GRUPO POSADAS S.A.B. DE C.V. – USP4983GAR13, US400489AH37, USP49 Prospectus Document

Document Text
Offering Memorandum
                                                        U.S.$50,000,000




                                Grupo Posadas, S.A.B. de C.V.
                                         7.875% Senior Notes Due 2022
We are offering U.S.$50,000,000 principal amount of 7.875% Senior Notes due 2022 (the “New Notes”). The New Notes will constitute a
further issuance of and form a single series with our outstanding 7.875% Senior Notes due 2022 issued on June 30, 2015 in the principal
amount of U.S.$350,000,000 (the “Existing Notes”). The New Notes sold pursuant to Rule 144A under the Securities Act of 1933 as
amended (the “Securities Act”) will trade under the same CUSIP and ISIN numbers and will have identical terms as the Existing Notes held in
the Rule 144A global note, other than their date of issue and their initial price. The New Notes sold pursuant to Regulation S under the
Securities Act will have identical terms as the Existing Notes held in the Regulation S global note, other than their date of issue and their
initial price. Through the 40th day following delivery of the New Notes, New Notes sold pursuant to Regulation S under the Securities Act will
have temporary CUSIP and ISIN numbers. Thereafter such New Notes will trade under the same CUSIP and ISIN numbers as the Existing
Notes held in the Regulation S global note. Unless the context otherwise requires, references to “Notes” in this offering memorandum refer to
the Existing Notes and the New Notes offered hereby as a single series. Upon completion of this offering, the aggregate principal amount of
outstanding Notes will be U.S.$400,000,000.
The Notes will mature on June 30, 2022. We will pay interest on the Notes on June 30 and December 30. The next interest payment date on
the Notes, including the New Notes, is June 30, 2016. The Notes will bear interest at a rate equal to 7.875% per annum.
Prior to June 30, 2019, we may redeem the Notes, in whole or in part, at a redemption price based on a “make-whole” premium and on or
after June 30, 2019, at the redemption prices set forth in this offering memorandum. Until June 30, 2018, we may redeem up to 35% of the
Notes with the net proceeds of qualified equity offerings (as defined under “Description of the Notes”). If we undergo a change of control or
sell certain of our assets, we may be required to offer to purchase Notes from holders.
The Notes will be our senior unsecured obligations and will rank equally with all of our other unsecured senior indebtedness, except for our
obligations that are preferred by statute, and senior to all of our subordinated indebtedness. The Notes will be guaranteed by certain of our
existing and future wholly owned direct and indirect subsidiaries. The guarantees will be the senior unsecured obligations of the guarantors
and will rank equally with all of the guarantors’ other senior unsecured indebtedness, except for their obligations that are preferred by statute,
and senior to all of the guarantors’ subordinated indebtedness. The Notes and the guarantees will be structurally subordinated in right of
payment to all of our and the guarantors’ secured indebtedness to the extent of the value of the assets securing such indebtedness, and the
Notes and the guarantees will also be structurally subordinated in right of payment to all liabilities, including trade payables, of our
subsidiaries that are not guarantors.
The Existing Notes are currently listed on the Official List of the Luxembourg Stock Exchange and trade on the Euro MTF Market. We have
applied to increase the principal amount of Notes listed on the Official List of the Luxembourg Stock Exchange and trading on the Euro MTF
Market so as to include the principal amount of the New Notes. However, we cannot assure you that the listing application will be approved.
This offering memorandum constitutes a prospectus for purposes of Part IV of the Luxembourg law on prospectus securities dated July 10,
2005, as amended.
Investing in the New Notes involves risks that are described in the “Risk Factors” section beginning on page 21 of this offering
memorandum.
Issue Price: 99.393% plus accrued interest from December 30, 2015.
The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any other
jurisdiction. We are offering the New Notes only to qualified institutional buyers under Rule 144A promulgated under the Securities Act and
to persons outside the United States under Regulation S promulgated under the Securities Act. See “Transfer Restrictions.”
THE NEW NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE REGISTRO NACIONAL DE VALORES (NATIONAL
SECURITIES REGISTRY) MAINTAINED BY THE COMISION NACIONAL BANCARIA Y DE VALORES (NATIONAL BANKING AND
SECURITIES COMMISSION), OR CNBV, AND MAY NOT BE OFFERED OR SOLD PUBLICLY, OR OTHERWISE BE THE SUBJECT OF
BROKERAGE ACTIVITIES IN MEXICO, EXCEPT PURSUANT TO THE PRIVATE PLACEMENT EXEMPTION SET FORTH UNDER
ARTICLE 8 OF THE LEY DEL MERCADO DE VALORES (MEXICAN SECURITIES MARKET LAW). AS REQUIRED UNDER THE
MEXICAN SECURITIES MARKET LAW, WE WILL NOTIFY THE CNBV OF THE OFFERING OF THE NEW NOTES OUTSIDE OF
MEXICO. SUCH NOTICE WILL BE DELIVERED TO THE CNBV TO COMPLY WITH THE MEXICAN SECURITIES MARKET LAW AND
FOR INFORMATION PURPOSES ONLY. THE DELIVERY TO AND THE RECEIPT BY THE CNBV OF SUCH NOTICE DOES NOT IMPLY
ANY CERTIFICATION AS TO THE INVESTMENT QUALITY OF THE NEW NOTES OR OF OUR SOLVENCY, LIQUIDITY OR CREDIT
QUALITY OR THE ACCURACY OR COMPLETENESS OF THE INFORMATION SET FORTH HEREIN. THE INFORMATION
CONTAINED IN THIS OFFERING MEMORANDUM IS SOLELY THE RESPONSIBILITY OF GRUPO POSADAS, S.A.B. DE C.V. AND
HAS NOT BEEN REVIEWED OR AUTHORIZED BY THE CNBV. IN MAKING AN INVESTMENT DECISION, ALL INVESTORS,
INCLUDING ANY MEXICAN INVESTORS WHO MAY ACQUIRE NEW NOTES FROM TIME TO TIME, MUST RELY ON THEIR OWN
REVIEW AND EXAMINATION OF GRUPO POSADAS, S.A.B. DE C.V.
ANY OFFER OR SALE OF NEW NOTES IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH HAS
           IMPLEMENTED DIRECTIVE 2003/71/EC (THE ‘‘PROSPECTUS DIRECTIVE’’) MUST BE ADDRESSED TO QUALIFIED
INVESTORS (AS DEFINED IN THE PROSPECTUS DIRECTIVE).
Delivery of the New Notes was made to investors in book-entry form through The Depository Trust Company and its direct and indirect
participants, including Clearstream Banking, société anonyme, and Euroclear S.A./N.V., as operator of the Euroclear System, on May 23,
2016.
                                                        Sole Bookrunner




                                                          June 1, 2016
          The initial purchaser makes no representation or warranty, express or implied, as to the accuracy
or completeness of the information contained in this offering memorandum. Nothing contained in this
offering memorandum is, or shall be relied upon as, a promise or representation by the initial purchaser
as to the past or future. We have furnished the information contained in this offering memorandum. The
initial purchaser has not independently verified any of the information contained herein (financial, legal or
otherwise) and assumes no responsibility for the accuracy or completeness of any such information.
         The Notes are subject to restrictions on transferability and resale and may not be transferred or
resold except as permitted under the Securities Act and the applicable securities laws of any state or
other jurisdiction pursuant to registration or exemption therefrom. As a prospective purchaser, you should
be aware that you may be required to bear the financial risks of this investment for an indefinite period of
time. Please refer to the sections in this offering memorandum entitled “Plan of Distribution” and
“Transfer Restrictions.”
         In making an investment decision, prospective investors must rely on their own examination of
our business and the terms of the offering, including the merits and risks involved. Prospective investors
should not construe anything in this offering memorandum as legal, business or tax advice. Each
prospective investor should consult its own advisors as needed to make its investment decision and to
determine whether it is legally permitted to purchase the securities under applicable legal investment or
similar laws or regulations.
        In this offering memorandum, we rely on and refer to information and statistics regarding our
industry and the economic condition of the countries where we operate. We have obtained this data from
either our internal studies or publicly available sources such as independent industry publications and
government sources. Although we believe that these publicly available sources are reliable, we have not
independently verified and do not guarantee the accuracy and completeness of this information.
        This offering memorandum contains summaries believed to be accurate with respect to certain
documents, but reference is made to the actual documents for complete information. All such summaries
are qualified in their entirety by such reference. Copies of documents referred to herein will be made
available to prospective investors upon request to us or the initial purchaser.
                                          ____________________
        The Regulation S New Notes have been issued with temporary identifiers. The temporary CUSIP
of the Regulation S New Notes is P4983G AR1, the temporary ISIN of the Regulation S New Notes is
USP4983GAR13, and the temporary Common Code is 138603385. Please see page 191 of this offering
memorandum for the CUSIP, ISIN and Common Codes for the Existing Notes.
                                     ____________________




                                                     ii
                                                SUMMARY
        This summary contains basic information about us and this offering. Because it is a summary, it
does not contain all of the information that you should consider before investing. You should read this
entire offering memorandum carefully, including the section entitled “Risk Factors” and our financial
statements and the notes thereto included herein, before making an investment decision.
Overview

