Real Turismo, S.A. de C.V. History

Address:

Incorporated: 1980 as Casamar, Bienes Raices y Turismo, S.A. de C.V.
Sales: 958.86 million pesos (US$96.62 million) (1999)
NAIC: 721110 Hotels & Motels

Key Dates:

1959:: The first Camino Real hotel opens in Guadalajara.
1960:: Western International Hotels invests in the creation of other Camino Real hotels.
1968:: Opening of the Mexico City Camino Real, the chain's flagship.
1982:: The Camino Real chain opens its twelfth hotel.
1987:: The enterprise goes public as Grupo Camino Real.
1989:: The chain is controlled by a private holding company, Real Turismo.
1998:: Following a banking scandal, a government agency obtains title to the chain.
2000:: Grupo Empresarial Angeles purchases the hotels at auction.

Company History:

Real Turismo, S.A. de C.V. is the operator of the Camino Real chain of Mexican luxury-class hotels. Camino Real is the third-largest Mexican-owned hotel chain and the longest in continuous operation. Real Turismo is a subsidiary of Grupo Empresarial Angeles, a privately owned conglomerate.

Growing Hotel Chain: 1959-1987

The first Camino Real hotel made its debut in Guadalajara in 1959. The owners were Jose Brockmann (or Brockman) Obregon and a group of local investors. The following year, Brockman formed a partnership with the U.S. company Western Hotels Inc., which soon changed its name to Western International Hotels Inc. (WIH) and then later to Westin Hotel Co. Western invested in the building and acquisition of other Camino Real hotels, taking a stake as high as 44 percent in what was named Western Hotels of Mexico (and, in 1963, Western International Hotels of Mexico). With Brockman at the helm, WIH built a Camino Real in Tampico in 1963, in Ciudad Juarez and Saltillo in 1965, and in Tapachula in 1967.

The enterprise's flagship was the 709-room Camino Real in Mexico City, constructed in 1968 to serve as the host hotel during the Summer Olympic Games held in the capital that year. It was built on 7.5 acres near Chapultepec Park at a cost of US$14 million and included duplex suites, each overlooking a private garden, a 570-car garage, a ballroom big enough to hold 1,500 people, four restaurants, seven bars, and two clubs. Also in 1968, WIH acquired a Guatemala City hotel that was converted into a Camino Real. Other Camino Real hotels were erected in Puerto Vallarta in 1969, Chapala in 1970, Mazatlan in 1971, San Salvador, El Salvador, in 1972, and Cancun in 1975. A hotel was acquired in Cabo San Lucas in 1970 and turned into another Camino Real. The company also assumed management of Acapulco's swank Las Brisas in 1976. Some of these ventures did not survive long in the chain: the Ciudad Juarez and Tapachula units were terminated in 1974 and the Cabo San Lucas and Chapala ones in 1975. Another beach-resort Camino Real was completed, in Ixtapa in 1981, and the Camino Real chain also constructed and opened the Galeria Plaza in Mexico City.

Banco Nacional de Mexico (Banamex), Mexico's largest bank, was providing much of the capital and held majority control of the chain by 1982, when the collapse of the national currency--the peso--resulted in the nationalization of Mexican banks. At this time, there were 12 hotels in the Camino Real roster, some of which were 100 percent owned by Banamex, others in which it held a minority of shares, and still others in which it had no stake at all.

During the following years, the holders of shares in Banamex received compensation from the government and used some of these credits to maintain a stake in the enterprise, which had been incorporated as Casamar in 1980. The Legorreta group, which had included major shareholders in Banamex, was especially prominent in this regard. In 1987, the enterprise was reorganized under a new holding company called Grupo Camino Real. At the end of that year, this group sold about 10 percent of its common stock on the Bolsa de Valores Mexicanos, Mexico City's stock exchange, collecting about US$20.55 million. The group had a five-year plan that called for an investment of US$300 million to add 5,000 rooms to the chain, building a new 500-room hotel in Cancun and others in the beach resorts of Cozumel, Huatulco, Los Cabos, and Puerto Vallerta. Starting more modestly, however, the chain began a program of adding 86 rooms to its existing Cancun hotel and constructing 76 more at its existing hotel in Puerto Vallerta. The company also was maintaining its affiliation with Western International (now Westin Hotels & Resorts) under a 10-year contract signed in 1983. Also in 1983, Camino Real had acquired ownership of a hotel in Villahermosa that had formerly been a Holiday Inn.

