Acapulco revival: with new luxury hotels and condos, the resort aims to attract more foreign tourists.

Acapulco--the "Pearl of the Pacific" as it was known in the fifties--has seen many mini declines and renaissances, probably more than any resort destination in North America.

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Past booms, faded glory, neglect and rejuvenation are etched on the resort's physiognomy to the extent that its skyline says it all. Retro gems, peeled plaster, new paint jobs, obras negras (black works, meaning half-built, abandoned developments) and new, glittering high-rises spiraling up into a heavenly blue future co-exist as a confusing testament to good, great, bad, worse and better days.

"You have to remember that Acapulco stood alone at the beginning," said to BUSINESS MEXICO Ernesto Rodriguez, Guerrero state's secretary for Tourism. "This led to overconfidence, when people then wanted to visit other places too, like Puerto Vallarta and Mazatlan."

Later, Cancun offered scuba diving and archeology, and Los Cabos attracted tourists with golf and fishing. "But there is only one Acapulco," said Rodriguez, citing the legendary climate with an average of 33C, and minimum of 22C.

The international jet set's romance with the resort was a phenomenon of the forties and fifties, when Europe fell out of favor because of the Second World War. However, as word of wealth drew hundreds of thousands of peasants from rural Guerrero in search of work in the new industry, Acapulco acquired a less desirable reputation as "A City of Two Worlds", with its shocking contrast between the glitzy hotels and shantytowns on the outskirts.

However, it was in sixties when Acapulco and Puerto Vallarta began to profit from the U.S. glitterati and tourists who, before the revolution, would go to Cuba. Stardust still hid the tarnish from most roving eyes, and an impressive momentum of investment and one-up-manship kept the destination on a roll through the seventies. It was more than another decade before it became impossible to turn a blind eye to the lack of attention to infrastructure and maintenance, which had resulted in by-now undeniable shabbiness, social and architectural eyesores, and downright dirt.

"The crisis came in the eighties, when hotel occupation, which had been at 90%, plummeted to 20%" said Antonio Palazuelos, Acapulco's ombudsman for Investors. Yet the last two years had seen a vivid turnaround, evident to anyone who drives between the airport and the Costera Miguel Aleman, the wide road along the main bay.

A new sparkle

Last year, Acapulco received more investment than any other tourism destination in the country.

"In the last seven years Acapulco and Ixtapa-Zihuatanejo were the areas of Mexico that had been receiving the greatest investments," said Alfonso Guillen, president of the state tourism promoter Protur.

"In 2004 Acapulco began to be the municipio turistico de playa with most investment; more than Juarez, the municipality in Cancun, and more than Los Cabos," said ombudsman Palazuelos.

Rodriguez said the resort's current renaissance started 15 years ago with the Autopista del Sol. Despite criticism, it made Acapulco's weekend market--the resort is 385 km south of Mexico City--only around three hours' drive away, as opposed to seven previously. Consequently, the tourism minister suggests, it's time to reassess the old hierarchy of preference for the foreign over the national market.

"If Mexican nationals have no money to spend, then how come they are buying condominiums in Acapulco?", he asked.

Most of the new wave of investment, around 85%, is national (from Guadalajara in particular, as well as Monterrey and Mexico City). Although U.S., European and Asian money is involved too.

The lion's share is in the zone known as Acapulco Diamante, from Puerto Marquez up to the international airport and Tres Palos lagoon. That's where is also located the venerable Fairmont Princess Hotel, which put this stretch of coast on the map in 1971. Investors associations say this area is the focus of at least 75% of total spending in the resort.

Protur was created in 1987 to unite efforts of investors and the government to build the needed infrastructure to this zone. The carretera escenica--the highway between the Costera to Revolcadero beach--was widened, and now the zone is unrecognizable, with stadiums (such as the nearly complete Foro Imperial) arching up to the sky, houses mushrooming, fat condos towering, McDonalds and Wal-Marts glinting in huge, pristine blocks, hotels large and small, and many other large ones to come.