          We are the largest and one of the fastest growing hospitality companies in Mexico, with 145
hotels, resorts and vacation properties in our portfolio comprising 23,826 rooms. In the more than 45
years since opening our first hotel, we have defined the hospitality industry in Mexico and established a
portfolio of 9 highly recognizable brands. Our flagship brands, Fiesta Americana and Grand Fiesta
Americana, are two of the most recognized hotel brands in Mexico. Our middle-scale brand, Fiesta Inn, is
among the largest brands in its category across Mexico based on total number of rooms. In the luxury,
lifestyle resort category, our Live Aqua brand is among the highest regarded of our brands and we expect
to further bolster its profile in the coming years through development initiatives that are currently in
process. Of our 145 hotels, 16 are owned, 14 are leased, 109 are managed-only hotels and six are
franchised. Our hotels are located in a mix of urban and coastal destinations serving both leisure and
business travelers across Mexico, with approximately 80% of our rooms located in urban destinations and
20% in coastal destinations. Currently we have more than 14,000 employees serving our guests on a
daily basis at our properties and in our corporate headquarters and over 1.7 million members in our
loyalty programs, which positions us among the leading hospitality providers in Mexico. Our shares are
listed on the Mexican Stock Exchange under the ticker “POSADAS” with a market capitalization as of
March 31, 2016 of Ps.21,322.9 million or U.S.$1,239.3 million.
         We are the leading operator of hotels in Mexico based on number of rooms, geographic coverage
and market share. We distinguish ourselves from other operators by offering hotel owners superior
management and franchise services including centralized reservation and distribution networks,
marketing programs, revenue-optimization tools, data gathering and customer relationship management
capabilities, web-based guest satisfaction systems, robust customer loyalty programs and strong, well-
defined brands. According to our internal market studies, as of December 31, 2015, we were the leading
hotel operator in Mexico with 27% of the total managed hotel rooms in the country. Our Fiesta Americana,
Fiesta Inn and One Hotels brands each rank first, with 23%, 33% and 58% of the total managed rooms in
the upscale, middle-scale and economy classes, respectively. In the luxury class, our Grand Fiesta
Americana and Live Aqua brands rank first and sixth, respectively, with 21% and 6% of the total luxury
managed rooms in Mexico, respectively.
        We have achieved a leadership position by implementing strategies and following opportunities
that have allowed us to grow consistently, with a diversified and balanced portfolio of owned, leased,
managed and franchised hotels, in both urban and coastal destinations.
        As part of our corporate strategy, we have continued to focus on our core strategic markets and
strengthening of our overall company risk profile. We believe that our ongoing shift to a more asset-light
business model, in combination with our leading position in the Mexican market, enhances our ability to
become more resilient to industry cycles while also providing us with flexibility to take advantage of future
growth opportunities.
         We also operate a vacation club business through Fiesta Americana Vacation Club (FAVC).
FAVC markets and sells memberships that grant a 40-year, point-based right to use vacation club resorts
that we own and operate in resort destinations in Mexico, including Los Cabos, Puerto Vallarta, Cancún,
Acapulco, Kohunlich and Cozumel, as well as other affiliated properties around the world. We also offer a
vacation club product called Kivac, which consists of the sale of points which may be redeemed within
five years of sale for accommodation in any of our hotels. Kivac was created to generate a new
distribution channel for our hotels’ unused inventory and targets a market for which FAVC membership
may be too expensive or long in duration. Kivac has proven to be very popular in the mid-scale market,
particularly in urban locations. In 2013, we launched a new product called The Front Door within our
Vacation Club business line which is similar to the FAVC product but targets a more exclusive and luxury


                                                     1
necessary infrastructure to provide hotel franchise services under our brands, including the Gamma
brand.
       Our Other Brands
           •   Fiesta Rewards is our hotels’ customer loyalty program. Launched in 1989, Fiesta
               Rewards was the first customer loyalty program developed in Mexico, and today we
               believe it is Mexico’s largest hotel loyalty program based on redemption numbers. The
               program is point-based and offers points for every hotel stay. Points can, in turn, be
               redeemed for a variety of rewards including free hotel stays, airline tickets, car rentals,
               electronics, clothing and fashion products. Fiesta Rewards has established partnerships
               with American Airlines AAdvantage, Avis, Accor Le Club, American Express, Thanks
               Again, Aeroméxico Club Premier, Iberia Plus and other programs and companies for use
               in our Fiesta Rewards program. As of March 31, 2016, our Fiesta Rewards program had
               approximately 1.7 million members. Fiesta Rewards represents approximately 38.0% of
               the occupancy of all of our hotels and is one of the most important competitive
               advantages of our urban hotels. Fiesta Rewards also has a co-branded credit card with
               Banco Santander, the Santander-Fiesta Rewards Card, which has approximately
               134,000 cardholders in Mexico and also generates points to be redeemed in our
               program.
           •   Fiesta Americana Vacation Club is the vacation club business within our hospitality
               portfolio. FAVC members receive an annual allocation of points that they can redeem
               over a period of 40 years to stay at our FAVC properties, any of our managed hotels, and
               through FAVC’s affiliation with Resorts Condominium International (RCI), Hilton Hotels
               Corp. and any RCI-affiliated or Hilton Grand Vacation Club Resort throughout the world.
               As of March 31, 2016, FAVC had over 31,000 members.
           •   Kivac is a vacation club product that we launched in 2010 and consists of the sale of
               points that may be redeemed within five years of sale for accommodations in any of our
               hotels or in certain other hotels. As of March 31, 2016, Kivac had over 26,000 members.
           •   The Front Door, to be rebranded as Live Aqua Residence Club beginning on June 1,
               2016, is our new luxury vacation club business. The Front Door provides similar services
               to FAVC with a particular focus on a more exclusive and luxury market. The Front Door
               members can redeem their annual allocation of points to stay at our apartments in Marina
               Vallarta and Cozumel dedicated to this business line, as well as other upscale properties
               managed by us and other properties affiliated with The Registry Collection throughout the
               world. As of March 31, 2016, The Front Door had over 400 members.
       We have also developed synergistic services businesses which, as of March 31, 2016,
represented 1.7% of our revenues and include:
           •   Konexo, which provides call center and customer care solutions for related and
               unrelated businesses;
           •   Conectum, which offers business process outsourcing services, or back office shared
               services, for diverse industries; and
           •   Ampersand, which previously managed our loyalty programs and those of third parties,
               but is currently transitioning into managing only our loyalty programs.
Our Competitive Strengths
         Although we operate in a highly competitive environment, we believe that we have a number of
competitive strengths that differentiate us from our competitors and position us well in the market
segments in which we operate. We believe that the following are the key highlights of our competitive
position:
           •   Leading hotel operator in Mexico. We believe we are the leading operator of hotels in
               Mexico based on number of rooms, geographic coverage and market share. Our



                                                   4
                 SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
         Grupo Posadas, S.A.B. de C.V., or Posadas, is a sociedad anónima bursátil de capital variable
(listed corporation with variable capital) and each of the guarantors is a sociedad anónima de capital
variable (corporation with variable capital) organized under the laws of the United Mexican States, or
Mexico. Substantially all of our directors and officers and certain of the experts named herein and the
directors and officers of all guarantors are non-U.S. residents, and all or a significant portion of the assets
of those persons may be, and substantially all of our assets and the assets of the guarantors are, located
outside the United States of America, or United States. As a result, it may not be possible for investors to
effect service of process outside Mexico upon such parties or to enforce against such parties judgments
predicated upon civil liability provisions of the U.S. federal or state securities laws.
         We have been advised by Curtis, Mallet-Prevost, Colt & Mosle, S.C., our special Mexican
counsel, that no treaty exists between the United States and Mexico for the reciprocal enforcement of
judgments issued in the other country. Generally, Mexican courts would enforce final judgments rendered
in the United States if certain requirements are met, including the review in Mexico of the U.S. judgment
to ascertain compliance with certain basic principles of due process and the non-violation of Mexican law
or public policy; provided that U.S. courts would grant reciprocal treatment to Mexican judgments.
Additionally, we have been advised by Curtis, Mallet-Prevost, Colt & Mosle, S.C. that there is doubt as to
the enforceability, in original actions in Mexican courts, of liabilities predicated solely on the U.S. federal
securities laws and as to the enforceability in Mexican courts of judgments of U.S. courts obtained in
actions predicated upon the civil liability provisions of the U.S. federal securities laws.
         In the event that proceedings are brought in Mexico seeking to enforce our or our guarantors'
obligations under the Notes, we would not be required to discharge such obligations in a currency other
than the Mexican peso. Pursuant to Mexican law, an obligation in a currency other than Mexican pesos,
which is payable in Mexico, may be satisfied in Mexican pesos at the rate of exchange in effect on the
date on which payment is made. Such rate of exchange is currently determined by Banco de México
(Mexican Central Bank) and published in the Federal Official Gazette. Upon declaration of insolvency
(concurso mercantil), payment obligations under the Notes (a) would be converted to Mexican pesos at
the exchange rate prevailing at the time of such declaration and subsequently converted into Unidades de
Inversión (inflation-indexed units), or UDIs, (b) would cease accruing interest, (c) would be paid at the
time claims of all creditors are satisfied, (d) would be paid depending upon the outcome of insolvency
proceedings and (e) would not be adjusted to consider the depreciation of the Mexican peso against the
U.S. dollar occurring after such declaration of insolvency.