Changing Hands Several Times: 1987-2000

Grupo Camino Real, still Mexico's largest luxury-class chain, recorded revenues of 211.88 billion pesos (about US$92.5 million) and earnings of 75.97 billion pesos (about US$33.2 million) during fiscal 1988 (the year ended August 31, 1988). Some of this money came not from owned hotels but from operating the Las Hadas resort hotel in Manzanillo (which the group purchased about this time), operating the Ambassador Hotel in Monterrey and Camino Real hotels the group no longer owned in Mazatlan and Saltillo, and from technical-assistance contracts with the hotels operating under the Camino Real name in El Salvador and Guatemala. By 1989, Grupo Camino Real had come under the control of two pairs of brothers--Israel and Pablo Brener and Moises and Anselmo (or Antonio) Cosio--and had been placed in a holding company named Real Turismo, S.A. de C. V., which also had other interests in the tourist sector.

The relationship quickly soured, and in early 1990, after months of bitter struggle, the Breners and Cosios split their holdings. The Breners retained the Real Turismo name, 10 Camino Real hotels--8 of them affiliated with Westin--and Las Hadas. The Cosios received the Camino Real in Ixtapa, Mexico City's Galeria Plaza, and management of Las Brisas. Real Turismo was operating nine Camino Real hotels in 1992, when it purchased the landmark 375-room Paso del Norte Hotel in El Paso, Texas, just a few blocks north of the Mexican border, and renamed it the Camino Real El Paso.

Expansion of the Camino Real chain continued in the1990s, with hotels added in Acapulco (1993), Cuernavaca (1993, a former estate of Woolworth heiress Barbara Hutton), Tuxtla Gutierrez (1994), Chihuahua (1996), and Tijuana (1996). The company also purchased a Stouffer Presidente hotel in what had once been Oaxaca's Convento de Santa Catalina, converting it into a Camino Real in 1994, and Puebla's Convento de la Concepcion into another one in 1996. In 1996, the chain consisted of 14 hotels with 3,324 rooms, 2,351 employees, and revenues that year of 569.19 million pesos (US$73.41 million). However, the company had gone through numerous and wrenching changes. When Zonura Compania Hotelera, headed by Alvaro Lopez Castro, bought it around 1993, only the hotels in Mexico City and Guadalajara were profitable. Eighty-five percent of the purchase price came in the form of short-term credits from a consortium of seven Mexican banks, and the chain was spending another $30 million to remodel the four oldest properties in the system. The units in Cancun and Puerto Vallarta lowered their rates up to 20 percent in an attempt to capture a larger market share. Camino Real's affiliation with Westin was dissolved.

New Ownership: 2000-2002

The currency crisis and peso devaluation of December 1994 resulted in the failure of many Mexican enterprises and the banks that had been financing them. Banco Union, which held the Camino Real assets, went bankrupt after a banker allegedly embezzled as much as US$700 million before fleeing Mexico. The hotel chain fell into the hands of a government agency that did not succeed in divesting it until 2000, when most of the hotels were sold at auction to a private conglomerate called Grupo Empresarial Angeles for US$255 million. For this price, the buyers received many of the 16 Camino Real hotels, including a 22 percent stake in the Saltillo unit, and the assumption of the contracts to operate the hotels in Cuernavaca, Huatulco, and Oaxaca. It chose not to include the Camino Real in Mazatlan or the Las Hadas unit in Manzanillo. The operating unit for the chain was renamed Real Turismo.

These hotels were nominally five-star luxury lodgings, but under government administration they did not receive adequate funding and deteriorated in quality. As a result, the chain had to lower its rates for its most expensive rooms from about 1,800 pesos (about US$190) to an average of 1,100 pesos (about US$115). In 1999, the chain had an average occupancy rate of 62 percent and recorded an operating profit of US$24 million. Grupo Empresarial Angeles, which was already in the lodging business by virtue of its hospitals, was hoping to create synergies of operation by such means as contracting for the hotel chain's furniture and electrical apparatus through the furniture stores that were also owned by the group and by centralizing purchasing, inventories, and accounts receivable.

