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Latin America Investment News on Viva Tropical

Mexico’s Resorts Fight Back Against Negative Travel Warnings

Article Summary:

Mexico needs to improve its image as a drug war-torn country, and struggling resorts are hatching new marketing strategies ranging from sales parties in private homes to online campaigns in which customers tout the area’s safety as a means to bring back visitors.

Photo Credit: Wall Street Journal

Original Article Text From Wall Street Journal:

Resorts Make Pitch for Mexico’s Reputation

For years, Mexico has waged a costly battle against drug and gang violence that has led to thousands of deaths and tarnished the country’s reputation.

Now it is taking on another fight: to convince tourists that some of its most popular resorts still are safe.

Strategic Hotels
Occupancy has fallen at the Four Seasons resort in Punta Mita, Mexico.

To improve Mexico’s image as a drug-war-torn country, struggling resorts are hatching new marketing strategies ranging from sales parties in private homes to online campaigns in which customers tout the area’s safety.

Most resorts frequented by American tourists are in locations still considered safe. Recently, however, the violence has spilled into popular vacation communities such as Acapulco and Mazatlan. The U.S. State Department has posted advisories warning tourists to “use caution” when traveling to those two areas.

Many Americans are playing it safe and staying away from the entire country. “The perception of violence has definitely been a challenge in specific areas of Mexico and has slowed down investment and travel within the region,” says Laura Botelho, a spokeswoman for Marriott International, which manages 20 hotels in Mexico including the Ritz Carlton in Cancun.

Mexico has accounted for only about 10% of AMT Travel’s business for the past three years, says Frank Morgan, Vice President of Sales and Marketing for AMT, the travel representative for American Express Travel in West Covina, Calif. That is down from a peak of 60% seven years ago, he says.

Chicago-based Strategic Hotels & Resorts has come up with a possible remedy: throw parties. Strategic owns the Four Seasons Resort in Punta Mita, located along the country’s Pacific coast with pristine beaches, spacious bungalows, high-end restaurants and lush grounds populated with sculptures and other artwork.

Even though the beachfront resort-city has been free of drug violence and isn’t on the State Department’s warning list, the resort’s occupancy has fallen to 44.8% in 2011 from 76% in 2007, Strategic says. During the same period, the average daily room rate declined to $645 from $743.73.

Hoping to turn business around, Strategic is hosting house parties in the homes of frequent guests. It already hosted a pilot party last November and now is planning to roll out events this fall in Chicago, New York and Calgary where it gives presentations on the safety of the 173-room beachfront luxury resort.

Strategic executives note that Punta Mita is more than 1,000 miles away from the epicenters of the drug warfare, which is largely in cities near the country’s border with the U.S.

“The challenge is the perception issue,” says John O’Sullivan, general manager of the Four Seasons resort. “Unfortunately, when some people hear Mexico they equate [the country] as being one location. It’s almost…like there is an event in New York and you evacuate Los Angeles.”

Strategic will finance and cater the parties at a cost of about $5,000 an event and target affluent travelers. The hosts won’t be compensated.

Bill Sullivan, a real-estate executive who owns a villa at the Punta Mita, hosted Strategic’s pilot party in November at his home in Dallas. He invited his friends as well as business associates and professionals in the real-estate and travel industries. He said most of the questions were about safety, including potential crime problems. “I’ve been coming down here nine years and I never had any kind of [bad] experience,” he said.

Analysts say Strategic’s strategy is somewhat unorthodox, but add that the company has little to lose. It is “low risk, but could yield high returns because the company isn’t investing a lot of money,” says Smedes Rose, an analyst at Keefe, Bruyette & Woods. He noted that Punta Mita’s contribution to Strategic profits have declined from $24 million at the peak of the market in 2008 to a little over $7 million.

In another effort to combat Mexico’s image problem, Wyndham Worldwide WYN -1.02% launched an online campaign called “Mexico Ambassador” to attract tourists to Mexican timeshare properties operated by its Resort Condominiums International subsidiary. As part of the campaign, customers post personal testimonials about their vacation experience including statements that they had no problems with safety.

“We have to be creative,” says Ricardo Montaudon, who heads the Latin American division of RCI. Customers who post testimonials don’t receive any form of compensation, RCI says.

In a February advisory, the State Department said that “resort areas and tourist destinations in Mexico generally don’t see the levels of drug-related violence and crime reported in the border region and in areas along major trafficking routes.” But the advisory also said that U.S. travelers should be aware that the Mexican government “has been engaged in an extensive effort” to fight drug activity.

The number of U.S. citizens who were murdered in all parts of Mexico increased to 120 in 2011 from 35 in 2007, the advisory stated.

The Mexican government said it has made strides over the past year to promote the safety of its resorts including through aggressive online testimonials. At the same time, it has coordinated with the U.S. State Department to alert tourists of the dangerous areas. “Sometimes governments are little bit slow in reacting,” says Rodolfo Lopez-Negrete, chief operating officer of the Mexico Tourism Board.

He said the country’s tourism industry is turning around after getting hit last year and noted that leisure and business travel from the U.S. rose 7% in June from the same period last year. Tourism is a $12 billion industry for Mexico, accounts for 9% of the country’s gross domestic product and relies heavily on U.S. and Canadian leisure travelers.

Mr. Morgan says while most of Mexico’s coastal resorts are out of harm’s way, travelers still can’t let their guards down. “It’s not the same place as it used to be,” he said, noting guests have to now take certain precautions. “You can no longer…walk along the beach at night in an unsecured area,” he says.

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From Wall Street Journal

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