                             WHERE YOU CAN FIND MORE INFORMATION
         So long as any Notes remain outstanding, we will make available, upon request, to any holder
and any prospective purchaser of Notes the information required pursuant to Rule 144(A)(d)(4)(i) under
the Securities Act, during any period in which we are not subject to Section 13 or 15(d) of the U.S.
Securities Exchange Act of 1934, as amended, or the Exchange Act.
        You may obtain a copy of the indenture that governs the Notes by requesting it in writing or by
telephone at the address and phone number below:

                                      Grupo Posadas, S.A.B. de C.V.
                                 Attention: Corporate Finance Department
                              Prol. Paseo de la Reforma 1015, Torre A, Piso 9
                               Colonia Santa Fe, Delegación Álvaro Obregón
                                         01210 Ciudad de México
                                                  México
                                  Telephone number: (+52 55) 5326 6700

        The Existing Notes are currently listed on the Official List of the Luxembourg Stock Exchange and
trade on the Euro MTF Market. We have applied to increase the principal amount of the Notes listed on



                                                      iii
Statements of Financial Position Data:
                                                                                                                          As of December 31,
                                                                                                          2013             2014             2015            2015
                                                                                                          (Ps.)            (Ps.)            (Ps.)        (U.S.$)(1)
                                                                                                              (in thousands, except as otherwise indicated)
Assets

Current assets:
  Cash and cash equivalents ............................................................                   706,365          997,792         763,810         44,391
  Investments in securities................................................................                525,351          519,073         450,000         26,153
  Accounts and notes receivable – Net .............................................                      2,251,204        2,627,080       2,496,491        145,090
  Inventories .....................................................................................         35,803           34,068          33,750          1,961
  Prepaid expenses ..........................................................................              121,866          133,311         158,797          9,229
  Vacation Club inventory .................................................................                105,996          286,968         198,485         11,535
  Other current assets ......................................................................               35,383           27,733          62,085          3,608
  Assets classified as held for sale ...................................................                         0           50,910          59,184          3,440
     Total current assets ...................................................................            3,781,968        4,676,935       4,222,602        245,407
Non-current assets:
  Long-term notes receivable ...........................................................                 1,513,309        1,726,722       2,285,534        132,830
  Long-term accounts receivable ......................................................                     396,679                0               0              0
  Vacation Club inventory in construction .........................................                        239,944          303,150         403,262         23,437
  Property and equipment – Net (4) ..................................................                    6,337,625        6,267,293       6,285,962        365,325
  Investment in shares of associated ................................................                       35,437            1,879           1,129             66
  Other assets ..................................................................................          214,415          269,362         404,920         23,533
  Deferred tax assets........................................................................                    0           72,610         173,554         10,087
     Total non-current assets ............................................................               8,737,409        8,641,016       9,554,361        555,276

Total assets .......................................................................................    12,519,377      13,317,951       13,776,963        800,684
Liabilities and stockholders’ equity

Current liabilities:
  Current portion of long-term debt ...................................................                     2,498         1,449,957           1,399              81
  Trade accounts payable.................................................................                 348,327           400,101         438,432          25,481
  Other liabilities and accrued expenses ...........................................                      769,125           805,688       1,100,236          63,943
  Income tax payable........................................................................              597,538           280,272         240,885          14,000
  Deferred income of Vacation Club .................................................                       60,875            65,822         253,639          14,741
  Current portion of long-term value-added tax .................................                          101,703           133,539          95,726           5,563
  Liabilities directly associated with assets classified as held
    for sale ........................................................................................            0            6,423           6,384            371
     Total current liabilities (5) ...........................................................           1,880,066        3,141,802       2,136,701        124,180
  Long-term liabilities:
  Debt (6) .........................................................................................     4,555,080        4,432,316       6,242,282        362,786
  Accrued liabilities ...........................................................................          276,050          343,898         436,767         25,384
  Value-added tax payable ...............................................................                  165,051          248,719         319,932         18,594
  Deferred income of Vacation Club .................................................                       394,198          508,858         703,538         40,888
  Income tax payable........................................................................               702,233          533,148         310,240         18,030
  Deferred income tax ......................................................................             1,158,482                0               0              0
     Total long-term liabilities ............................................................            7,251,094        6,066,939       8,012,759        465,682
     Total liabilities ............................................................................      9,131,160        9,208,741      10,149,460        589,862
                                                                                                                          As of December 31,
                                                                                                          2013              2014            2015            2015
                                                                                                          (Ps.)             (Ps.)           (Ps.)          (U.S.$)
                                                                                                              (in thousands, except as otherwise indicated)
Stockholders’ equity:
Contributed capital:
  Capital stock ..................................................................................        495,937           495,937         495,881          28,819
  Contributions for future capital increases .......................................                       12,516            12,516           4,828             281
  Share repurchase reserve .............................................................                  133,509            16,800          16,856             980
  Shares held in trust ........................................................................            (3,322)                0               0               0
  Additional paid-in capital ................................................................             157,429           157,429         157,429           9,149
                                                                                                          796,069           682,682         674,994          39,229
Earned capital:
  Share repurchase reserve .............................................................                   559,371         535,556          535,556         31,125
  Retained earnings .........................................................................            1,776,394       2,645,031        2,172,779        126,277
  Other items of comprehensive income ...........................................                           25,982          27,244           47,424          2,756
                                                                                                         2,361,747       3,207,831        2,755,759        160,158
     Total controlling interest .............................................................            3,157,816       3,890,513        3,430,753        199,387
   Non-controlling interest ..................................................................             230,401         218,697          196,750         11,435
     Total stockholders’ equity ..........................................................               3,388,217       4,109,210        3,627,503        210,822
   Total liabilities and stockholders’ equity .........................................                 12,519,377      13,317,951       13,776,963        800,684

                                                                                               16
                 PRESENTATION OF FINANCIAL AND OPERATING INFORMATION
         Grupo Posadas, S.A.B. de C.V. is a sociedad anónima bursátil de capital variable (listed
corporation with variable capital) organized under the laws of Mexico and is a holding company that
conducts business itself and through its subsidiaries. In this offering memorandum, except when
indicated or the context otherwise requires, the words “Posadas,” “Grupo Posadas,” the “Company,” “we,”
“us,” “our” and “ours” refer to Grupo Posadas, S.A.B. de C.V. together with its consolidated subsidiaries.
         For purposes of this offering memorandum, we refer to hotels we operate to which we hold title or
in which we have an equity interest of 50% or greater in the titleholder as our “owned hotels,” hotels we
operate in which we have a leasehold interest as our “leased hotels,” hotels we operate for unrelated third
parties (i.e., hotels other than our owned or leased hotels) and hotels we have franchised under a new
scheme launched in 2014 as our “managed and franchised hotels” or our “managed-only hotels.” We
have entered into management contracts with all of the hotels that we operate, pursuant to which we
receive management and other fees. The management fees we receive from our owned and leased
hotels are paid to us on substantially the same basis as fees we receive from unrelated third parties with
respect to our managed hotels. With respect to our owned and leased hotels, we receive revenues from
hotel operations in addition to management fee revenues. Under International Financial Reporting
Standards, or IFRS, issued by the International Accounting Standards Board, or IASB, pursuant to the
criteria established in IAS 27, Consolidated and Individual Financial Statements, revenues generated by
the fees that our owned and leased hotels pay to us are eliminated from our consolidated statements of
comprehensive (loss) income. For additional information relating to the consolidation of our financial
statements and the methods of intercompany elimination employed in such consolidation, see note 4.c to
our consolidated audited financial statements.
Financial information
        This offering memorandum includes our audited consolidated financial statements for the years
ended December 31, 2013, 2014 and 2015 and for each of the three years in the period ended December
31, 2015, or our audited financial statements, and our unaudited condensed consolidated interim financial
statements as of March 31, 2016 and for the three months ended March 31, 2015 and 2016, or our
unaudited interim financial statements.
        On January 1, 2012, we began preparing our consolidated financial statements, including
presentation of comparable annual statements for the prior year, in accordance with IFRS in order to
comply with regulations promulgated by the CNBV. IFRS differ in certain significant respects from
accounting principles generally accepted in the United States of America, or U.S. GAAP.
         We have not prepared a reconciliation of our audited consolidated financial statements and
related footnotes between IFRS and U.S. GAAP and have not quantified such differences.
       The CNBV requires that we prepare and disclose our financial information through the Bolsa
Mexicana de Valores, S.A.B. de C.V. (the Mexican Stock Exchange) in conformity with IFRS.
        Our unaudited interim financial statements have been prepared in accordance with International
Accounting Standards (IAS) 34, Interim Financial Reporting as issued by the IASB, applicable to the
preparation of interim financial statements.
        In making an investment decision, investors must rely upon their own examination of Posadas,
the terms of the offering and the financial statements and other information included herein. Potential
investors should consult their own advisors for an understanding of the differences between IFRS and
U.S. GAAP and how those differences might affect the financial information herein.
Rounding
        Certain figures included in this offering memorandum and in our financial statements have been
rounded for ease of presentation. Percentage figures included in this offering memorandum have not in
all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to
rounding. For this reason, percentage amounts in this offering memorandum may vary from those
obtained by performing the same calculations using the figures in our financial statements. Certain



