INTRODUCTION TO BAJA TOURISM/MARINA MARKETS

 

In the 1960s the national government of Mexico prepared a national tourism plan and formed several institutions that would play major roles in the development of tourism. The Fondo de Fomento al Tourism (FONATUR) was established to promote international tourism as an economic development engine for the country. Thus, FONATUR, and other similar institutions, took part in developing five major resort areas in Mexico: Los Cabo. Loreto, Ixtapa, Zihuatanejo and Huatulco.

 

Given the location of the La Flor Del Desierto we will highlight the area of Los Cabos.

 

San Jose Los Cabo and Cabo San Lucas (Los Cabos) have become extremely popular in the past decade. San Jose Los Cabo is still a small town of less than 22,000 people, with colonial architecture, narrow streets and Spanish style plazas. Cabo San Lucas, once a small fishing village, has become a major destination for fishing, golf and sailing enthusiasts. It is also famous among the younger crowd for its exciting night life.

 

Los Cabos offers excellent recreational opportunities, including surfing, swimming, scuba diving and kayaking. Though the destination attracts fewer American visitors than Acapulco, Vallarta or Mazatlan, its’ share of the foreign tourist market is considerable larger, with much of the growth a result of the efforts of FONATUR to promote the area.

 

From West San Jose to Cabo San Lucas, a large number of luxury resorts have developed along the coastline. Los Cabos has a desert climate. The area is similar to Palm Springs in the United States. The area seldom receives rain, except in the month of September, when it may rain up to six inches. In winter, temperatures are usually in the mid 70s, while the summer months enjoy temperatures of about 90 degrees (F). Summer night temperatures drop to about 70 degrees (F), about 55 (F) at night for the balance of the year.

 

In 2000, Los Calms saw over 500,000 hotel visitors, a significant increase from the 360,000 in 1994. The hotel occupancy rate in Los Cabos reached a high of 14 percent in 1996, and has since dropped to about 66 percent. This is attributed to a dilution of the market due to increased expansion of the hotels being built. Approximately 83 percent of all visitors to Los Calms are international visitors.

 

The Mexican Department of Tourism has concluded that new resort developments need to focus on extended stay, upscale guests and a more exclusive environment. It is with that recommendation in mind that we have chosen the location, business model and concept for La Flor Del Desierto.

 

COMPETITIVE MARINA DEVELOPMENTS

 

Sailing along the coast of Mexico is a very popular activity for many U.S. visitors. A large number of Americans, particularly Californians, sail the Pacific Coast of Mexico because it offers a scenic, inexpensive, safe and convenient place to both sail and dock a boat. The ports of call are interesting, and the sailing is close to home without the need to cross open bodies of water. The harbors offer protected mooring while waiting out bad weather or the hurricane season. From discussions with various operators, research shows there are between 2,000 and 2,500 yachts that cruises this area annually.

 

Mexico is also popular for boaters on their way to, or coming from, the Panama Canal. To accommodate these sailors, many marinas have been established along the Pacific Coast. Most of the marinas sell gas and supplies, and offer repairs and maintenance facilities. These types of marinas report an annual occupancy of about 50 percent. However, marinas which are supported by amenities such as hotels, golfing and other forms of entertainment enjoy occupancies of between 80 and 100 percent. The Mexican government is extremely interested in seeing more marinas develop along the West Coast.

 

The higher end resort and marina development boom began in the mid 1980s when Grupo Sodek Situr began developing a string of mega resort marinas on Mexico's Pacific Coast. The original plan called for each development to be a tourism based marina, lodging facilities, a golf course, homes, condominiums and other popular tourist amenities. However, Grupo Sidek encountered financial difficulties in the mid 1990s and ceased further development. Nevertheless, the concept has proven to be quite popular. Many other marina developments have been created and have been successful in attracting tourists and real estate purchasers.

 

All along the coast during the prime sailing season of the winter months, virtually all of the major marinas report near capacity on a daily operating basis. Many more of the successful marinas report waiting lists varying from weeks to months for the use of their facilities. The most frequently visited marinas are located along the stretch from Ensenada to Cabo San Lucas. (LaFlor Del Desierto will be located at the mid-point of these two ports of call.)

