Playa Del Carmen (and the Riviera Maya generally) is a unique business market. Businesses here face challenges that combine the realities of Mexico’s economy with the specifics of a tourist-driven economy. Over the past decade we have seen hundreds of businesses close their doors and started to see patterns of why businesses fail. We hate to see someone’s passion and effort fail, so we are writing this article on why some places fail. Here are the top 10 reasons businesses fail in Playa Del Carmen, in no particular order, with some explanation for each:
1. Overreliance on Tourism and Other Expats
Playa Del Carmen’s economy is heavily seasonal. Businesses that depend solely on foreign tourists often struggle during low season (June–October). Without catering to locals or diversifying customer bases, many run out of cash in the slow months. Labor laws in Mexico also prevent businesses from firing or letting employees go without just cause. This means planning ahead to keep everyone on the payroll as well as paying everything else.
Some choose a business idea that is targeted at other expats. This might seem like an easy thing to do since you speak the same language and want to provide a service to a market you understand well. The main problem is that the foreign-born population in Playa Del Carmen is very small. It is estimated at about 7%. So, of a population of about 300,000 inhabitants, there are about 21,000 non-Mexicans living in town. That might sound like a lot but remember there are a lot of Spanish speaking non-Mexicans in Playa, for example people from Argentina, Venezuela, Guatemala, and Cuba.
There are others that are not native English speakers (i.e. French, Portuguese). So, your market is narrowed down and then there are other factors like people finding the same service cheaper locally or so integrated with the community that they don’t seek our expat run businesses.
2. Poor Market Research
Many entrepreneurs assume that because Playa is full of tourists, “anything will sell.” In reality, competition is fierce. Opening yet another ice cream spot or souvenir shop without analyzing demand, foot traffic, and target demographics leads to quick burnout.
We see many businesses owners’ price themselves out of the market because they don’t understand how many locals make and spend money. Many locals make $20/$30 USD a day. Many services and products are expensive for the majority of people living in the area. This does not mean that people don’t splurge, but it does mean a limited client base for businesses.
Advertising is another area of your market research that business owners need to pay attention to. Playa Del Carmen has a new population each week here on vacation. That is a hard market to reach because they come and go. Knowing how to contact the local market and reach out to tourists is key to a survival of a business. See our article on marketing in Playa Del Carmen.
3. High Rent in Prime Areas
Fifth Avenue (La Quinta Avenida) and beachfront properties charge some of the highest rents in Mexico. Business owners often underestimate how much sales they’ll need just to cover rent, leading to unsustainable overhead. Rent on 5th Avenue is thousands of dollars a month. Rents are cheaper in other parts of the city, but you need to balance it with access to clients and foot traffic.
Another thing to balance out for new businesses is signing a lease that works for them. If a business intends in being around for a while, signing a long-term contract can lock in a better price for rent. It also maintains the location, so clients get used to where they are. Many new businesses sign short leases to see how it goes. Often, they put a lot of work in renovations and before you know it, the first year is up and the rent is ready to be negotiated again, often going up.
4. Cultural & Language Barriers
Foreign entrepreneurs who don’t speak Spanish or understand Mexican business culture (permits, contracts, supplier relationships) can make costly mistakes. Miscommunication with authorities, staff, or vendors often derails operations.
Simple things like knowing Mexican Holidays and to pay employees or if it is good to open around certain holidays is important.
5. Legal & Bureaucratic Issues
Getting the right permits, licenses, and tax compliance in Mexico can be complex. Businesses that skip steps or rely on bad legal advice sometimes face shutdowns, fines, or “surprise inspections” that drain resources. Requirements and processes can also change with the election of a new governor as well.
6. Cash Flow Mismanagement
Many small businesses over-invest in renovations, flashy interiors, or imported products without a buffer for seasonal downturns. When cash dries up, they can’t cover payroll, inventory, or rent — and collapse quickly.
7. Staffing & Turnover
Playa has a transient workforce (many young workers work for their convivence and will switch jobs as something becomes available). High turnover, lack of training, or unreliable staff can damage service quality, reputation, and ultimately profitability.
Many expats often comment on Facebook about how to retain employees or complaining about another staff person just leaving one day. This is often because they do not understand the local workforce. There are standard wages in Mexico. Jobs often have a small window on the pay scale. Mexicans understand that job opportunities are limited and will often settle for a job until something better comes along. Often if the job pays a basic wage, they give you basic effort. Sometimes if paid more, they work harder for the extra pay. This means there needs to be a good line of communication between employees and bosses.
As an example, I had a worker at my house working on a large project. The worker had a job offer in Cozumel that offered more pay. We settled on just 200 pesos more a week to have him stay. It was a good compromise because losing the worker would mean looking for someone else and he was a good worker. For him, the higher wage in Cozumel was good, but had to pay transportation and other expenses that only worked out to making a little more. Because of good communication, we easily settled and kept everything on track.
8. Security & Safety Concerns
While Playa Del Carmen is generally safe for tourists, crime, extortion attempts, or “protection fees” sometimes affect local businesses. Even minor incidents can damage trust with customers or drain profits unexpectedly. It is always good to talk to other businesspeople in similar lines of work about what to expect. New business owners are often targeted because people want to try to take advantage of someone who is not seasoned in how things work.
9. Not Picking the Right Location
As the expression goes in real estate “Location, location, location!”. Especially in Playa Del Carmen it is important to pick the right spot for your business and times to open. There are dead zones or blocks that are cursed in Playa Del Carmen where many businesses have opened and closed. The main reason they fail is the amount of foot traffic that passes by and parking availability. A good example is Constituyentes Avenue between 20th and 25th. In the not-too-distant past there was not much on Constituyentes. Now there are condos and some shops open. The block between 20th and 25th Avenues has had rental car companies, tacos, sports supplements, a bakery, dress shops and more all open and close there. It is a s high visibility area but there is not too much parking near there and people don’t usually walk on that block.
There are other areas of the downtown where many businesses have opened and closed. There has to be a balance between being visible like 5th Avenue, the price of rent, and how your clients reach you. Many times, a block away from 5th is 30% cheaper the rent but 90% less foot traffic. By being in Playa for a while, you start to see patterns with certain blocks, and you find yourself not even walking on certain streets. Then you understand the importance of location.
10. Overestimating Tourist Spending
Many visitors are budget travelers or stay in all-inclusive resorts where they spend little outside. Even though there are thousands of tourists walking on 5th Avenue each day, that does not mean they are dropping cash everywhere. Businesses expecting “rich American tourists dropping money everywhere” often overprice their products/services, only to find few takers.
Summary: Most failures come from underestimating costs, overestimating demand, or not adapting to Playa’s tourist-driven, seasonal, and competitive market. Those who succeed usually:
- Plan for low season
- Engage locals as well as tourists.
- Stay flexible and are creative.
- Have a good location.
- Offer consistency of service and products.
- The owners are always heavily involved, meaning always there or checking on things.
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