                                                    v
transform the Company into a pure stock holding company. It will therefore continue operations and may
directly own operational assets. We continue analyzing several aspects of our proposed corporate
restructuring plan which may have an impact on the final corporate structure that will result from such
restructuring. We are exposed to several risks, known and unknown to us, in connection with such
restructuring related to, among others, opposition by our and our subsidiaries’ creditors, governmental
and third-party approvals and consents, legal matters under Mexican and other applicable laws and
fluctuations in our share price and taxation. Although we have sought the assistance of legal counsel and
other advisors, as appropriate, we cannot assure that we will be in a position to foresee and prevent all
risks associated with our corporate restructuring. There can be no assurances that our restructuring will
be completed or completed as proposed, that the implementation of our corporate restructuring will not be
subject to delays or complications or entail unforeseen or unexpected costs which may affect our current
operations and revenue and that the results and efficiencies that we are expecting as a result of such
restructuring can be achieved.
        We are subject to significant claims under tax disputes in Mexico for which we do not
        maintain reserves.
         We are involved in various tax proceedings, including several tax disputes with federal tax
authorities in respect of our operations. See “Business–Legal Proceedings–Tax Proceedings.” As of the
date of this offering memorandum, the most relevant tax related proceeding relates to allegations by SAT
that we failed to pay certain income taxes in fiscal year 2006 in connection with a trademark repatriation
strategy. In connection with such dispute, SAT assessed a tax liability of Ps.767.2 million (U.S.$49.5
million). On July 7, 2014 we initiated and filed an administrative appeal for revocation in order to defend
ourselves against the claim presented by SAT.
        We are also currently subject to tax audit proceedings, with respect to fiscal years 2010 and 2013
as a result of the effects of the enactment of new tax laws that made us pay the income tax determined
that was monetarily deferred until December 31, 2013, and the tax attributable to the termination of the
consolidation regime. The SAT is reviewing certain transactions that were included in the tax returns of
such years. As of the date of this offering memorandum, these proceedings are still in progress.
        If any of these claims are resolved unfavorably to us, we may ultimately be required to pay
amounts levied together with certain interest, penalties and fees associated with our challenges, which
could have a material impact on our business, financial condition, results of operations and cash flows.
Tax proceedings pose a significant amount of unpredictability and, as a result, we cannot forecast the
outcome of any of such proceedings, when they may be resolved or the final amounts that may be
payable in connection therewith.
         We are audited by the Mexican tax authorities from time to time and may be subject to additional
tax related claims in the future. Any such future claims, to the extent significant and resolved unfavorably
to us, may also have an adverse impact on our business, financial condition, results of operations and
cash flows.
        Tax legislation is often amended by the authorities. See “Management's Discussion and Analysis
of Financial Condition and Results of Operations–Taxes.” These amendments or interpretations by the
relevant authorities, which may differ from our own, may have a material impact on our business, financial
condition, results of operations and cash flows. As discussed below, the Mexican Government has
recently enacted changes to tax laws. See “Risk Factors–Mexican federal governmental policies could
adversely affect our results of operations and financial condition.”
        We are exposed to risks related to litigation filed by or against us.
         We are subject to a number of legal actions in the ordinary course of business, as well as
exposed to the risk of future litigation. See “Business–Legal Proceedings–Other Legal Proceedings.” As
a property owner, franchisor and manager of hotels, we are subject to accident claims, civil liability or
other similar claims on behalf of our guests and employees. If such claims are not resolved in our favor,
we may be liable for negligence with respect to incidents that occur in our hotels. As a hotel developer,
we contract with and supervise third-party contractors during the construction of our hotels and such
contractors and their employees may bring claims against us for various reasons. We may be subject to
legal disputes or proceedings that involve our development sites and cannot ensure that we will not be


                                                    27
held responsible for the claimed compensation. We do not currently maintain reserves for any legal
proceedings.
         In addition, we are currently, and may in the future be, involved in other litigation or proceedings
arising from claims with respect to our assets and operations, including claims on behalf of suppliers,
neighbors and governmental authorities and labor issues. We cannot predict with certainty the ultimate
outcome and related damages and costs of litigation and other proceedings filed by or against us.
Adverse results in litigation and other proceedings may materially and adversely affect our business,
operating results and financial condition.
        We are exposed to currency and interest rate risk on our debt, and we have entered into
        derivatives contracts in the past.
         In recent years, substantially all of our indebtedness has been denominated in U.S. dollars. As of
March 31 2016, substantially all of our indebtedness was denominated in U.S. dollars (Ps.6,258.3 million
(U.S.$363.8 million)). In addition, as of the date of this offering memorandum, substantially all of our
indebtedness bears interest at fixed rates. However, we have contracted indebtedness at variable interest
rates in the past and may do so in the future. As a result, we have been, are and might be exposed to
risks from fluctuations in exchange rates and interest rates.
         To help minimize our exposure to high volatility in peso interest rates, we have sought to maintain
a significant percentage of our indebtedness in U.S. dollars. At times when we issue debt in peso or other
non-U.S. dollar markets, we enter into derivative financial instruments with financial institutions, to
balance our debt in alignment with our revenues, specifically, revenues from certain hotels in Mexico
whose room rates are typically quoted in U.S. dollars, as well as the sale and financing of vacation club
memberships, which are also typically quoted in U.S. dollars. We have not entered into derivative
financial instruments for any other purpose, although we may do so in the future. The types of derivative
instruments we have typically entered into in recent periods principally include cross-currency swaps
under which we generally pay U.S. dollar amounts based on fixed interest rates and receive peso
amounts based on peso floating interest rates. As of March 31, 2016 we have no derivative financial
instruments in effect. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Market Risk Disclosure—Derivative Financial
Instruments.”
         Our use of derivative instruments is primarily intended to provide protection against the exchange
rate risk of our indebtedness. Our use of derivative instruments for interest rates is primarily intended to
mitigate risk. We may determine that such risks are acceptable or that the protection available through
derivative instruments is insufficient or too costly. These determinations depend on many factors,
including market conditions, the specific risks in question and our expectations concerning future market
developments. We review our derivatives positions regularly, and our hedging policies change from time
to time. Notwithstanding such review, our derivative positions may be insufficient to cover our exposure.
        When the financial markets experience periods of heightened volatility, as they have recently, our
results of operations may be substantially affected by variations in exchange rates and, to a lesser
degree, interest rates. These effects include foreign exchange gain and loss on assets and liabilities
denominated in U.S. dollars, fair value gain and loss on derivative instruments, and changes in interest
income and interest expense.
         Although we attempt to match the cash flows on our derivative transactions with the cash flows
on our indebtedness, the net effects on our reported results in any period are difficult to predict and
depend on market conditions and our specific derivatives positions. Although we seek to enter into
derivatives that are not affected by volatility to a significant extent, in the event of volatile market
conditions our exposure under derivative instruments may increase to a level that impacts our financial
condition and results of operations. In addition, volatile market conditions may require us to post
collateral to counterparties to our derivatives, which affects our cash flow position, the availability of cash
for our operations and may impact our financial condition and results of operations.
        Our derivative transactions are also subject to the risk that counterparties will default or seek
bankruptcy protection. The instability and uncertainty in the financial markets has made it more difficult to
assess the risk of counterparties to derivatives contracts. Moreover, in light of the greater volatility in the


                                                      28
global securities and exchange markets, there may be fewer financial entities available with which we
could continue entering into derivative financial instruments to protect against currency and interest rate
risk and the financial condition of our counterparties may be adversely affected under stressful conditions.
See “—Risks Relating to Mexico.”
        Fluctuations in foreign currency exchange rates could negatively affect our operating
        results and net income.
         For the year ended December 31, 2015, approximately 25% of our revenues was denominated in
U.S. dollars. However, our operating expenses are generally in pesos. As we customarily do not hedge
against exchange rate fluctuations other than with respect to our indebtedness, a weak U.S. dollar in
relation to the peso may have a material adverse effect on our business, results of operations and
financial condition. In addition, because substantially all of our debt is denominated in U.S. dollars, and
our financial results are reported in pesos, a strong U.S. dollar relative to the peso would increase the
amount of our interest payments, which could negatively impact our net income.
        We are exposed to third-party claims with respect to industrial or intellectual property
        rights.
         During the course of our business activities, third parties may perceive that we violate or infringe
their industrial or intellectual property rights. Although we take measures to mitigate exposure to these
claims, the measures taken could be insufficient or ineffective and, in the future, litigation may be
necessary to defend use of industrial or intellectual property rights and so determine the validity and
scope of the intellectual property rights of third parties. Litigation of this nature may result in substantial
cost and we may be obligated to allocate monetary resources for such purposes, which may result in
counterclaims or other claims against us, distract the attention of our officers, and may significantly affect
the income of our operations.
        External perception of our hotels could harm our brands and reputation as well as reduce
        our revenues and lower our profits.
         Our brands and our reputation are among our most important assets. Our ability to attract
development partners and franchisees and to attract and retain customers depends, in part, upon the
external perceptions of Grupo Posadas and our brands, the quality of our hotels and services and our
corporate and management integrity. There is a risk to our brands and our reputation if we fail to act
responsibly or comply with regulatory requirements in a number of areas, such as safety and security,
sustainability, responsible tourism, environmental management, human rights and support for local
communities. The considerable increase in the use of social media over recent years has greatly
expanded the potential scope and scale, and increased the speed of the dissemination, of the negative
publicity that could be generated by any such adverse incident or failure. An adverse incident involving
our associates or our customers, or in respect of our third-party vendors or owners and the industry, and
any media coverage resulting therefrom, may harm our brands and reputation, cause a loss of consumer
confidence in Grupo Posadas, our brands or the industry, and negatively impact our results or operations.
        Costs of compliance with employment laws and regulations could adversely affect
        operating results.
         Union contracts for hotel employees in several major markets and for employees in certain
corporate offices are up for renewal periodically. Although under the terms of the management contracts
the employees and service providers at our managed hotels are employed by the hotel owners, such
employees may, nevertheless, direct their claims against us. In such circumstances, if we are not
successful in defending our position before a labor court, we could be held liable for those employee
claims. A similar situation would occur in the case of franchised hotels. We also have a great number of
suppliers of, among others, outsourcing, labor, security, promotion or intermediation services whose
employees may, despite legal and contractual provisions, file claims against us. Under such
circumstances, if we are not successful in defending our position before a labor court, we might be held
liable for those claims. In addition, we have a significant number of employees working at our wholly
owned hotels. Although we have not experienced labor stoppages or disruptions in the past, the failure to
timely renegotiate the contracts that are expiring could result in labor stoppages or disruptions, which
could adversely affect our revenues and profitability. Labor costs, including indemnities and severance


