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Process for Opening Hotels in Mexico: Analysis and Improvement Proposals

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Process for Opening Hotels in Mexico: Analysis and Improvement Proposals STRENGTHENING COMPETITIVENESS IN MEXICO THROUGH REGULATORY IMPROVEMENT Process for opening hotels in Mexico: Analysis and improvement proposals APRIL 2017 Process for opening hotels in Mexico 96pp.indd 1 7/23/18 2:08 PM Process for opening hotels in Mexico 96pp.indd 2 7/23/18 2:08 PM Preface The Secretariat of Economy (SE) and the Federal Commission for Regulatory Improvement (COFEMER) requested the Organisation for Economic Co-operation and Development (OECD) to prepare a report in order to identify the regulatory barriers in the tourism industry in Mexico. The objective of this report is to propose regulatory improvement measures that allow the optimization of administrative procedures to open a hotel, including federal, state and municipal procedures, which at the same time improves the regulatory quality of the country, thus, its competitiveness. This study is made as part of the cooperation between the Secretariat of Economy, COFEMER, and the OECD to strengthen the competitiveness in Mexico through regulatory improvement. The relevance of a study as this is the fact that tourism is an industry that significantly contributes to Mexico’s Gross Domestic Product (GDP): for the period of 2005-2013, touristic GDP represented an average of 8.5% of the total GDP. Thus, facilitating the process of opening a hotel can contribute to fostering the momentum of this industry, and in this way support the national economic growth. The recommendations offered in this report were elaborated from the identification of areas of improvement in the process that an entrepreneur or business owner has to go through when the person decides to open a hotel in a beach area; in this case, the case studies used were Cancun and Mazatlan, and it was compared to a case study of Australia. It is worth mentioning that this report includes federal, state, and municipal procedures, which provides a comprehensive vision and analysis of the topic. 3 Process for opening hotels in Mexico 96pp.indd 3 7/23/18 2:08 PM Process for opening hotels in Mexico 96pp.indd 4 7/23/18 2:08 PM Acknowledgements The work that supports this report was led by Manuel Flores Romero under the supervision of Nick Malyshev, Chief of the Regulatory Policy Division, and the direction of Rolf Alter, Director of Public Governing and Territorial Development of the OECD. The main authors of this report are Andres Blancas Martinez, Itzel de Haro Lopez, Alberto Morales Villarreal, Delia Vazquez Luna, and Carolina Agurto Salazar. Valuable comments were obtained from Adriana Garcia de Campos. All of them belong to the Regulatory Policy Division. We thank Ildefonso Guajardo Villarreal, Mexico’s Secretary of Economy, and Rocio Ruiz Chavez, Undersecretary of Competitiveness and Regulation of the Secretariat of Economy, for their valuable support and intense work to improve Mexico’s regulatory governance, and for providing the facilities to finish this report. We express our gratitude to Jose Eduardo Mendoza Contreras, Chief of the Competence and Public Policies for Markets Efficiency Unit of the Secretariat of Economy, and his team which includes David Lopez Victoriano, Gustavo Rodrigo Perez Valdespin, and Alin Martinez Morales, for their valuable support to finish this report and for the comments provided. Thanks to Mario Emilio Gutierrez Caballero, head of the Federal Commission for Regulatory Improvement of Mexico, and his team for the comments made. Thanks for the comments of Maria Angelica Gonzalez-Saravia Cos, General Director of Touristic Standardization and Regulatory Quality, Under-secretariat of Quality and Regulation, Secretariat of Tourism, and her team, for their valuable comments which enriched and improved the previous versions of this report. This document would not have been possible without the collaboration of several institutions and experts. Interviews to such experts were carried out in Mexico City during 2015 first quarter, and included the following. From Mexico’s Federal Government: Federal Commission for Regulatory Improvement, Secretariat of Tourism, Federal Commission of Electric Power, National Institute of Anthropology and History, and Secretariat of Environment and Natural Resources. From the Government of the State of Quintana Roo: Secretariat of Economic Development, Secretariat of Public Management, and Commission of Drinkable Water and Sewage. From the Municipality of Benito Juarez in Quintana Roo: General Secretary of the Mayor’s Office, Direction of Urban Development and Ecology, Integral Solution for Solid Wastes (SIRESOL), Institute of Urban Development Planning (IMPLAN), Direction of Civil Protection, Municipal Treasury Office, General Direction