DESTINATION : THE EVOLUTION OF LUXURY TRAVEL

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TABLE OF CONTENTS

Introduction: The evolution of the luxury traveler, and what 4 that means in Mexico

Five experiences and the destinations where they resonate: 7 1. Cuisine as a cultural encounter 7 2. Hotels that are more than hotels 8 3. Adventure and nature travel 9 4. Top-of-the-line transportation 10 5. Special events 11

The challenges and opportunities of the sharing economy 12

Infrastructure upgrades 13

The evolving role of travel agents and operators 14

Key takeaways 15

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INTRODUCTION The evolution of the luxury traveler, and what it means in Mexico

Upscale travelers aren’t what they used to be, especially in Mexico. The days when a typical luxury vacation focused mostly on long stretches of sand, posh hotels and pampering spas aren’t gone, of course. But they’ve evolved to include a far wider range of activities and destinations, often far from any beach, as travelers seek more authentic experiences and a closer connection with local culture. The sometimes-overused buzzword in the industry is “experiential,” but it certainly applies to what many suppliers are aiming to emphasize in Mexico’s luxury travel segment.

The Mexico Tourism Board, meanwhile, is recognizing the evolution not only of upscale travelers but of the general travel public, with an ambitious new program that just might revolutionize how the organization targets various market segments. The new strategy is centered around what the group calls a “digital ecosystem” — an interrelated series of projects designed to help the industry better understand travelers.

Among the elements of this new strategy are the following:

• A content generator unit, to provide text, images and videos to promote the destination • Segmented studies, to evaluate the preferences and behavior of various market segments • A business intelligence unit, to provide real-time statistical analysis of Mexico’s tourism efforts as well as those of its competition • Customer relationship management, to create personalized content and promotions and offer services like live chat with consumers • A redesigned Mexico Tourism Board site (www.visitmexico.com) and app

Noting that technology places a wealth of abilities and information in the palm of travelers’ hands, the Mexico Tourism Board is actively addressing the fact that it now competes with a much broader array of destinations — in the old days, perhaps only the Caribbean and Hawaii were considered close competitors. Today, increased access to travel, news and data means that Mexico must keep an eye on regions as diverse as Europe, South America and Asia. And one-on-one marketing, coupled with a personalized tourism product, are essential in today’s ultra-competitive competitive environment.

To maximize the potential of personalization and remain relevant with increasingly sophisticated travelers, the Mexico Tourism Board aims to identify specific market segments and niches, and create detailed taste and behavior profiles. Mass marketing and general advertising is becoming a thing of the past, as the organization sets its mark on ever-more- specific audiences. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 5

One of those markets, of course, is the upscale traveler. And deep-pocketed globetrotters are looking for new and authentic experiences like never before.

Experience Counts

The shift from passive to experiential luxury is backed up by multiple surveys. According to the 2016 Virtuoso Luxe Report, the top five travel motivations were as follows:

1. Exploring new destinations 2. Seeking authentic experiences 3. Rest and relaxation 4. Personal enrichment 5. Spending time or reconnecting with loved ones

In addition, Mexico appears on three Luxe Report “top five” lists, including one that ranks the top global destinations for luxury travel. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 6

Elsewhere, Mexico scored an impressive sixth place on the list of luxury travel top destinations in the Travel Leaders Group Fall Luxury Travel Trends survey , released in October 2016.

The importance of experiential travel is confirmed by the 2016 Future of Luxury Travel Report: published in September by Resonance Consultancy and based on an online survey of 1,667 U.S. travelers with annual household incomes of $200,000 or more, and/or a net worth of $2 million or more.

Among the key trends identified in the 60-page report:

• Travel as Transformation: Experiences that truly affect and change the traveler are a compelling aspect for upscale consumers — but since they tend to have already experienced so much, the bar is especially high. • Art is the New Food: Cuisine is a big draw for many vacationers, and so is art and culture.

The fact that Mexican destinations like Mexico City and San Miguel de Allende — both of which are far from any beach or all-inclusive resort — recently topped lists of “must-visit” destinations in publications like the New York Times and Travel + Leisure further confirms that Mexico has pushed far beyond its traditional “sun and sand” allure to attract upscale travelers. Culture, history, archeology, adventure travel, cuisine, fashion and art have become increasingly important selling points.

