IN 2023 LOS CABOS GENERATES THE MOST PROFIT IN SHORT-TERM RENTALS
Thanks to its allure as a tourist hotspot and the rise of near-shoring opportunities, Mexico has become a magnet for short-term housing businesses. Leading this surge, Los Cabos generates an impressive $320 million annually from short-term rentals, eclipsing Mexico City’s $290 million. While the economic prospects seem sunny, industry leaders stress the need for better professionalization, market regulation, and strategies that balance both locals’ and tourists’ needs to ensure sustainable growth.
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Los Cabos surpasses Mexico City in income from short-term rentals
It is estimated that, in both cities, this market would generate around 600 million dollars a year.
Due to its tourist attraction and the new opportunities that come with the relocation of companies (nearshoring), Mexico has become one of the most attractive countries for housing businesses for temporary rental or short-term rentals.
Mexico City, Los Cabos in Baja California Sur, as well as Cancun and Tulum in Quintana Roo, are the main markets for the item throughout the country.
Based on the supply of houses and apartments for short-term rental , their price and average occupancy, Los Cabos and Mexico City generate 320 and 290 million dollars a year, respectively, according to data from the Spanish proptech Alterhome.
Chema González, general director of the company specialized in vacation rentals, indicated that this segment of the Mexican economy has a favorable outlook for the future, although it will also have to face challenges such as regulation and professionalization.
“Mexico is a very large market, it is growing even more than the European one. With what is happening with nearshoring and the behavior of the peso against the dollar, years of good economy are coming that will benefit vacation rentals; although the gap must be filled of professionalization and regulation that is lacking to consolidate the market”, he commented in an interview.
They will invest 1.4 million euros
In its first year of operation in Mexico, Alterhome plans to invest 1.4 million euros to deploy its business in 12 parts of the country; the goal is to accommodate up to 12,000 travelers in properties managed with its technology.
To achieve this, the objective is to democratize the opportunities offered by vacation rental housing through a business model aimed at entrepreneurs who want to capture market profitability, even without owning any property and without having experience in the sector.
According to González, an average home in Cancun or Mexico City can generate an average income of $33,000 a year through short-term rentals ; where the property manager can earn 9 to 12% commission.
“We have created technology so that anyone can set up a business that allows them to manage from 30 to 100 homes in a year. For this we provide them with training and digital tools specialized in property management,” said the specialist.
The Alterhome platform uses Big Data for strategic factors such as pricing, the digital key to access homes , agreements with OTAs (Online Travel Agency) and applications to control noise.
Regulation is paramount
Although the vacation home boom has been good business, the truth is that it has also raised disagreements in certain cities such as Mexico City, where a decrease in the inventory of houses and apartments for traditional rental has been reported, as well as such as price increases.
As vice president of the Vacation Rental Association in Spain, González mentioned that market regulation is a priority to safeguard the interests of all parties involved, that is, owners, administrators, travelers and the local population.
“I have worked with public administrations for 10 years and we have participated in many regulations that have helped to relieve the pressure on inventory, as well as to improve coexistence between neighbors and travelers. A similar regulation will surely be created in Mexico,” said the expert.
In this sense, he remarked that some of the alternatives to regulate temporary rental housing are: delimiting the areas of interest for locals and those most popular with tourists; as well as issue operating licenses for the properties.
