Diversification: Cancún has reached saturation point ...

In 1970, Cancún was little more than a fishing village surrounded by glorious, deserted white-sand beaches. Thanks to Fonatur, which plans and develops infrastructure for Mexico’s tourism projects, it has grown into a world-class tourist destination.

But Mexico’s holiday hub on the Yucatán peninsula is reaching saturation point, as is the country’s other top beach getaway of Los Cabos on the southern tip of the Baja California peninsula. So state-run Fonatur is turning its gaze elsewhere.

“Both in Cancún and Los Cabos we’re finishing up. We’ve got very little merchandise left,” says Salvador Romero Dominguez, Fonatur’s commercialisation director, who expects the last remaining plots of land in both places to be sold this year.

Now, Fonatur is prioritising destinations such as Loreto, about 300 miles (500km) north up the Baja California peninsula from Los Cabos on the shores of the sheltered Sea of Cortes, and projects in the lusher state of Nayarit, which is further south on Mexico’s Pacific coast.

Loreto – the first Spanish settlement in Baja California and founded by Jesuit missionaries in 1697 – already has infrastructure largely in place. In Nayarit, Fonatur is developing the Costa Capomo resort, investing about 300m pesos ($25m) in infrastructure this year, in order to put 290 hectares on sale by January 2014, with capacity for about 4,800 hotel rooms, according to Mr Romero Dominguez.

... while Ixtapa is earmarked for expansion

Fonatur is also concentrating on consolidating existing destinations on the Pacific coast that have been less successful than Cancún. Cases in point include Ixtapa, a resort created by the agency at the same time as Cancún, and Huatulco, about 800km further down the coast, with its series of nearby bays pounded by crashing Pacific rollers.

Over the next year, Fonatur is planning to sell lots in Huatulco that will enable the resort’s total of hotel rooms to increase from 4,500 to 6,000 within three years. It will require private investment of about $225m.

This is all part of Mexico’s strategy to diversify its tourism industry, not only by expanding the range of destinations beyond the more traditional getaways of Cancún and Los Cabos, but in terms of the countries of origin of its visitors.

“We are betting on diversification,” says Rodolfo Lopez-Negrete, the head of Mexico’s tourism board. He adds that since the country suffered a big drop in visitors from the US after the financial crisis struck in 2008, the government has aimed to attract tourists from further afield, especially the large and growing markets of the Bric countries, Brazil, Russia, India and China.

“We are trying to evolve from a strategy of few feeder markets and few destinations to multiple feeder markets and multiple destinations,” says Mr Lopez-Negrete.

So far, the strategy is working. That is in spite of persisting concerns about safety in Mexico, which has been wracked by a war against drug cartels that has left more than 80,000 dead since the violence began to escalate in 2006. Although grim news stories have dominated headlines, tourist numbers are rising.

“Business is good. There’s an appetite for Mexico in every major market we go to,” says Mr Lopez-Negrete, who points out that arrivals are increasing from almost all of Mexico’s important markets, including a significant rebound in visitor numbers from the US.

He is more excited about the growth in tourists from markets such as Russia, which “continues to explode”, with visitors increasing by 78 per cent in the first quarter of this year to over 30,000, compared with less than 3,000 five years ago.

Visitor numbers from countries in Latin America have also been rising fast – arrivals from Peru were up by 57 per cent in the first quarter. Other huge markets such as China so far remain largely untapped owing to a lack of international flights, although a growth of 16 per cent in visitors from South Korea in the first quarter suggests there is considerable Asian interest. “Our biggest challenge is to improve air connectivity from our long-haul markets,” says Mr Lopez-Negrete.

The fact that the growing number of tourists visiting Mexico – there were more than 23m arrivals last year – is putting pressure on the government to develop its tourist infrastructure has not escaped the private sector. Both national and international investors are responding to this demand, and they are encouraged by the attitude towards tourism of the new government of Enrique Peña Nieto.

“There is much clearer focus on investment around infrastructure for tourism,” says Juan Vela Ruíz, the vice-president of Velas Resorts, a Mexican luxury hotel group based in the Pacific coastal resort of Puerto Vallarta. “The government finally realises that to keep up destinations that have been successful in the past you have to keep investing in infrastructure. That’s something that did not happen in the past.”

InterContinental Hotels Group (IHG), which opened its first Mexican hotel in Acapulco over 40 years ago and is the country’s largest hotel company by hotel count and number of rooms, is continuing to grow. IHG, which hosted US President Barack Obama when he visited Mexico this year, has 121 hotels open in Mexico, with 33 more in the pipeline.

The country’s tourism has a “bright future”, says Kirk Kinsell, IHG board member and president for the Americas. “We are very confident of the long term growth prospects in Mexico.”

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