This shift in focus creates fresh opportunities for growth in the luxury segment. But destinations, suppliers and those who sell travel need to think outside the box to address the ever-changing interests of a diverse and finicky population of travelers. This trend report highlights examples of how current trends and new developments are affecting the market. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 7

FIVE EXPERIENCES, AND THE DESTINATIONS WHERE THEY RESONATE

1. CUISINE AS A CULTURAL ENCOUNTER

The way to a traveler’s heart is increasingly through his or her stomach, it seems. In San Miguel de Allende, the luxurious Rosewood San Miguel de Allende recently unveiled a brand-new, open-air culinary venue and herb garden for chef-led classes and demonstrations, while in Puebla, a boutique property called Sacristia de la Compañía unlocks the secrets of mole poblano and other regional delicacies during its culinary workshops, and in the Yucatecan capital of Merida, the Los Dos cooking school has attracted fans including Martha Stewart with its guided market tours and cooking classes.

“Epicureans come looking for the unique flavors of different cultures, and that is one of the reasons the gastronomical segment has been the focus of marketing efforts in the state, presenting our gastronomy in international fairs and exhibits around the world,” said Saúl Ancona, the minister of tourism for Yucatan state, of which Mérida is the capital.

Also popular on the gastronomic tourism map is the city of , which is home to an increasing number of restaurants with popular chefs and sophisticated cuisine. , which was born in the eponymous nearby town, is also a big selling point — with tours and experiences that can include tastings and tequila pairings with gourmet cuisine. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 8

2. Hotels that are more than just a place to relax

Hotels that are simply pretty places to stay may bore today’s luxury travelers. Properties that engage guests and provide insider access to local culture and authentic experiences are more likely to excite globetrotters hungry for memorable experiences.

That’s why the response to the Cultural Curator program has been so positive at the St. Regis Mexico City, according to the hotel’s general manager, Bernard de Villele. “The St. Regis Mexico City is known for curating on- site and off-site experiences that inspire the senses and embody the spirit of Mexico City,” he said, referring to a portfolio of customizable activities that include private tours of top museums and galleries, invitations to special openings and events and a “personal shopping experience” that takes guests on a walking tour of some of the city’s most elegant designer shops.

On the Caribbean coast, NIZUC Resort and Spa this year debuted a 56-foot catamaran that’s available for private excursions, staffed with butler, chef and expert guides. And on the Riviera Maya, an all-inclusive hotel called UNICO 20˚87˚ (named for the longitude and latitude where the property is located) slated to debut in 2017, aims to provide guests with access to contemporary local culture through what it calls a “Proud Local” approach, with customized outings, cooking classes and curated dining recommendations.

Nearby, “the hotel industry in Yucatan has adapted itself to new trends in luxury travel, in which travelers not only demand comfort and luxury services, but also unique experiences,” according to Ancona, who noted as an example the soon-to-open Chablé Resort, a member of Small Luxury Hotels of the World. “Haciendas, now turned into boutique hotels, have incorporated new experiences as an added value to the guest experience, involving the communities that surround the property. For instance, there are cooking classes with people from the villages around the properties, massages with ancient Mayan techniques and elements, Mayan blessings and purification ceremonies.” Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 9

Unique, hotel-led experiences await on the Pacific coast as well. In Los Cabos, the Resort at Pedregal offers Mexican wine tasting sessions, while the Hilton Los Cabos Beach & Golf Resort — which recently debuted the upscale Vista Club, a “hotel within a hotel” concept — is among the properties that allows guests to participate in turtle protection programs. Further south, near Puerto Vallarta, Grupo Vidanta is to unveil the first-ever Cirque du Soleil theme park in 2018, at the Vidanta Nuevo Vallarta. The venue will have three themed hotels on site, as well as a water park and various entertainment venues.

3. ADVENTURE & NATURE TRAVEL

Upscale travelers are more active than ever, and those who market to them are keen to link open-air excitement with posh travel experiences.

“Riviera Nayarit, which was founded in 2007, is the perfect intersection of luxury and nature,” according to Richard Zarkin, public relations manager for the Riviera Nayarit Convention & Visitors Bureau. “While the destination has always been home to rare and indigenous wildlife, we have masterfully integrated acclaimed hotel brands, including Grand Velas Riviera Nayarit and Four Seasons Resort Punta Mita, within our lush landscapes.” The recently opened W Punta de Mita is the newest luxury brand to join the local portfolio.

All of these properties make it easy for guests to access outdoor activities in the Riviera Nayarit, including boat rides to the Marietas islands, swimming with dolphins and kayak tours.