 

In order to expand the maritime tourist industry in Mexico, FONATLUR has launched the Sea Of Cortez Nautical Staircase Initiative. FONATUR released a market study in July 2001, which outlines the demand for marina facilities in the Sea of Cortez region, including the Baja California Peninsula, Sinaloa and Sinora. In particular, FONATUR studied marinas in San Calos. Mazatlan, La Paz., Cabo San Lucas and Ensenada. The study results found that currently the Sea of Cortez region, including the coast areas of Baja California, Sinora and Sinaloa, include approximately 21 private marinas and a total of 3,650 slips. The average occupancy rate for marinas in the Sea of Cortez is 65 percent. The number of slips has grown significantly from 1,133 in 1990 at an annual average rate of 12 per cent, Much of the growth has occurred in Ensenada, which built six new marinas in the 1990s.

 

The marinas in the Sea of Cortez range in the level of services provided to tourists. The marinas of Cabo San Lucas, El Cid in Mazatlan, Marina Coral in Ensenada and Palmira in La Paz have the highest service and infrastructure standards. La Flor Del Desierto will meet or exceed those standards.

 

The average monthly occupancy rates for marinas in the Sea of Cortez region range from 80 to 100 percent. The length of stay varies depending on the marina's services and the quality of the ports. In the more active port areas the length of stay varies from 15 to 30 days.

 

The average slip size is about 40 feet long. The daily fees are about US $1 per foot. Monthly fees vary from US $ 8 to $21 per foot. Currently there are plans to build an estimated 5,500 slips in the four state regions.

 

The states in the Western United States are in the largest source of business for Mexican marinas, particularly California. Within the U.S., there has been virtually no new marina construction and no expansions are planned in the short term. Currently occupancy rates in the U.S. range from 80 to 95 percent. Occupancy rates are particularly high for 30 to 60 foot slips. Monthly fees range from $12 to $15 per foot for the most popular marinas.

 

Most U.S. sailors entering Mexico by the sea go through the ports of Ensenada and Cabo San Lucas. Arrivals at these marinas, and La Paz, increased at an average annual rate of 6.9 percent from 1993 to 2000. The greatest increase occurred in Ensenada, where arrivals grew by 17.7 percent annually.

 

According to FONATUR statistics, there are currently 1.65 million boats registered in California, Oregon, Washington, New Mexico, Arizona and Colorado. Of these, about 531,000 are at least 16 feet long. Based on their size and residential location, FONATUR estimates that the total market potential of U.S. boats traveling the "nautical staircase" of the Sea of Cortez is about 52,700. Approximately 30,000 boats are larger than 30 feet.

 

FONATUR compiled a profile of boat owners in an effort to gain an understanding of potential visitors to Mexican marinas. For owners of board 30 to 50 feet long, they concluded:

 

· 70 percent are over 45 years old

· almost half are professionals

· two-thirds have annual incomes in excess of US $100,000.

· most travel with family and friends

· most travel an average of 95 nautical miles per day

· the average daily per person expenditure is approx. US $205.

· 77 percent would consider docking on the Pacific Coast for a prolonged period

 

The following points describe owners of boats larger than 55 feet:

 

· 88 percent are over 45 years old

· almost half are professionals

· more than half are retired

· 50 percent earn over US $100,000 per year

· owners travel an average of 80 nautical miles daily

· average per capita daily spending is US $248.

· 50 percent would consider docking on the Pacific Coast for a prolonged period

 

One of the most important factors influencing the trend in resort development, and the purchase of second homes and condominiums in Mexico has been the recent change in laws regulating foreign ownership of real estate in the Mexican restricted zones.

 

A system of bank trusts, known as "fideicomisos," have been established to allow foreigners to purchase real estate in this previously forbidden are. This trust system has opened up the Mexican coast to many American home buyers and real estate investors. Given these factors, there has been a renewed interest in Mexican resort development.

 

 

CONCLUSION:

 

The market research and feasibility study completed by FONATUR supports the thesis that there are development opportunities for additional resort projects in Mexico.

 

Of the traditional markets, the more accessible locations along the Western coast will have the strongest ability to attract U.S. investors and buyers. There are plans for extensive development in Baja on both sides of the Peninsula that are currently not well served.

 

Based on all of these factors, Stettner Asociados is confident that La Flor Del Desierto is the correct product, in the proper location, at the right point in time.