                                                      29
        We are subject to risks related to stoppages or failures in informational systems.
         Our operation depends on sophisticated informational systems and infrastructure through which
we operate or carry out our business. Systems are prone to failures arising from, among others, fires,
floods, power outages, information or infrastructure theft, telecommunication failures, system failures. The
occurrence of any failure in our informational systems and infrastructure may affect our operations, which
may negatively impact our revenues and operating costs. Although we have plans to reduce the impact
of such failures, such plans may not be effective. In 2014, in accordance with better industry practices,
we initiated a project to migrate information to a collaborative cloud in order to mitigate loss of information
risk, as well as to implement improved information security and protection controls. However these
measures may be insufficient to address the risks related to our informational systems and infrastructure
and to ensure compliance with the data protection rules to which we are and may be subject.
        Room distribution technology is subject to continuous changes.
        Due to changes in travelers’ purchasing trends and decision making, a greater demand exists for
high-content information with respect to hotels, and purchasing preferences may increasingly be affected
by the provision of various related services such as airplane tickets, lodging, car rental and attractions at
the selected destination. Catering to these trends entails online information exchange from several
websites and databases which requires high capacity IT infrastructure in order to consolidate information
from us and from the parties that provide such services and connect our products with the final
consumers.
         This demand may require significant investments in technology and contents, as well as high
distribution costs that may render our products less profitable. To the extent that our IT infrastructure may
become outdated with respect to our competitors’ and suppliers’, we may not experience adequate
connectivity with the main distribution channels or have the capacity to provide the required content
(images, videos, information) to all relevant websites.
        Changes in privacy law could increase our operating costs and/or adversely impact our
        ability to market our products, properties and services effectively.
         We are subject to numerous laws, regulations, and contractual obligations designed to protect
personal information, including relevant Mexican privacy law, other foreign data privacy laws, various U.S.
federal and state laws, and credit card industry security standards and other applicable information
security standards. We have established policies and procedures to help protect the privacy and security
of our information. However, every year the number of laws, regulations, and information security
requirements continue to grow, as does the complexity of such laws and requirements. Further, privacy
regulations, on occasion, may be inconsistent from one jurisdiction to another. Compliance with
applicable privacy regulations may increase our operating costs and/or adversely impact our ability to
market our products, properties and services to our guests. In addition, any misuse of such data could
have an adverse impact on the Company.
        Our business may be adversely impacted as a result of changes in demand for our
        services.
       Economic and political uncertainty may, among other external factors, adversely impact our
customers’ demand for our services businesses. A general economic downturn, such as the worldwide
economic slowdown in 2008-2010, could adversely affect our customers’ demand for Conectum’s
business process outsourcing services and Konexo’s call center and contact services.
        Our intellectual property portfolio may not prevent competitive offerings, and we may not
        be able to obtain necessary licenses.
        Our intellectual property may not prevent competitors from independently developing products
and services similar to or duplicative to ours, nor can there be any assurance that the resources we have
invested to protect our intellectual property will be sufficient or that our intellectual property portfolio will
adequately deter misappropriation or improper use of our technology. In addition, we may be the target
of aggressive and opportunistic enforcement of patents by third parties, including non-practicing entities.
Also, several of the services we provide rely on platforms and systems that we use under licenses from



                                                       36
third parties, and there can be no assurances that we will be able to obtain from such third parties the
licenses we need in the future.
        Any failure to protect our trademarks could have a negative impact on the value of our
        brand names and adversely affect our business.
          We believe our trademarks are an important component of our business. We rely on trademark
laws to protect our proprietary rights. The success of our business depends in part upon our continued
ability to use our trademarks to increase brand awareness and further develop our brand in both the
Mexican and international markets. Monitoring the unauthorized use of our intellectual property is difficult
and burdensome. In the future, litigation may be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Litigation of this type could result in
substantial costs and diversion of resources, may result in counterclaims or other claims against us, divert
management attention and could significantly harm our results of operations. From time to time, we apply
to have certain trademarks registered. There is no guarantee that such trademark registrations will be
granted. We cannot assure you that all of the steps we have taken to protect our trademarks will be
adequate to prevent imitation of our trademarks by others. The unauthorized reproduction of our
trademarks could diminish the value of our brand and its market acceptance, competitive advantages or
goodwill, which could adversely affect our business.
        Our ability to provide our customers with competitive services is dependent on our ability
        to attract, train and retain qualified personnel.
         Our ability to grow and provide our customers with competitive services is partially dependent on
our ability to attract, train and retain highly motivated people with the skills to serve our customers. The
markets we serve are highly competitive and competition for skilled employees is intense. During 2014,
we started a project aimed at attracting and retaining talent for key positions at our various business units.
However we cannot predict or guarantee the success of such project.
        Our customers may experience financial difficulties and we may not be able to collect our
        receivables, materially and adversely affecting our profitability.
        Over the course of a contract, our customers’ financial fortunes may change affecting their ability
to pay their obligations and our ability to collect our fees for services rendered. While we may resort to
other methods to pursue our claims or collect our receivables, these methods are expensive and time
consuming and success is not guaranteed. Failure to collect our receivables or prevail on our claims
would have an adverse effect on our profitability.
        A network failure could cause delays or interruptions of service, which could cause us to
        lose customers and revenues.
         We rely on our telecommunication network and infrastructure to provide our hotel customers,
vacation club members and service business clients with reliable access to our reservation system,
customer contact and other services, including internet and telephone. Some of the risks to our network
and infrastructure include physical damage, natural disasters such as hurricanes, earthquakes, floods
and storms, among others, and other disruptions beyond our control. Although we carry casualty
insurance against loss and we have implemented redundancy in our network and installed backup
technologies, disruptions may cause interruptions in service or reduced capacity for customers, either of
which could cause us to lose customers and revenues or incur additional expenses and will adversely
affect our operations, financial condition and results of operation.
        Cyber threats and the risk of data breaches or disruptions of our information technology
        systems could harm our brand and adversely affect our business.
          Our business involves the processing, use, storage and transmission of personal information
regarding our employees, customers, hotel owners, and vendors for various business purposes, including
marketing and promotional purposes. The protection of personal as well as proprietary information is
critical to us. We are dependent on information technology networks and systems to process, transmit
and store proprietary and personal information, and to communicate among our various locations in
Mexico and the United States, which may include our reservation systems, vacation exchange systems,
hotel/property management systems, customer and employee databases, call centers, administrative


                                                     37
systems, and third-party vendor systems. We store and process such internal and customer information
both at onsite facilities and at third-party owned facilities, including for example, in a third-party hosted
collaborative cloud environment. The complexity of this infrastructure and the shared control and
management of hotel systems contributes to the potential risk of security breaches. We rely on the
security of our information systems, and those of our vendors, owners and other authorized third parties,
to protect our proprietary and personal information.
         Despite our efforts, information networks and systems may be vulnerable to threats such as
system, network or internet failures; computer hacking or business disruption; cyber-terrorism; viruses,
worms or other malicious software programs; employee error, negligence, fraud, or misuse of systems; or
other unauthorized attempts by third parties to access, modify or delete our proprietary and personal
information. Although we have taken steps to address these concerns by implementing network security
and internal controls, there can be no assurance that a system failure, unauthorized access, or breach
will not occur.
Risks Relating to Mexico
        Mexican federal governmental policies could adversely affect our results of operations
        and financial condition.
         We and the majority of our subsidiaries are incorporated under Mexican law, and our corporate
offices and substantially all of our operations and assets are located in Mexico. As a result, our business
has been and may be affected by the general condition of the economy, inflation, interest rates, political
and other developments and events in Mexico. The Mexican federal government has exercised, and
continues to exercise, significant influence over the Mexican economy and therefore, the government’s
economic policies may have a significant impact on the Mexican private sector in general, and on us in
particular, as well as on market conditions, prices and payment of securities issued by Mexican legal
entities, including the Notes. We cannot assure you that changes in Mexican federal governmental
policies will not adversely affect our business, financial condition and results of operations.
          Recently, several reforms have been approved by the Mexican Federal Congress (including tax
and labor reforms). Certain aspects of such changes have affected our business and we have sought
relief from certain elements of such reforms. It is not possible to predict, at this time, the full effect of such
reforms on our business, financial condition and results of operations.
        Economic slowdowns could adversely affect our revenues.
        We believe that economic slowdowns have negatively affected and could continue to negatively
affect our revenues. The market value of securities in Mexican companies is affected by economic and
market conditions in developed and other emerging market countries. Although economic conditions in
those countries may differ significantly from economic conditions in Mexico, adverse economic conditions
may expand regionally or investors’ reactions to developments in any of these other countries may have
an adverse effect on the market value of securities of Mexican issuers. In recent years, for example,
prices of both Mexican debt and equity securities have sometimes suffered substantial drops as a result
of developments in other countries and markets.
        In addition, in recent years economic conditions in Mexico have been linked increasingly to
economic conditions in the United States and Europe as a result of the free trade agreements signed by
Mexico, the United States and the European Union, and increased economic activity among these
countries, similar to what took place during the recent economic crisis affecting the United States and
Europe. The Mexican economy is still strongly influenced by the United States and European economies
and therefore any deterioration in the economic conditions or delays in the recovery of the United States
or European economy can affect recovery in Mexico. These events could have a material adverse effect
on our results of operations, which could affect our liquidity, financial condition and the market price of the
Notes.
        Currency exchange fluctuations may affect our results of operations.
        As of March 31, 2016, after giving pro forma effect to the sale of Notes offered hereby as
described under “Use of Proceeds,” 100% of our indebtedness would be U.S. dollar-denominated,
whereas a significant portion of our consolidated revenues are peso-denominated. Accordingly, we are