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"Our brief is to identify places that have tourist vocation in all of Guerrero." Guillen said. "We scout them out and make a technical file for potential investors."

There are many contributors to the current wave of investment, including a 20 year plan furnished by Fonatur, in response to complaints that Mexico's national fund for tourism (famous for creating Cancun, Huatulco, Ixtapa and Los Cabos) had never lent a hand to the grand dame of Mexican tourism resorts.

However, probably the most important initiative was by the current municipal government--due to hand over the reigns in November.

"We created the procurador de Inversiones (ombudsman for Investors), the only one in the country, to encourage construction discounts and reduce property tax," said Abraham Garay, director for Tourism at Acapulco's Presidencia Municipal (Town Hall).

"What was needed was a government strategy to push private investment," said ombudsman Palazuelos.

Crucial land in the Diamante area had been obtained but development simply wasn't happening. The current municipal government was faced with the challenge of establishing governance, in a climate of land invasions, demonstrations, unemployment and discontent.

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His mission has been to attract investment using a similar strategy to that of the federal government under president Vicente Fox, by opening mechanisms for deregulation and administrative simplification.

One legal operation used was beginning to apply an existing law, the Ley de Fomento Economico.

"This allowed us to give fiscal incentives, such as real estate acquisitions tax, construction rights and land tax, sometimes of up to 80%", Palazuelos said.

And it worked in six months. By July 2003, US$ 60 million in investments had been secured, ten times the amount under the previous administration.

The major players

Suddenly investors who had land, but whose projects hadn't taken off, flew into action, such as the real estate company Gonzalez Hermanos with a mall and Wal-Mart, that were ready in 6 months with 600 new jobs.

The most important developments of the last two years have been the investment of Mayan Palace and Mansion Imperial, said Garay, as well as the pioneering Torre Tikal, also in Diamante, and Maralago, a trio of huge condos, two yet to be completed.

Acapulco has now 18,400 hotel rooms, which will go up to 22,000 and, including the extra hotelera offer of condominiums, will reach 35,000 rooms.

Mayan Resorts, owned by a business group from Guadalajara that has hotels also in Nuevo Vallarta and the Riviera Maya, is responsible for the Mayan Palace in Diamante, one of the first hints of what was to come. But is also building Mayan Lakes nearby, a US$ 35 million investment, as well as the Hotel Gran Mayan, a further US$ 25 million.

"The main development is Mansion Imperial by Grupo Autofin, investors from Mexico City," said Victor Garcia, of the ombudsman's office. The stadium alone represents an investment of over US$ 30 million, and the total complex will be about US$ 700 million.

Another major project is La Isla, a new mall with interior lakes, on Diamante's Blvd. Las Naciones. This investment of nearly US$ 20 million is by Gicsa, a consortium from Monterrey, who also have La Isla in Cancun and are building another one in Miami.

Other major condominiums in Diamante are Las Olas, an investment of about US$ 50 million.

One example of a major investment in Acapulco's Costera is the Galeria Diana, a mall and cinema complex that opened opposite the Hotel Imperial last August. Investors from Veracruz built the US$ 20 million mall, as well as remodeled the hotel to the tune of a further US$ 10 million, and completed the luxury condominiums at the side of the hotel, called Las Palmas, with an investment of US$ 30 million, said Garcia.

Back to Diamante, Fairmont Heritage Place is the latest new deluxe concept, pioneering fractional ownership in Mexico, recently completed--and already all sold out--with an investment of US$ 40 million.

By the end of the year, US$ 5 billion will have been spent on this new face of Acapulco. Although this burgeoning stage of development is now reaching its limit, Garcia foresees probably a further US$ 2.5 billion in the next three years.

Garay says the next move is to shift the emphasis away from condominiums and back to hotels, starting next year, generating more jobs.

"Our aim is to attract more foreign tourists again," he says, explaining that of Acapulco's 5.2 million annual visitors, 85% are national, and only 15% international. "We want to increase this, especially attracting high-end tourists."