of the Honorable Fire Brigade, and Direction of Urban Planning. From the Government of the State of Sinaloa: State Commission of Business Management and Regulatory Reform, Secretariat of Tourism, and Secretariat of Social and Human Development. From the Municipality of Mazatlan in Sinaloa: Direction of Ecology and Environment, Municipal Treasury 5 Process for opening hotels in Mexico 96pp.indd 5 7/23/18 2:08 PM ACKNOWLEDGEMENTS Office, Direction of Urban Development, Municipal Board of Drinkable Water and Sewage of Mazatlan (JUMAPAM), Direction of Civil Protection, Head Clerk’s Office, Municipal Institute of Planning of Mazatlan (IMPLAN), and Secretariat of Economic Development. Private entities; Aguakan, Bremer Tec, and business owners of Cancun and Mazatlan. The OECD specially thanks the Federal Commission for Regulatory Improvement, the State Commission of Business Management and Regulatory Reform of the State of Sinaloa, and the Under-secretary of Economic Development of the State of Quintana Roo. Without these institutions’ support, this document would not have been possible. 6 PROCESS FOR OPENING HOTELS IN MEXICO: ANALYSIS AND IMPROVEMENT PROPOSALS © OECD, APRIL 2017 Process for opening hotels in Mexico 96pp.indd 6 7/23/18 2:08 PM Table of Contents Acronyms and abbreviations ����������������������������������������������������������������������������������������������������11 Executive Summary . 13 Introduction . 17 Methodology . 19 Legal Assessment . 21 Statistical Analysis . 23 Case Studies . 23 The touristic activity in Mexico. 31 Public policy and competencies in tourism in Mexico . 39 National Tourism Policy . 39 National tourism policy competencies . 42 National and international case studies . 45 Cancun, Quintana Roo . 46 Mazatlan, Sinaloa . 51 Cross-cutting opportunity areas . 57 Australia . 59 Public policy options . 73 General . 73 To improve processes . 74 To improve the Environmental Impact Assessment. 76 To improve the Alcoholic beverages license . 76 To improve inspections . 77 To develop an interoperability system between government agencies and levels . 78 Comprehensive redesign of the hotel opening process . 78 Bibliography . 83 Annex . 85 List of Illustrations Illustration 1. Participation of the tourism sector in the GDP per state, 2013 . 23 Illustration 2. Number of tourists in Mexican beaches in 2014 . 24 7 Process for opening hotels in Mexico 96pp.indd 7 7/23/18 2:08 PM TABLE OF CONTENTS Illustration 3. Number of tourists in cities in Mexico 2014 . 25 Illustration 4. Distribution of accommodation services income per type of service in Mexico in 2014 . 26 Illustration 5. Distribution of employed staff per type of touristic service in Mexico in 2014 . 26 Illustration 6. Prioritization criteria . 27 Illustration 7. Tourist visitor growth vs total investment in beach destinations in Mexico . 28 Illustration 8. Tourist visitor growth vs Per capita total investment in beach destinations in Mexico . 28 Illustration 9. Gross Production vs Per capita Total Investment in beach destinations in Mexico . 29 Illustration 10. Number of international tourists in Mexico. 33 Illustration 11. Spending of international tourists in Mexico . 33 Illustration 12. Average spending of international tourists in Mexico . 34 Illustration 13. Balance in account of international visitors in the balance of payments. .35 Illustration 14. Account balance of international tourists in the balance of payments. .35 Illustration 15. Gross Domestic Product in Mexico’s Tourism . 36 Illustration 16. States with more international tourists in hotel occupancy in Mexico in 2014 . 37 Illustration 17. Hotel opening process in Cancun. 49 Illustration 18. Process to open a hotel in Mazatlan . 54 Illustration 19. Annual average growth of GDP in % (1992 – 2014) . 60 Illustration 20. PMR Indicator 2013, OECD countries . 60 Illustration 21. Administrative burdens index for new businesses, OECD and non-OECD countries . 61 Illustration 22. Ease of doing business, Doing Business 2015: Number of procedures . 62 Illustration 23. Ease of doing business, Doing Business 2015: Number of days. 62 Illustration 24. Australian productivity index as related to global competitors, by percentage . 62 Illustration 25. Necessary procedures to set up a business at Bondi beach . 66 Illustration 26. ABLIS website homepage . 69 Illustration 27. DA application format . 70 Illustration 28. Information contained in ASIC website. 71 Illustration 29. Authorized certification agencies webpage . 72 Illustration 30. Hermosillo Municipal Geographic and Statistic Information System . 75 Illustration 31. Ideal model of hotel opening . 81 8 PROCESS FOR OPENING HOTELS IN MEXICO: ANALYSIS AND IMPROVEMENT PROPOSALS © OECD, APRIL 2017 Process for opening hotels in Mexico 96pp.indd 8 7/23/18 2:08 PM TABLE OF CONTENTS List of Tables Table 1. Relation between the interviews
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