Destructive Creation: Hurricane-Related Risk and Opportunity for Mexican Hotel/Resort Investments

Shane Taylor Dav Lynn, Pago Lumban-Tobing and Patricia Jovane

LARES from Latin American Real Estate Society (LARES)

Abstract: The risk posed by hurricane events in Mexican tourism zones is assessed and hotel/resort development trends after catastrophic events are analyzed. Risk profiles are developed for major hotel/resort zones of Mexico based on 150 years of storm-track data which are plotted using GIS buffering. Yucatan resort centers have a very high frequency of hurricane events with a higher number of category 4 and 5 storms. Hotel data for tourist zones confirm the severe impacts to business following hurricane events. Although personal damages and losses are incalculable, disaster- related destruction can be the catalyst for redevelopment schemes. Wilma’s impacts in Cancun (2005), show that tourist arrivals/room occupancy fell considerably but gave impetus to a renewed round of tourism-related development which spurred recovery. Weather-related phenomena pose specific risks to real estate investment and hotels/resorts are especially vulnerable given the short- lease nature of contracts and the overall seasonality/volatility of demand. Climatic conditions will likely worsen in future and the greater density of coastal development, implies that these risks will intensify. More optimistically, these events have shown to be catalysts for renewal and update of stock.

Keywords: Hotel/Resort Development; Hurricanes; Mexico; Opportunity; Risk (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2007-10-01
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