are inquiring about Mexico, they’re not asking about security. Business to Mexico overall is growing.
Robert Whorral, Beach Bum Vacation: We’re up 12 percent right now [as of May]. It’s great to see that in the first quarter. Clients nowadays are looking for authentic, environmentally responsible destinations and resorts. People also want to know their budget up-front. We’re seeing a trend for that. The all-inclusive resort is getting to be a much better experience for the client, with better food, better service, better room service; all of these are reasons why we’re seeing a bigger shift toward all-inclusives. Ten years ago, the all-inclusive was basically for that person who wanted buffet-style dining. Now you’re ordering off menus. You can put five-star EP resorts against five-star all-inclusives any day. They are that good. Our numbers this year and last are the highest they’ve ever been for Mexico. There are a lot of new resorts here and Millennials want new resorts. They want good food and authentic experiences.
Mitch Toren, Trip Guy: We’re up well over 20 percent year-over-year. Mexico is by far our largest growth market and that’s because we’re consultatively selling to our clients. Two years ago, Mexico would be off the table before we could even pitch the product. We’ve now seen much less resistance to Mexico. It’s no longer not an option. Now that it’s available as an option, we can go into the mode of identifying what’s the right property for our clients, and more and more, Mexico is the best fit for their budget, for the airlift options and for the quality that they’re looking for. Mexico and exotic Caribbean are the two biggest requests in terms of growth.
|Jack Richards, Pleasant Holidays and Journese and Gerardo Llanes, Mexico Tourism Board|
Hope Smith, Born to Travel: I live in California and people don’t always want to go all the way to the Caribbean. It’s almost like going to Europe for them. There is so much type of product in Mexico; whether it’s an all-inclusive or an FIT product, the value is incredible. But you have to explain the value to the client.
David Hu, Classic Vacations: Mexico is such a centrally located destination for both the east and west coasts of the U.S. A couple of years ago, it was basically closed off because of all the different issues it had. Now it’s opening up and people are seeing it as a fantastic option relative to all the other destinations out there. Airlift is creating a lot more options.
Mandy Chomat, Karisma: We’re all talking about the product but we have to talk about the staff and the quality of the service as well.
Gerardo Llanes, Mexico Tourism Board: We’ve been seeing the numbers pick up for the U.S. – it’s grown 13 percent for Mexico year-over-year in the first quarter. All of our international markets are growing except for Argentina and France, which have economic problems. We’re very excited our two biggest markets, the U.S. and Canada, are growing for us. Canada grew around 11 percent in the first quarter. It seems as if everything is picking up.
Jack Richards, Pleasant Holidays: Overall, business is up double digits for us despite Hawaii being very, very soft. We’re seeing a shift in business from Hawaii to Mexico, the Caribbean, Europe and other destinations. We think this will continue. Keep in mind, we’re just now coming up on our peak season. First quarter is off peak for us. That’s the reverse of several people in the room. As we head into the summer, we think Mexico will have its best year since 2007. Our corporate and incentive group business to Mexico is skyrocketing. Destination weddings are doing very, very well. Overall leisure groups are pacing way ahead in 2014 and 2015. We expect to be up significantly in Mexico, double digits by the end of year.
Tim Mullen, Travel Impressions: We saw last year and are seeing this year that the average spend per person is up close to 10 percent. In years prior, we’d see the passenger levels being sustained even if there were economic issues. Nevertheless, the revenue was the same. Now, we’re seeing passengers increase and we’re seeing revenue outpace passenger levels, which is a good sign.
John Caldwell, MLT Vacations: We’re aligned with Delta, and Delta is expanding dramatically to Mexico with nearly a 25 percent increase this year, with lots of new service coming out of places like Los Angeles and Seattle, from the east and west coasts, and from interior points within the U.S. as well as the hubs. That’s on top of a 20 to 30 percent growth last year as well. Of course, with our partnership with Aeromexico, we’re seeing some great opportunities to send folks to the cultural destinations.
|Mitch Toren, Trip Guy; Robert Whorral, Beach Bum Vacation; Ruthanne Terrero, Travel Agent and Hope Smith, Born to Travel|
Ruthanne Terrero: Is there a pent-up demand for Mexico?