                                                       38
necessary infrastructure to provide hotel franchise services under our brands, including the Gamma
brand.
       Our Other Brands
           •   Fiesta Rewards is our hotels’ customer loyalty program. Launched in 1989, Fiesta
               Rewards was the first customer loyalty program developed in Mexico, and today we
               believe it is Mexico’s largest hotel loyalty program based on redemption numbers. The
               program is point-based and offers points for every hotel stay. Points can, in turn, be
               redeemed for a variety of rewards including free hotel stays, airline tickets, car rentals,
               electronics, clothing and fashion products. Fiesta Rewards has established partnerships
               with American Airlines AAdvantage, Avis, Accor Le Club, American Express, Thanks
               Again, Aeroméxico Club Premier, Iberia Plus and other programs and companies for use
               in our Fiesta Rewards program. As of March 31, 2016, our Fiesta Rewards program had
               approximately 1.7 million members. Fiesta Rewards represents approximately 38.0% of
               the occupancy of all of our hotels and is one of the most important competitive
               advantages of our urban hotels. Fiesta Rewards also has a co-branded credit card with
               Banco Santander, the Santander-Fiesta Rewards Card, which has approximately
               134,000 cardholders in Mexico and also generates points to be redeemed in our
               program.
           •   Fiesta Americana Vacation Club is the vacation club business within our hospitality
               portfolio. FAVC members receive an annual allocation of points that they can redeem
               over a period of 40 years to stay at our FAVC properties, any of our managed hotels, and
               through FAVC’s affiliation with Resorts Condominium International (RCI), Hilton Hotels
               Corp. and any RCI-affiliated or Hilton Grand Vacation Club Resort throughout the world.
               As of March 31, 2016, FAVC had over 31,000 members.
           •   Kivac is a vacation club product that we launched in 2010 and consists of the sale of
               points that may be redeemed within five years of sale for accommodations in any of our
               hotels or in certain other hotels. As of March 31, 2016, Kivac had over 26,000 members.
           •   The Front Door, to be rebranded as Live Aqua Residence Club beginning on June 1,
               2016, is our new luxury vacation club business. The Front Door provides similar services
               to FAVC with a particular focus on a more exclusive and luxury market. The Front Door
               members can redeem their annual allocation of points to stay at our apartments in Marina
               Vallarta and Cozumel dedicated to this business line, as well as other upscale properties
               managed by us and other properties affiliated with The Registry Collection throughout the
               world. As of March 31, 2016, The Front Door had over 400 members.
       We have also developed synergistic services businesses which, as of March 31, 2016,
represented 1.7% of our revenues and include:
           •   Konexo, which provides call center and customer care solutions for related and
               unrelated businesses;
           •   Conectum, which offers business process outsourcing services, or back office shared
               services, for diverse industries; and
           •   Ampersand, which previously managed our loyalty programs and those of third parties,
               but is currently transitioning into managing only our loyalty programs.
Our Competitive Strengths
         Although we operate in a highly competitive environment, we believe that we have a number of
competitive strengths that differentiate us from our competitors and position us well in the market
segments in which we operate. We believe that the following are the key highlights of our competitive
position:
           •   Leading hotel operator in Mexico. We believe we are the leading operator of hotels in
               Mexico based on number of rooms, geographic coverage and market share. Our



                                                   4
       The following table sets forth the number of our hotels by type of hotel, the number of available
rooms by type of hotel, the number of our hotels by brand and the number of available rooms by brand, in
each case, as of December 31, 2013, 2014 and 2015, as of March 31, 2015 and 2016, and as of May 16,
2016:

                                                                                               As of                        As of                As of
                                                                                            December 31,                   March 31,            May 16,
                                                                                2013            2014        2015        2015        2016         2016
 Number of Hotels (1) ..............................................               110             127         141         131           142        145
      Owned hotels ........................................................            16              17       17             17         17         16
      Managed hotels ....................................................              79              97      105             98        105        109
      Leased hotels .......................................................            15              13       13             13         14         14
      Franchised hotels                                                                                          6              3          6          6
 Number of available rooms (1) ..............................                    18,943         21,094      23,259      21,742         23,324     23,826
      Owned hotels .......................................................        4,811          4,817       4,817       4,817          4,814      4,593
      Managed hotels ....................................................        11,575         14,002      15,349      14,169         15,214     15,937
      Leased hotels ......................................................        2,557          2,275       2,192       2,275          2,395      2,395
      Franchised hotels                                                                                        901         481            901        901
 Number of hotels (1) .............................................                110             127         141         131           142        145
      Live Aqua..............................................................          2               2           3           2           3              3
      Fiesta Americana and Grand Fiesta
        Americana (1)(2) ................................................              17              17          18          17          18           20
      Fiesta Americana Vacation Club ...........................                        6               7           7           7           7            7
      Fiesta Inn and Fiesta Inn LOFT .............................                     60              62          65          62          63           64
      One Hotels ............................................................          23              33          37          35          39           39
      Gamma Hotels ......................................................               0               4           9           6          10           10
      Other Brands (4) ...................................................              2               2           2           2           2            2
 Number of available rooms (1) .............................                     18,943         21,094      23,259      21,742         23,324     23,826
      Live Aqua..............................................................      506             506         566         506           566        566
      Fiesta Americana and Grand Fiesta
        Americana (1)(2) ................................................         4,865          4,889       5,333       4,889          5,352      5,698
      Fiesta Americana Vacation Club ...........................                  1,607          1,613       1,613       1,613          1,613      1,613
      Fiesta Inn and Fiesta Inn LOFT (3) .......................                  8,676          9,091       9,414       9,091          9,091      9,247
      One Hotels ............................................................     2,873          4,061       4,582       4,312          4,840      4,840
      Gamma Hotels ......................................................             0            518       1,335         915          1,449      1,449
      Other Brands (4) ...................................................          416            416         416         416            413        413




(1)     Includes the Fiesta Americana Hermosillo, which is expected be transferred to FibraHotel in 2020 pursuant to a purchase
        agreement signed in April 2016. See “Summary — Recent Developments”
(2)     Includes hotels operating under the Grand Fiesta Americana brand.
(3)     The figures as of December 31, 2015, March 31, 2016 and as of May 16, 2016 do not include two hotels operating under the
        Fiesta Inn LOFT brand.
(4)     Hotels operating under the Holiday Inn and Ramada brands.




