Hospitality investors face a strategic decision between acquiring performing resorts or pursuing new developments. Performing assets—stabilized hotels with consistent cash flow—are trading at cap rates between 6–7%, attracting institutional investors prioritizing immediate yield. By contrast, new development projects promise higher IRRs, often above 20%, but involve risks tied to land acquisition, permitting, and construction delays.
Market conditions are favorable for both approaches. Tourism demand remains robust, with international arrivals climbing nearly 9% in 2024. However, construction costs are rising, and access to financing is increasingly limited to sponsors with strong reputations. This has created a bifurcated market: institutional capital is concentrating on performing resorts in Cancún and Los Cabos, while private equity funds and boutique sponsors are selectively entering the development space.
Why it matters: Hybrid strategies—anchoring portfolios with stabilized income assets while selectively pursuing development—are gaining traction among fund managers.
*GCM Intelligence is sponsored by Global Capital Mobility, Inc. and GCM Fund Management. All content is provided for informational purposes only and should not be considered investment advice.*
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GCM Intelligence © 2025 | Sponsored by Global Capital Mobility, Inc. and GCM Fund Management