A US$48 million remodeling program was undertaken with, in the initial stages, the rooms, restaurants, bars, public areas, and recreational areas of the Cancun, Guadalajara, Mexico City, and Puerto Vallarta properties. Ricardo Legorreta, the architect of the Cancun and Mexico City hotels, was charged with the task of refitting the units within a unified architectural and decorative concept. Some US$19 million of that sum was earmarked for the Mexico City and Guadalajara hotels. The bulk of the US$14 million spent on the Mexico City Camino Real went for rooms upgraded with Internet hookups, work desks with ergonomic chairs and task lighting, and dual-line telephones. The hotel also opened two new restaurants, one featuring Spanish cuisine and the other a steakhouse. The Guadalajara makeover included replacement of the hotel's facade and a new business center and health club. The Puerto Vallerta unit received two restaurants and the Cancun one new meeting rooms and a new swimming pool for the exclusive use of guests staying in the more expensive Camino Real Club rooms.

The Camino Real hotels closed the year 2000 with an impressive list of honors from the travel industry. Conde Nast Traveler named the Cancun and Puerto Vallarta units to its Gold List of the best places in the world to stay. Travel & Leisure named the Puerto Vallarta unit among the top 25 destinations in the Americas other than the United States and Canada. Each Camino Real property scored "excellent" on more than 90 percent of the surveys filled out by vacationers for Apple Vacations. In 2001, Hilton Hotels Corp. signed an agreement with Hoteles Camino Real to affiliate 14 Camino Real hotels and resorts with the Hilton family of brands. The Camino Real hotels became active participants in the Hilton Honors guest-reward program, receiving sales and reservations support from Hilton Sales Worldwide and Hilton Reservations Worldwide offices around the globe.

The Camino Real hotels consisted at the time of the following: Acapulco, 157 rooms; Cancun, 391 rooms; Cuernavaca, 163 rooms; El Paso, 359 rooms; Guadalajara, 205 rooms; Huatulco, 120 rooms; Mexico City, 709 rooms; Oaxaca, 91 rooms; Puebla, 83 rooms; Puerto Vallarta, 83 rooms; Saltillo, 140 rooms; Tijuana, 250 rooms; Tuxtla Gutierrez, 210 rooms; and Villahermosa, 197 rooms. By the spring of 2002 another Camino Real resort hotel had been added, at Loreto, in Baja California Sur.

Hoteles Camino Real announced plans in 2001 to introduce a chain of limited-services hotels in secondary cities throughout Mexico. These hotels would target business travelers, with all rooms featuring dual-line phones, voice mail, fax machines, data ports, and work desks. The first of these Camino Real Ejecutivo hotels, a 137-room unit in or just north of Mexico City, was scheduled to open in December 2002. Four more were planned, including hotels in Guadalajara, Saltillo, and Torreon. It was believed that as many as 10 of these hotels could be in operation within three years.

Real Turismo's revenues fell from 994.92 million pesos (US$103.34 million) in 1998 to 958.86 million pesos (US$99.62 million) in 1999. Net profit fell from 108.19 million pesos (US$11.24 million) to 32.82 million pesos (US$3.41 million). Of the 1999 revenue, rooms accounted for 51 per cent; food and drink, 35 percent; other departments of operation, 7 percent; and operations for third parties and other revenues, 7 percent.

Principal Subsidiaries:Camino Real Guadalajara, S.A. de C. V.; Camino Real Mexico, S.A. de C.V. (96 percent); Camino Real Puerto Vallarta, S.A. de C.V. (98%); Caribe Resorts, S.A. de C. V.; Casanueva Inmobiliaria, S.A. de C. V.; Controladora Hotelera Acapulco, S.A. de C. V.; Controladora Hotelera Ixtapa, S.A. de C. V.; Desarrollos Turisticos del Pacifico, S.A. de C. V.; Hotel Camino Real Cancun, S.A. de C.V. (79%); Hotel Paso del Norte, Inc. (United States); Hoteles Camino Real, S.A. de C. V.; Inmobiliaria y Promotora Cancun, S.A. de C.V. (59%); Promociones C R, S.A. de C.V.

Principal Competitors:Grupo Posadas, S.A. de C. V.; Hoteles Presidente.

Real Turismo, S.A. de C.V. History

Key Dates:

Company History:

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