                                                                                   55
                channel for our hotels’ unused inventory and targets a market for which FAVC
                membership may be too expensive or long in duration. In addition, since 2013 with the
                launch of our new product called The Front Door (which is being rebranded as Live Aqua
                Residence Club) within our Vacation Club business line, we provide a similar service to
                the FAVC product but with a particular focus on a more exclusive and luxury market.
            •   Mexico’s largest loyalty program based on redemption numbers and a portfolio of
                value-creating ancillary service-based businesses. We have created a loyal
                customer base through our Fiesta Rewards guest loyalty program. As of March 31,
                2016, our Fiesta Rewards program had approximately 1.7 million members. Fiesta
                Rewards has established partnerships with American Airlines AAdvantage, Avis, Accor
                Le Club, American Express, Thanks Again, Aeroméxico Club Premier, Iberia Plus and
                other programs and companies for use in our Fiesta Rewards program. Our Fiesta
                Rewards program allows us to retain valued customers while generating stable cash
                flows during cyclical periods. Fiesta Rewards also has a co-branded credit card with
                Banco Santander, the Santander-Fiesta Rewards Card, which has over 134,000
                cardholders in Mexico and also generates points to be redeemed in our program. We
                have capitalized on our position as the leading hotel operator in Mexico by marketing our
                management skills and technology platform, originally developed to support our hotel
                operating business, and establishing a number of value-creating services businesses that
                set us apart from the industry.
            •   Consistent market outperformer. The effectiveness of our overall strategy and our
                business model, as well as the success of our distribution and loyalty programs, is
                supported by our consistent outperformance of our competitors in the Mexican market, as
                reflected in our occupancy and RevPAR data. The average occupancy at our managed
                hotels has consistently been higher than occupancy at hotels managed by our
                competitors in Mexico. For the twelve month period ended March 31, 2016, the
                occupancy average at our managed hotels, excluding new hotel openings during such
                twelve month period, was 67%, compared to 60% for the Mexican market’s average.
                Historically, the RevPAR penetration average at our managed properties has been over
                100% and, for the three month period ended March 31, 2016, our RevPAR penetration
                average was 120%.
            •   Highly respected and influential management team. Our management team has
                extensive industry expertise and is well respected among peers and investors. With some
                of the lowest turnover rates in the industry, our management team has been able to
                reduce organizational volatility, thereby facilitating our pursuit of longer-term goals and
                objectives. Our Chairman, Pablo Azcárraga Andrade, and our Chief Executive Officer,
                José Carlos Azcárraga Andrade, have been with us 31 years and 25 years, respectively,
                and members of our top management team collectively have an average of more than 19
                years of industry experience.
Our Business Strategy
         Our long-term strategic plan is to continue to be the leading hotel operator and a major tourism-
related services provider in Mexico.
         We focus on maximizing shareholder value and return on capital by optimizing the use of our
talent, third party management contracts, real estate and advanced proprietary operating systems. As
part of our portfolio management strategy, we continuously examine our business units to address issues
of market dynamics, demand, supply and competition. Several of our key strategies are highlighted
below:
            •   Continue to consolidate and expand our hotel network through the addition of
                long-term hotel management and franchise contracts. An important part of our
                growth strategy is to utilize our strong brand recognition, solid reputation, centralized
                resources and extensive management experience to enter into additional hotel
                management and franchise contracts and, by extension, reduce our investment in owned


                                                    6
    hotels. We believe that we are an attractive option for hotel owners who seek profitable
    investments with a stable revenue stream. Management and franchise contracts with
    hotels owned by third parties, including hotels that we lease from third parties, help
    improve our profitability by generating revenue streams with minimal additional capital
    investment by us. As of the date of this offering memorandum, our development pipeline
    is comprised of plans to operate 33 new hotels with 4,851 rooms, which will represent an
    increase of approximately 20.4% in our total number of rooms. Approximately 63.1% of
    these hotels are Fiesta Inn, Fiesta Inn LOFT and One Hotels, which are our economy
    and budget-brand tiers. We estimate our pipeline hotels to represent a total investment
    of U.S.$442.4 million, of which we estimate that we will contribute approximately 25.8%
    or U.S.$114.2 million, mainly from our cash flow generation and by contributing in kind
    certain of our existing owned real estate assets to the development of such plan, with the
    remainder contributed by the owners of the hotels we will manage and franchise. We
    anticipate opening these hotels within approximately 30 months following the date of this
    offering memorandum.
•   Continue to increase capital efficiency. The continued shift to an asset-light model and
    a focus on our Mexican operations has resulted in reduced operational risk, as well as
    diminished capital expenditure requirements. Furthermore, the sale in 2012 of our South
    American hotel operations for approximately U.S.$278 million, in combination with the
    sale to FibraHotel of 14 of our hotels in 2013 and the sale of two additional hotels in 2014
    by a subsidiary in which we held a non-controlling interest and the sale of our corporate
    headquarters, have provided us with significant proceeds that have helped to reduce our
    overall indebtedness. In addition, in April 2016, we entered into an agreement with
    FibraHotel pursuant to which we will lease the Fiesta Americana Hermosillo to FibraHotel
    for a three-year period and invest the total amount of the rent for this period into
    remodeling and improvements of the property. After the end of the lease, subject to
    certain terms and conditions, FibraHotel will acquire the property in 2020. We are also
    negotiating an agreement to sell the Fiesta Inn Monterrey Valle to FibraHotel which we
    expect to enter into in June 2016. In addition, we are also currently in the process of
    reprofiling our debt to reschedule existing maturities, which we believe will contribute to
    improving our capital structure. We expect that these initiatives will provide additional
    financial flexibility to achieve our strategy. See “Recent Developments.”
•   Continue to enhance our operational efficiency. We are in the process of
    implementing an internal corporate restructuring in order to reorganize the number of our
    subsidiaries and the functions that some of them perform in our structure in order to
    reduce intercompany operations and streamline our organizational structure. We expect
    that this corporate restructuring will allow us to reduce the number of our subsidiaries to
    37 from 55, consolidate our hotel operations and payroll activities in a single entity,
    eliminate 70% of our intercompany transactions and close 273 bank accounts. This
    corporate restructuring is expected to be completed in 2017. As of the date of this
    offering memorandum, we have merged several of our subsidiaries into other
    subsidiaries or into the Company, and are in the process of completing three more such
    mergers. In addition, we are implementing strategies and making investments aimed at
    improving our operational procedures and reducing our operating costs, including
    redirecting bookings at our properties from third-party intermediaries which charge us
    booking fees to our own reservation systems and reducing headcount to avoid
    redundancy.
•   Continue to penetrate the moderately priced business traveler segment. We have
    successfully addressed the needs of the domestic and regional business traveler, and
    our success has allowed us to diversify our operations. We believe the domestic
    business travel segment continues to be underserved and represents attractive growth
    opportunities to us going forward. In 1993 we began to serve this segment in Mexico
    through our Fiesta Inn brand. Building on the success of Fiesta Inn, in 2007 we launched
    One Hotels, an economy class line in Mexico, catering to business travelers with lower



                                         7
               budgets. We currently operate 64 Fiesta Inns and 39 One Hotels serving this market
               segment. We plan to continue expanding our Fiesta Inn brand in the moderately priced
               business traveler segment and to expand our One Hotels economy class budget brand,
               primarily through third-party owned hotels, by opening 12 Fiesta Inn hotels (including one
               Fiesta Inn LOFT hotel) and 12 One Hotels within approximately 30 months following the
               date of this offering memorandum.
           •   Continue to develop our vacation club portfolio. We have been able to build a solid
               and profitable vacation club business by leveraging our brand positioning. Our strong
               brand names have helped us significantly increase our customer base while providing our
               customers a unique experience with unparalleled flexibility. We believe that the vacation
               club business enhances the profitability of our existing asset base by leveraging
               synergies stemming from both businesses. We will selectively continue converting,
               developing and constructing resorts or new vacation club units in appealing destinations.
               We currently have seven vacation club resorts in Acapulco, Los Cabos, Cancún,
               Kohunlich, Puerto Vallarta and Cozumel, and we will soon have another in Los Cabos. A
               recent example of our innovative approach to the vacation club business is our new
               product called The Front Door (which is being rebranded as Live Aqua Residence Club)
               within our Vacation Club which was launched in 2013 and complements our previously
               existing FAVC and Kivac vacation club programs.
           •   Enhance the guest experience. We believe our knowledge of our guests’ preferences
               and patterns grants us a significant competitive advantage. For more than 20 years, we
               have consistently invested in customer loyalty programs, such as our Fiesta Rewards
               program, thereby creating repeat users of our hotels. Using the knowledge of our
               customers as a foundation, we have built a detailed database that feeds into our
               proprietary guest experience customer relationship management system, which allows us
               to anticipate each customer's pre-stay, in-stay and post-stay needs, preferences and
               desires. This platform allows us to tailor our services to each guest based on experience,
               thus creating a unique bond with our customers. In addition, we closely monitor and
               study global trends in the hotel industry in terms of customer experience and seek to
               improve our customers’ stay at our properties by providing unique attention to their needs
               through our selection of furniture, beds, pillows, services and food and beverages. We
               have also implemented a service culture which is focused on creating out of the ordinary
               and spontaneous experiences with bespoke elements and details based on each client.
           •   Use our leading sector and geographical expertise to selectively develop and
               acquire strategic assets. Our management team possesses significant market
               knowledge, an average of 19 years of industry experience and strong relationships within
               the Mexican real estate and hospitality sector. We intend to identify opportunistically
               unique asset acquisitions that are consistent with our overall risk profile, as well as our
               asset-light strategy. We have successfully partnered with FibraHotel, Fibra Danhos and
               FibraUno, three Mexican REITs whose stock trades on the Mexican Stock Exchange,
               with whom we have entered into real estate sale and purchase, leasing and hotel
               management transactions in connection with our business, and we have successfully
               renewed our management contracts with many of the owners of the hotels we have
               operated throughout the years.
           •   Focus on strengthening the core capabilities of our services platforms. We have
               successfully designed and developed specific services platforms, such as Ampersand,
               Konexo and Conectum, to support our day-to-day operations and, to a lesser extent, offer
               our management experience to third parties. We intend to continue strengthening and
               developing these services platforms through marginal investments.
Recent Developments
       In October and September of 2015, the Servicio de Administración Tributaria (the Mexican Tax
Administration Service), or SAT initiated tax audit proceedings with respect to the effects of the