Connecting luxury and nature is also easy in the Yucatan state, according to Ancona. “Hiring one of the destination management companies [that] specialize in luxury travel will guarantee you a tailor-made experience — visiting, for instance, a secluded Mayan site, swimming in private sinkholes, ‘glamping,’ bird watching [and] learning how to make handcrafts with the native people of the villages.” Among the local tour operators offering high-end services is Catherwood Travels, which employs archeologists, ornithologists and historians among its expert guides. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 10

4. TOP-OF-THE-LINE TRANSPORTATION

Crowded tour buses and even standard private transfers are a no-no for Mexico-bound upscale travelers.

Upscale transportation options in Mexico are as varied as the attractions. Vacationers can glide over the pre-Hispanic pyramids of Teotihuacan in a hot-air balloon just outside of Mexico City, plunk into the driver’s seat in a high-performance luxury car from Exotic Rides Cancun or book a First Express ticket on the Chepe, the train that cuts through Mexico’s scenic Copper Canyon.

Among the newest options is the Tequilacopter, a helicopter service that shuttles visitors between the Guadalajara airport and the Sauza Tequila distillery, for private tours and tastings. It’s a noteworthy complement to the Express, a train service operated by Mundo Cuervo that serves margaritas, tequila and empanadas en route to the historic town of Tequila. The Four Seasons Resort Punta Mita, meanwhile, offers its own “ultimate Tequila tour,” which includes roundtrip private helicopter transfer from the Pacific coast to the town.

With the 2015 opening of the 93-room Solar de las Animas, a Relais & Chateaux property in Tequila, the allure for upscale travelers is even greater, according to Gustavo Staufert Buclón, CEO of the Guadalajara Convention and Visitors Bureau. “The cultural infrastructure that the town of Tequila has developed around the agave invites visitors to experience the whole process of tequila distillation,” he said. “You can arrive by a themed train, private car tours [and] the Tequilacopter, where you will go through the magnificent Barranca de Huentitán and land on an agave garden, or spend the night at a five-star hotel right in the heart of the UNESCO World Heritage scenery.”

Photo credit: Mark Chesnut - LatinFlyer.com Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 11

5. SPECIAL EVENTS

The 2015 James Bond movie Spectre opened with a gala Day of the Dead parade in Mexico City. The thing is, that parade didn’t actually exist in real life, even though Día de los Muertos is one of the most hallowed times of the year in many parts of Mexico. The vibrant event attracted much attention and clearly presented an opportunity for the tourism industry. So in 2016, for the first time, the Mexico Tourism Board and Mexico City’s Secretary of Culture remedied the situation — and took advantage of increased interest — by creating a brand-new Day of the Dead parade. The response was so impressive that the event is already confirmed for 2017. Pop culture can, indeed, sometimes work wonders for tourism.

The allure of special events and annual celebrations is as strong with upscale travelers as with anyone else, but the need for a personalized experience is greater. Guadalajara scores big with gastronomical festivals including Poniente and the COME Festival Internacional de Sabores, both of which provide a platform for local and international chefs to present their latest creations.

The Pacific coast has its own special events. Carnival, the annual pre-Lenten celebration, is especially big in Mazatlan, with parades, live music and street festivals. The Los Cabos International Film Festival, meanwhile, draws an A-list array of celebrities and moviemakers, some of whom stay at the destination’s most luxurious hotels, alongside festival attendees.

“The events that prove especially attractive to Riviera Nayarit’s discerning travelers include the International Migratory Bird Festival, Punta Mita Gourmet & Golf Classic, Banderas Bay International Regatta, International Sport Fishing Tournament, Festival International Gourmet and Beach Polo World Cup,” said Zarkin, noting several events that take place in Vallarta-Nayarit. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 12

THE CHALLENGES AND OPPORTUNITIES OF TECHNOLOGY AND THE SHARING ECONOMY

As a general rule, most taxi drivers hate Uber, and most hoteliers feel some degree of threat from Airbnb. But for the tourism industry as a whole, the sharing economy has expanded the range of possible sales, and upscale travelers in Mexico are responding. Today, vacationers can easily rent entire haciendas and mansions around the country, while long-standing concerns about the safety of street taxis in places like Mexico City have withered away, as secure Uber rides have replaced the need for traditional cabs.

“Technology makes traveling to Riviera Nayarit, and ultimately all over the world, much simpler,” said Zarkin. “You no longer need to book every activity, restaurant or hotel before a trip, because everything can be done on the go. Specifically, we’ve noticed an increase in travelers booking airline tickets and hotels on their smartphones. This ability to dive into spontaneous experiences also helps travelers learn about our niche destination offerings, as they are constantly looking up reviews and background information on the go.”

