2 Stock Picks For Booming Tourism In Mexico
The COVID-19 pandemic put a hurt on many areas around the world that rely on international travelers to fly into their airports, stay in resorts and ultimately spend money.
Rising cases of COVID-19 variants has hurt tourism again, but one place that doesn’t seem to be feeling the hurt is the tourist areas of Mexico.
Here’s a look at the latest stats and two stocks to watch.
What Happened: Several regions in Mexico are seeing a boost in travel with limited COVID-19 restrictions. Areas such as Cancun, Tulum and Riviera Maya have all seen tourism jump back to 2019 levels or above with international travelers looking for places they can go without restrictions.
Unlike other regions that shut down due to COVID-19 and required testing and vaccine cards, Mexico didn’t want to hurt its tourism industry and kept restrictions to a minimum.
Data from a recent Bloomberg report says tourism in Cancun and Tulum is 6% ahead of 2019 levels and airlines are scheduling 20% more seats on flights from the U.S. to the region than they did in 2019. The Cancun International Airport had 22 million arrivals in 2021, up 82% from 2020.
Another report shows international tourists were up 65% year-over-year in February 2022. Tourist spending rose 165% year-over-year in February 2022.
The boost in tourism has led to 16,000 new hotel rooms being built in Quintana Roo, the state that includes Cancun and Tulum. Mexico is the No. 1 or No. 2 most visited destination according to reports, up from No. 7 in 2019.
Along with the already increased tourism figures, the region could see another boost in future years. A train line is planned along the coast in 2023 and a local airport could be added to the region in 2024.
Playa Hotels & Resorts: With the region seeing a boost in traffic, one stock that should be on investors' radars is hotel and resort company Playa Hotels & Resorts NV (NASDAQ:PLYA). Playa owns and manages 22 resorts with 8,366 rooms across Mexico, Jamaica and the Dominican Republic.
The company has eight properties in the Cancun/Riviera Maya region, making it a potential play on the boost in tourism there. The resorts here have 2,915 rooms and represent 35% of the company’s total rooms. Western Mexico represents another 11% of company rooms. The Dominican Republic represents 35% of rooms and Jamaica represents 19% of rooms.
Playa is also rebranding its properties under the names of several well-known hotel organizations such as Hilton and Hyatt, which offer strong name recognition and also give the company access to new databases of potential customers.
The company’s first quarter had an adjusted net income of $31.8 million, compared to a loss of $50.9 million in the prior-year period. RevPAR was up 207% in the first quarter and adjusted EBITDA rose over 3,170% in the quarter.
Occupancy for the company in the first quarter hit 72.4%, more than double the 31.6% reported in the prior year. Revenue in the first quarter hit $213.2 million, up 183% year-over-year.
“Our first quarter occupancy rate reached a post-pandemic high and our ADR reached an all-time high, with fundamental momentum building through the quarter,” Playa Hotels & Resorts CEO Bruce Wardinski said.
The company said bookings were “extraordinarily strong” in the first quarter with the second half's booked revenue well ahead of last year.
If Mexico continues to see strong tourism figures, Playa is one company that stands to benefit.
Related Link: 15 Stocks And ETFs With Exposure To Mexico
Grupo Aeroportuario: Another company that could benefit from a surge in visitors to Cancun and surrounding towns in Mexico is Grupo Aeroportuario del Sureste (NYSE:ASR). The company is a leading international airport operator with 16 airports in Mexico, the Caribbean, Latin America and Colombia.
Grupo Aeroportuario operates six airports in Colombia and has 60% ownership in the operation of a Puerto Rico airport. The company says it operates the nine most important airports in Southeast Mexico, including the Cancun Airport, which is one of the busiest tourist destinations in the country.
With tourism booming in the region, airlines are seeing strong occupancy and revenue. Groupo Aeroportuario reported first-quarter revenue up 87% year-over-year with the Mexican segment up 102.8% year-over-year.
Passenger traffic in the first quarter was up 76% for the Mexican segment. The international portion of travelers to Mexico saw triple-digit year-over-year growth in January, February and March and was up 133% year-over-year for the first quarter.
The Mexican segment had traffic up 3% compared to the first quarter of 2019, showing stronger figures than the pre-COVID-19 pandemic. For the month of April, passenger traffic for the Mexican segment was up 12.7% compared to April 2019.
With international travelers flocking to the region, this airport company stands to benefit from strong passenger traffic.
Photo: Playa Resort and Hotels Hyatt Ziva Cancun via Playa