Jack Richards, Pleasant Holidays: I just think vacation travel itself is up. The economy is improving and a rising tide lifts all boats. It becomes a choice of where you’re going to go. They’re not going to Hawaii; that’s primarily related to higher airfare. Mexico is a viable option. For us, luxury all-inclusive vacations are selling very, very well. It’s not the price-sensitive market that it was years ago. So we’re selling up in Mexico.
David Hu, Classic Vacations: Over the last couple of years, we’ve seen hotel rates creep up in alternative destinations. Mexico, if anything, has been flat, and so you have this disparity in terms of rates and value. Mexico has good airlift but it also has great hotels with very good price value points. From a consumer’s perspective it’s a great option.
Tim Mullen, Travel Impressions: I agree that a rising tide lifts all boats but I think Mexico has seen an increase in market share because the product has improved significantly.
Ruthanne Terrero: Let’s talk about the tourism infrastructure in Mexico. How has it changed? What’s different from five years ago?
Jack Richards, Pleasant Holidays: I don’t have the data specifically, but it’s my opinion that Mexico has more four and five diamond resorts than any other destination. That’s a sign of confidence. That’s a sign of trust in travel. In addition to what John said about what Delta is doing, other airlines are expanding their Mexico lift in 2014 and 2015 by about 15 percent. That means prices will be fairly reasonable. Overall, with the introduction of luxury all-inclusive resorts, there’s no higher standard of service than in Mexico. It’s just a very good destination to travel to.
David Hu, Classic Vacations: The hotel part itself has gotten to be very fantastic but people are also venturing outside the hotels now; they are realizing there are so many activities that make the destination experience exponentially better, it makes it all that much more authentic.
Hope Smith, Born to Travel: I design so many itineraries for places that most people don’t venture to. I’m not talking about the all-inclusives or the beach resorts. I’m talking about Chiapas and Oaxaca. It’s incredible how many small, boutique hotels there are. There are also the little hotels in Mexico City, Huatulco and Veracruz. So the infrastructure for the higher-end, small boutique B&Bs has also increased a lot. It’s just that perhaps the American market is not that aware of it, but the hotels are there. The luxury traveler is looking for an experience, to get in touch with the destination. There’s so much to see in Mexico. I come here four times a year and I still find things I didn’t know were here.
Mitch Toren, Trip Guy: It’s gotten so developed here; it used to be about finding the right hotel for the client. Now it’s finding which is the right action park for them or the right nightclub. Clients want reservations to dine in town for an authentic experience, even if they’re staying at an all-inclusive. But they need help with the planning because there are so many options. In this area alone [in the Riviera Maya], there are probably six to eight options for ziplining within a 30-mile radius. People want to plan these things in advance. They have access to information but they need someone to help digest it and explain it to them because the differences in all the attractions are very different.
Hope Smith, Born to Travel: We have a first-class museum in Cancun. We have the Cirque du Soleil coming soon. Speaking from an agent’s point of view, we have to be very aware of what’s available to our clients and get to know the client so we can sell them the right product, whether it’s putting them at the right all-inclusive or the right small hotel in Tulum. I can’t tell you how many phone calls I get about Tulum. I’m constantly going over and looking at all of these hotels. We have to do the work.
Jeff Mullen, Apple Vacations: People are opting for a private transfer or a private SUV transfer. This is a big change from five years ago when people settled for the 50-passenger bus.
Jack Richards, Pleasant Holidays: One of the last infrastructure items we have to work on here, and this is not a secret, is the arrival and the departure experience at the airport. We’ve been working on that for many, many years. So many times, the customer is accosted as they’re walking through the airport, and that’s not a good arrival experience because it’s very consuming. Everybody wants to sell to you. That’s one of the last items that has to be focused on. It’s gotten better but we’re still a long way from perfect.
Robert Whorral, Beach Bum Vacation: I agree with that. That’s why we push private transfers, complete with the family’s name on a sign and the company they booked with. It is confusing. But the roads here are good and the power is consistent, compared to some other destinations where the roads are shaky and winding. People feel when they’re on the highway here [in the Riviera Maya] going to Cancun or Tulum that these are just like the interstate highways at home. We’ve sold more private transfers this year than ever before, and it’s always in private SUVs or limos and they just want to go straight to where they want to go. It’s not always about efficiency; they want to feel special and important and they’re willing to spend that extra little money to do so.