“Gwyneth Paltrow, a known fan of Punta Mita, booked a private villa last year through Airbnb to celebrate the New Year,” Zarkin added.

“This is another reason that luxury travel is growing in the city [of Guadalajara],” said Staufert. “Tour operators are customizing the experiences.”

The long-term effect of the sharing economy remains to be seen, according to Miguel González González, general director of tourism promotion at the Secretary of Tourism for the state of Jalisco. “Uber hasn’t entered Puerto Vallarta, and Airbnb isn’t for everyone, since some have higher expectations about attention and service standards,” he said. “These services aren’t as developed in the luxury segment, and we don’t have statistics to do a deep analysis. Uber, on the other hand, is a service that operates in Guadalajara and it has received a very warm welcome from locals as well as tourists. But so far it hasn’t presented a challenge for local transportation operators.” Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 13

INFRASTRUCTURE UPGRADES

An array of infrastructure and service upgrades promises to expand the reach and opportunities for upscale travel to and around Mexico.

A new air transport agreement put into place this year has removed limits on the number of airlines serving U.S.-Mexico city pairs. And the construction of a brand-new airport outside of Mexico City will greatly expand the strained capacity of the existing facility, providing more opportunities for growth and competition.

“The open-air agreement signed between the United States and Mexico has created opportunities for airlines from both countries to add frequencies out of important markets and less saturated airports,” noted Zarkin.

In the state of Jalisco, home to both Guadalajara and Puerto Vallarta, hopes are high for a new highway — slated for completion in 2018 — that will greatly reduce the travel time between both destinations. “It will open a new line of tourism in the area,” said Staufert. “The construction of the highway will broaden the offer and provide a new touristic product that will increase tourism in both cities.” Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 14

THE EVOLVING ROLE OF TRAVEL AGENTS AND OPERATORS

People don’t buy travel the way they used to — and the role of travel agents, online travel agencies and tour operators continues to evolve.

“If you are traveling to Riviera Nayarit, or a different location within Mexico, the general difference in booking methods depends on your generation,” said Zarkin. “Affluent Millennials make their own travel decisions through research and personal recommendations, but older generations prefer to have travel agents design their trip and handle the logistics.”

“The Internet is playing a big part in how people are searching for their future travel destinations, and we believe it is influencing what travel agents are selling, because people ask for certain activities or experiences as they read [about them] in the media,” said Staufert. “The people who book directly with tour operators look for a more controlled, in-the-know experience, while people who travel by themselves are more adventure oriented.”

“Due to the technological changes that have facilitated demand with rapid access to information, agencies have thrown themselves into satisfying the demand through their own applications and alliances, to be able to link that information directly to sales,” said González. “In Jalisco, we try to always work on training for travel agents, since our luxury offering is very tied into our culture and traditions.”

With generational differences and personal booking preferences still in play within the upscale segment, marketers need to target consumers with a multi-pronged approach, using both direct marketing as well as alliances with top-selling travel agents and online travel agencies. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 15

INSIGHTS AND STRATEGIES

To thrive, Mexican destinations, suppliers and those who sell them must embrace the opportunities presented by new technology and the sharing economy — even if it may at first appear to be threatening.

Mexico’s unique culture and traditions provide myriad opportunities for authentic experiences in every destination. Insider connections that create truly memorable moments are a compelling way to attract upscale travelers. Celebrate what’s unique about each destination, and how the visitor can appreciate it first-hand.

Increased air connectivity between the United States and Mexico, as well as within Mexico, will likely create new opportunities to sell various destinations — while a new highway between Guadalajara and Puerto Vallarta may also help to encourage more multi-destination vacation travel. Destination Mexico: The Evolution of Luxury Travel SKIFT REPORT 2016 16

ABOUT THE TOURISM BOARD OF MEXICO

The Mexico Tourism Board is an organization that coordinates, designs and oversees tourism promotion strategies on a national and international level. It also promotes the amazing natural and cultural destinations and activities that Mexico offers. The vision is to be an leading tourism promotion organization, benefiting from the involvement of a diverse range of participants in the sector. Its goals include to strengthen the image of Mexico as a tourism destination, to grow the economic contributions of international travel to Mexico, to spur the growth of domestic tourism, to increase the participation of the US, Canadian, LATAM, European and Asian markets, and to diversify source markets.

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