Studies suggest national tourists spend about US$ 70 dollars per day, while foreign visitors spend double that, and high-end tourists around US$ 200 per day.

"One important development for this market is golf courses," Garay said. "Acapulco now has five, four with 18 holes." Work to increase direct flights from the U.S. has shown positive results, such as a weekly flight starting in December from Denver with Frontier Airlines. A direct flight from L.A. that started December 2004, designed to cover the popular winter period (the high season for foreign tourism), was so successful it continued through the summer. Direct flights also will be arriving in the coming high season from Dallas, Chicago, New York and Phoenix.

"We hope to be attracting 6 million tourists annually in the next two years," Garay said.

Professionalism and pride in Acapulco as a mature resort and great achiever in the world of tourism--attitudes you could not find ten, or even five, years ago--are also clearly evident. The highly efficient Convention and Visitors Bureau is working to attract more business tourists with a new convention center in Mansion Imperial.

The Future

Miguel Guajardo was the right hand man of former president Miguel Aleman, the grand architect of Acapulco in the nineteen fifties. Guajardo, a gentleman now in his eighties, spoke of a part of Acapulco's investment history that is little known.

"Miguel Aleman was planning a commercial port that would not affect Acapulco on the other side of the Tres Palos lagoon, but President Ruiz Cortinez stopped it. He didn't think with the same vision," Guajardo said ruefully. "It was very well planned and we would have had a more orderly city."

Today's developments are stretching in that direction, although the challenge for ordered planning remains.

Fernando Alvarez, owner of Calera's best-known beachside restaurant La Cabana, established since the fifties, says its about time Acapulco developed an ecotourism ethos.

"I think the demand for investing in Acapulco is growing continually, and we can't lose in sight that this growth should take place in an orderly fashion, respecting the environment, and that it ought to be sustainable," he said.

Guajardo said it is good to see the new developments but authorities should "take care not to abandon the places that are already developed."

"Investment in public works has been gigantic in the current municipal administration," ombudsman Palazuelos said, giving the example of works to bring drinking water to 12 lower class neighborhoods. But "three years is not enough," he noted, acknowledging that the traditional areas of Acapulco near the Zocalo, Caleta and La Quebrada have received very little funding.

The task of the next municipal government will be to motivate this original area of the resort.

Palazuelos also mentioned an impulse to move local housing out of Diamante, building other social housing projects, and a more complete infrastructure for water. "We need to light a veladora (votive candle) the size of the Empire State building to the Virgin of Guadalupe for the Presa de la Parota", he said. This is a major dam project, 11 times the size of Acapulco's Sta. Lucia bay, that is currently stalled. According to the ombudsman, it would make all the difference to the town's future.

The departing administration has some ideas on how to preserve the traditional Acapulco.

"We need to promote investment--which hasn't been done yet--in small hotels, so that the same owners, through credits, can re-invest," said Garay.

A three-month pilot program called Moderniza is in place, backed by the Federal Tourism Ministry (Sectur), to improve administration and facilities in small tourist establishments.

Alvarez said Acapulco is also hoping for investment in a first line hospital, which would further encourage the increase of people coming to live in Acapulco for health reasons, such as heart problems and emphysema.

To prevent the recurrent blight of obras negras, he thinks government should demand a deadline for completion, so that the onus on the constructor is to "finish or we'll expropriate." The law states that expropriation should be "palpably" for the public weal, such as a hospice for the elderly, an orphanage or a public green space. This was done recently in Caleta, where a high rise that had been standing empty for decades was pulled down and made into a public park.

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There is no doubt Acapulco is on the rise again--its third renaissance, according to Guajardo--and is already back on the national map. The next two years will show whether, with the state tourism department's work on direct flight routes, conventions, cruise ships and promotional events, and the new town hall authority's attention to necessary infrastructure and reinvestment in neglected areas, it can edge its way back on to the world map too.

Barbara Kastelein writes about travel in Mexico for The Herald, Travesias magazine, Fodor's Travel Publications and Brides magazine.