Hope Smith, Born to Travel: It takes a good agent to take the time to explain this to clients. I take pictures of what an Olympus person looks like, what an Apple Vacations person looks like, and I include that in their package. I warn them that once they go through customs, they are going to go through this massive experience where people are approaching them, and to completely avoid that. As an agent, we have to do a lot of hand-holding, but that hand-holding will give you that loyal client who will come back again and again. It’s all about building relationships, coming out here, meeting people, and talking to people, even to the cab drivers, to find out what is going on.
|John Caldwell, MLT Vacations; Jeff Mullen, Apple Vacations; Mandy Chomat, Karisma Hotels & Resrots and David Hu, Classic Vacations|
Ruthanne Terrero: Are there emerging destinations in Mexico?
Hope Smith, Born to Travel: I’ve never sent so much business to Mexico City. I think it’s because so many museums have opened and it has an incredible culinary scene with so many restaurants opening up. What we need in Mexico City are more deluxe hotels. And I need to find more guides. I have really good contacts for great cooking classes and to go out and do a taco tour. But Mexico City takes time because of the traffic, so it takes a long time to get from point A to point B.
Tim Mullen, Travel Impressions: We have multiple charters to Huatulco, which is an emerging destination. But we’re also seeing a reemergence of destinations for whom maybe the bloom was off-the-rose for several years. We’re seeing real interest in the west coast, particularly Los Cabos and Puerto Vallarta, thanks to the good relationship, after many years of trying, between the private and public sectors. The private sector is investing in airports, roads and in new developments. That results in new hotel product.
David Hu, Classic Vacations: We’re seeing those destinations coming back, as well as Ixtapa and Zihuatanejo. We haven’t seen as much resurgence in the colonial areas – that’s going to take time, and people need to feel more comfortable in the destination over all.
Mitch Toren, Trip Guy: The biggest change in Mexico is how niche the all-inclusive sector is. Before, it used to be, “I want a family vacation.” Now it’s, “I want a boutique, family all-inclusive experience.” New resorts or new niches in new locations are what is driving our traffic. There are now adult-only resorts on the west coast which all of a sudden is getting attention because it’s a new market for the client who may have experienced that product elsewhere. You’ve got generation-specific product that never existed. That’s what’s driving a lot of traffic. Mexico can now click the boxes in so many of those niches that never existed before.
Robert Whorral, Beach Bum Vacation: I agree with you.
Ruthanne Terrero: That’s a great segue. At Questex, we have an alliance with MMGY Global and they gave me some statistics from their Portrait of the American Traveler study that says Millennials, those between 18 and 35, have the highest interest in visiting Mexico. In terms of Millennials, are you seeing a rise in that market in terms of who’s coming down to Mexico?
Mitch Toren, Trip Guy: We’re seeing a lot more group couple trips – four to six couples traveling together who may have done Las Vegas or South Beach traditionally. Mexico’s now an upscale, viable alternative for them. They’re looking for the culinary aspects, the activities both on- and off-property. They’re going ziplining. They’re doing snorkel trips or scuba diving. They’re going to Cozumel for the day and exploring because they’re not the type of people who want a five- to seven-day, sit-on-the-beach, read-a-book type of vacation. Food and alcohol have become so much more important than they were five years ago. How many restaurants is not as important as how good the food is. It’s sort of stepped up the game, where if you’re not evolving in those areas, you’re sort of old news. The competition has passed you by.
Robert Whorral, Beach Bum Vacation: We’re seeing the same thing. Internally, we call them foodies because they’re asking, “What is the food like? What are the beverages like? Is it premium brand liquor or are they just well drinks?” They’re asking, “Oh, I have a butler on the floor of my hotel? What can we do with that person?” They also don’t want to travel more than four or five hours, so the airlift is helping.
Mitch Toren, Trip Guy: Even the style of the hotel – hacienda versus ultra-modern versus very traditional. People are really getting to that level of detail in their requests.
Hope Smith, Born to Travel: If you want a Millennial as a client, you’d better know the product. You have to know that Quintana Roo is not the Yucatan. That’s why I think coming down here is important. You have to take the time to explore it yourself. I love working with Millennials, but my one thing is, are they willing to listen to me? You have to tell them that you’ve been there. What they might have read in a book might not exist anymore. I tell them I would be more than glad to design something for them but that they can’t then constantly call me and say, “Well, my friend told me this,” or “I read this.” But they are great. They’re open to new things, which I really love. And let’s face it, they’re the next generation.
