Business Strategy

A fundamental element of Fibra Inn’s platform has traditionally been its specialization in business hotels. However, management has identified significant opportunities in cities that represent deep demand for hotels that offer complete luxury services. As such, the company has opted to enter this market via the “Hotel Factory” model.

The hotels that currently comprise the Trust’s Equity are classified within the segments of Limited Services, Select Services, Full Services and Extended Stay. Today, Fibra Inn’s portfolio of hotels is highly diversified, with properties that are strategically-located and mainly aimed at the business traveler. The markets we select are those that are mainly driven by industrial and corporate activity, and in which business travelers have demonstrated a preference for properties located near industrial parks, airports, office complexes and business centers, at very competitive prices. These strategic locations are not easily replicated and offer guests access to a wide range of complementary services. Additionally, there are hotels within the Trust’s Equity that have a tourism component and are aimed at the leisure traveler. For example, hotels located in tourist cities, such as Puebla and Guanajuato, which are very attractive destinations in Mexico, both for the national as well as the international traveler.

The hotel projects in which Fibra Inn will invest under the Hotel Factory Model, which offer Full Luxury Services, are aimed at: (i) the executive business traveler, located in cities with extensive demand, or (ii) the beach or leisure traveler, located in Mexico’s main vacation destinations.

Fibra Inn has entered the beach or resort hotel segment, for the following reasons:

• The cyclicality of the business hotels is offset by the seasonality of the beach hotels, which benefits Fibra Inn with higher revenue stability throughout the year.
• The lodging rate for luxury hotels are generally dollarized, which complements Fibra Inn’s revenue mix, with a more balanced participation of dollar and peso revenues.
• Expectations for occupancy levels is growing given a higher number of international guests traveling to key destinations, Mexican beaches, given an environment of competitive prices at a global level.
• Fibra Inn will take advantage of the experience of the resort hotel operators of the international hotel chains, as these operate these types of specialized properties, both in all-inclusive as well as European formats.
• The high profitability of the beach hotels is due to the fact that these compete in the international market and recent transactions in the luxury and beach segments have demonstrated a higher valuation of this type of asset with cap rates of below 8.5%.

Fibra Inn’s business model is supported by leading and widely-recognized international brands, that are well positioned and that generate attractive returns. The international brands with which Fibra Inn has franchise agreements offer significant competitive advantages and generate a high level of demand given the high quality hotel services they offer. These brands belong to some of the most prestigious hotel chains in the world including: IHG, Hilton Worldwide, Marriott International Inc. and Wyndham Hotel Group.

Fibra Inn’s business model is vertically integrated, which allows us to take advantage of the experience of our team of professionals and key personnel in the development and/or acquisition of properties. As such, the company has developed an integral process for the identification and analysis of acquisition and development opportunities with the goal of expanding the portfolio of properties, mainly via the selective acquisition of hotels that are already developed and operating. The selective acquisition of properties that are already developed and operating will mainly take place in high-growth markets or in markets where the company is already present, and where the combination of properties allows for the generation of economies of scale. Together with the Hotel Operators, the company is able to quickly identify improvement areas, as well as economies of scale to make costs and expenses more efficient. The improvement areas for the hotels that are acquired consist of renovations, repairs, seeking to convert and reposition these properties to the brands that are most appropriate for that specific location. Additionally, this places the hotel under the management of the Hotel Operator that is best suited, so as to reach the performance levels sought by Fibra Inn’s strategy.

Hotel Factory

Recently implemented, the “Hotel Factory” model is an alternative external development structure for the Fibra, whereby future growth opportunities are expanded. The Hotel Factory will develop properties via the joint investment of Fibra Inn and other strategic partners (third-party institutional investors or investment funds). In accordance with this development structure, once the hotel is developed under this Hotel Factory model and is generating revenues and the operation stabilizes, Fibra Inn will, via a purchase agreement, acquire the participation of these third-parties in order to incorporate the Real Estate asset into its equity holdings. This strategy is planned to make the use of Fibra Inn’s resources more efficient and, consequently, maintain an adequate level of distributions for its holders. This structure allows the ability to combine properties that may generate immediate cash flow, as well as projects with attractive returns in the medium term.

As a result of the abovementioned, we consider that Fibra Inn has a business model that is innovative, efficient and highly profitable, highlighted by the fact that it includes the following three fundamental elements: i) diversification of brands and formats, ii) strategic geographic location, and iii) level and quality of service of the hotels. These three elements are fundamental for guaranteeing the growth of the portfolio as well as keeping our hotel guests satisfied.