Robert Whorral, Beach Bum Vacation: With Millennials, we actually force them, especially for a destination wedding or an important trip where they’re going to spend a decent amount of money, to go through a questionnaire which we put on our website. They will do it as long as they can get through it quickly. You got to set up the destination first and the resort next, then the room category, then the experiences, then the bars they want to go to. If they don’t trust you, they won’t listen. That’s when they’ll come back with, “Well, hey, what about this and this and this.” Nine chances out of 10, you’ll circle right around to the first thing you offered then. It’s all about food. It’s all about experiences. They want to get dressed up every night and do something unique. The resorts are offering that now. You didn’t have that five years ago.
|John Caldwell, MLT Vacations|
Mandy Chomat, Karisma: A hotel experience that we know from our gourmet-inclusive concept is that food is very important to the deliverables of a vacation. I want to go back to the travel agents here. We’ve spoken about weddings being booked further out. What do you see with multigenerational travel? Are they booking those milestones further out?
Robert Whorral, Beach Bum Vacation: Yes, we’re seeing 10 to 12 months out now where it used to be five to six weeks sometimes. I was looking at our numbers and I’m like, “Wow, 2015 is doing well!”
Mitch Toren, Trip Guy: Multigenerational travel for Spring Break for next year has been really hot for us already because there’s no concern about “will I be able to afford this trip come final payment?” because they’re not footing the bill in many cases. The parents or the grandparents booking the vacation are the ones paying. We’re seeing strong bookings in the summer months for next year, for exactly that reason. They know which resort they want to go to. It’s not so much a price-driven discussion, it’s more about the product. They’re willing to commit now. The air price isn’t the driving factor, they’re not worried about what the price will be when it comes out.
|Tim Mullen, Travel Impressions and American Express Vacations; Jack Richards, Pleasant Holidays and Journese; Gerardo Llanes, Mexico Tourism Board; Mitch Toren, Trip Guy and Ruthanne Terrero, Travel Agent|
Ruthanne Terrero: Mandy, how are you designing your hotels for multigenerational travelers? Are you doing anything differently?
Mandy Chomat, Karisma: With our new product, Generations, we have one-, two- and three-bedroom suites. We also have Azul Fives [with large suites]. You’ll see more of that as we continue to build. And it’s not always for multigenerational. With girlfriend getaways they want a rooming experience where they can all get into one suite.
Mitch Toren, Trip Guy: The one thing that we’re still short on is family suites. If a hotel won’t give us guaranteed connecting rooms I’m not taking the risk that when the client gets there they’re not going to get it. We’re not doing any families of four with two double beds anymore. Some hotels are building smarter to include connecting rooms and family suties.
Robert Whorral, Beach Bum Vacation: Families are making the decision only if the kids can all be in the next room. They can’t be down the hall. That’s big.
Mandy Chomat, Karisma: We have 144 suites ready for this summer and fall. At Azul Fives, we have guaranteed connecting rooms with no charge.
David Hu, Classic Vacations: With larger families and multigenerational travelers, we’re seeing a nice pickup in interest in private homes. People are saying, “At this point, I might as well just book a private home with four bedrooms somewhere for four or five days and enjoy the destination that way.”
Tim Mullen, Travel Impressions: We’re seeing travel agents recommending the preferred sections of hotels more and more to multigenerational families. In the case of Dreams and Now resorts, they have the Preferred Club. That allows a multigenerational family to be closer to each other. They have private check-in and a private lounge that they can use at their own disposal versus the family getting lost in a bigger 500-room complex. I encourage travel agents to continue selling it that way.
Jack Richards, Pleasant Holidays: We’re focused more on the suites. We’ll pay for connecting rooms. In some instances, we’ll guarantee the rooms ourselves if we have to. Our model is a little different. We don’t mind being charged for connecting rooms. We have to have them. There is a move to villas and private homes in our [Journese] luxury brand, we have agents who will only book three-bedroom units. And we have to guarantee them. I agree with Tim, the club floors offer a unique experience. Any new hotel in Mexico or any destination should have a club floor.