                                                   8
        Other revenues
        Revenues from our other revenues line item consist primarily of revenues from ancillary activities.
Revenues for the year ended December 31, 2015 were Ps. 54.4 million, compared to Ps.25.8 million for
the year ended December 31, 2014, as a result of the payment of a dividend corresponding to the sale of
2 hotels to FibraHotel by a company in which we had a non-controlling interest of 25%.
        Corporate expenses
         Corporate expenses include our corporate overhead such as salaries, administrative expenses,
legal fees and severance payments of our corporate finance, corporate human resources and technology
departments, as well as the office of the Chief Executive Officer. Corporate expenses in the year ended
December 31, 2015 represented Ps.321.1 million, a 25.3% increase from Ps.256.2 million for the year
ended December 31, 2014. As a percentage of our revenues, corporate expenses represented 4.7% and
4.4%, respectively, of our total income for the years ended December 31, 2015 and December 31, 2014.
The increase in corporate expenses is the result of expenses that have been incurred in connection with
the reorganization of our management team.
        Depreciation, amortization and real estate leasing
        We had depreciation, amortization and real estate leasing expenses of Ps.801.6 million in the
year ended December 31, 2015, a 8.5% increase from the Ps.739.0 million for the year ended December
31, 2014 mainly due to a higher exchange rate as payments under some hotel leases are denominated in
U.S. dollars and to the addition of the LAT20 by Live Aqua leased hotel in Playa del Carmen in November
2015.
        Operating (loss) income
         Our operating (loss) income consolidates the operating income of our hotel operation; hotel
management, brand and other; Vacation Club and other revenues business lines and deducts our
corporate expenses and depreciation, amortization and real estate leasing expenses. Accordingly, as a
result of the foregoing, consolidated operating income was Ps.947.3 million in the year ended December
31, 2015 compared to Ps.544.7 million in the year ended December 31, 2014. The income in the year
ended December 31, 2015 was mainly related to the better performance of our hotels system-wide.
        Other expenses, net
       Other expenses, net include primarily all amortized commissions, premiums and fees related to
new loans or debt issuances and pre-operating expenses.
        Our other expenses, net decreased by 99.0% during the year ended December 31, 2015 to
Ps.0.5 million compared to Ps.45.7 million during the year ended December 31, 2014. The decrease is
mainly attributable to the capitalization of expenses incurred in connection with the issuance of the
Existing Notes in June 2015.
        Net financing result
        Our net financing result was Ps.1,283.0 million in the year ended December 31, 2015, a 45.2%
increase from Ps. 883.8 million in the year ended December 31, 2014. Interest expense increased by
21.8% to Ps.508.8 million in the year ended December 31, 2015, from Ps.417.7 million for the
comparable period of 2014. Currency exchange effects related to transactions denominated in foreign
currency resulted in a loss of Ps.708.6 million in the year ended December 31, 2015, compared to a loss
of Ps. 427.9 million in the year ended December 31, 2014. The aforementioned increases were mainly
due to the depreciation of the peso against the U.S. dollar by 16.9% during the year ended December 31,
2015.
        Taxes
        After the enactment of new tax laws in Mexico and the repealing of the prior tax rules regarding
consolidation recorded in 2013, we recorded Ps.131.3 million of taxes payable for 2015, while in 2014 we
recorded a Ps.1,061.2 million benefit.




                                                    75
        In 2015, we reached a partial settlement with the federal tax authorities of Mexico with respect to
the audit of our subsidiary Turística Hotelera Cabos Siglo XXI, S.A. C.V. The Mexican tax authorities
determined a potential tax credit of Ps.243.5 million. The adoption of a conclusive agreement was
requested before the office of the Attorney General for Taxpayer Protection (Tax Ombudsman) and we
reached a preliminary agreement with SAT to pay Ps.41.8 million in order to settle the total claim. As of
March 31, 2016, we have paid the total amount settled
        Income from discontinued operations, net of income tax
         We recorded a loss of Ps.2.6 million in 2015 while in 2014, we recorded a net gain of Ps.8.7
million included in discontinued operations. The change is due to expenses in connection with the
restructuring of our subsidiaries.
        Consolidated net (loss) income
       As a result of the factors described above, our net consolidated loss for the year ended
December 31, 2015 was Ps.470.4 million, compared to net income of the Ps.718.2 million for the year
ended December 31, 2014.




                                                    76
                                           payment to all liabilities, including trade payables, of our
                                           subsidiaries that are not guarantors.
                                          As of March 31, 2016, after giving pro forma effect to the sale of
                                          the New Notes offered hereby, and the application of the gross
                                          proceeds thereof, all as described under “Use of Proceeds,” our
                                          total   consolidated      indebtedness    would    have      been
                                          U.S.$401.4 million. Applying the same pro forma effect, we and
                                          the guarantors would have had no secured debt outstanding,
                                          while the total indebtedness of our non-guarantor subsidiaries
                                          would have been approximately U.S.$1.4 million of debt that is
                                          structurally senior to the Notes. In addition, as of March 31,
                                          2016, Grupo Posadas, S.A.B. de C.V. together with the
                                          guarantors on a consolidated basis represented 94.1% and
                                          90.9% of our consolidated revenues and total assets
                                          respectively, for the three months ended March 31, 2016.
Optional Redemption ......................... Prior to June 30, 2019, we may redeem the Notes, in whole or in
                                              part, at a redemption price based on a “make-whole” premium,
                                              and on or after June 30, 2019, at the redemption prices set forth
                                              in “Description of the Notes—Optional Redemption”. Prior to
                                              June 30, 2018, we may redeem up to 35% of the aggregate
                                              principal amount of the Notes with the proceeds from certain
                                              qualified equity offerings. The redemption may, at our discretion,
                                              be subject to one or more conditions precedent.              See
                                              “Description of the Notes–Selection and Notice of Redemption.”
Redemption for Tax Reasons ........... We may redeem the Notes at a redemption price equal to 100%
                                       of their principal amount, plus accrued interest, and any
                                       additional amounts thereon, in whole but not in part, upon giving
                                       not less than 30 or more than 60 days’ notice if, as a result of
                                           •   any change in, or amendment to, the laws, rules or
                                               regulations of any Relevant Jurisdiction (as defined in
                                               “Description of the Notes—Redemption for Tax Reasons”) or
                                               taxing authority thereof or therein; or
                                           •   any amendment to or change in any (or any subsequently
                                               enacted) official interpretation, application or pronouncement
                                               regarding such laws, treaties rules or regulations, which are
                                               of general applicability;
                                          we or any guarantor would be obligated to pay additional
                                          amounts in respect of the Notes, in excess of those payable at a
                                          rate of 4.9%. See “Description of the Notes—Redemption for
                                          Tax Reasons.”
Restrictive Covenants ....................... The indenture governing the Notes contains certain covenants,
                                              which, among other things, restrict our and our restricted
                                              subsidiaries’ ability to:
                                           •   incur additional indebtedness;
                                           •   grant liens;
                                           •   make restricted payments;
                                           •   make certain investments;
                                           •   sell assets;




                                                      11
                                                •   permit restrictions on the ability of restricted subsidiaries to
                                                    declare dividends;
                                                •   enter into certain types of transactions with affiliates; and
                                                •   merge or consolidate with other companies or transfer all or
                                                    substantially all of our assets.
                                               These covenants are subject to a number of limitations and
                                               exceptions. See “Description of the Notes—Certain Covenants.”
Change of Control Offer .................... If we experience a change of control, holders of the Notes may
                                             require us to repurchase all or part of the Notes at 101% of their
                                             principal amount, plus accrued and unpaid interest and any
                                             additional amounts to the redemption date. See “Description of
                                             the Notes—Repurchase at the Option of Holders—Change of
                                             Control.”
Transfer Restrictions ......................... We have not registered the Notes under the Securities Act or
                                                any state securities laws, and we will not be required to do so.
                                                Consequently, the Notes may not be offered or sold within the
                                                United States or to, or for the account or benefit of, U.S. persons,
                                                except pursuant to an exemption from, or in a transaction not
                                                subject to, the registration requirements of the Securities Act.
                                               Pursuant to the Mexican Securities Market Law, the Notes may
                                               not be offered or sold publicly in Mexico but may be privately
                                               offered in Mexico under the private placement exemption set
                                               forth in Article 8 of the Mexican Securities Market Law.
Form of Notes and Clearance ........... The Notes were issued in the form of one or more global notes in
                                        fully registered form, without interest coupons, in denominations
                                        of U.S.$150,000 and integral multiples of U.S.$1,000 in excess
                                        thereof. Each global note will be deposited with, or on behalf of,
                                        a custodian for The Depository Trust Company, or DTC, and
                                        registered in the name of DTC or its nominee.
                                               Beneficial interests in each global note will be shown on, and
                                               transfers will be effected only through, records maintained by
                                               DTC and its direct and indirect participants, and any such
                                               interest may not be exchanged for certificated notes, except in
                                               limited circumstances.
Listing.................................................. The Existing Notes are currently listed on the Official list of the
                                                          Luxembourg Stock Exchange and trade on the Euro MTF
                                                          Market. We have applied to increase the principal amount of
                                                          Notes listed on the Official List of the Luxembourg Stock
                                                          Exchange and trading on the Euro MTF Market so as to include
                                                          the principal amount of the New Notes. However we cannot
                                                          assure you that the listing application will be approved.
Governing Law ................................... The Notes, the guarantees and the indenture will be governed by
                                                  the laws of the State of New York.
Use of Proceeds ................................. After deducting the discount and fees to the initial purchaser and
                                                  the estimated offering expenses, we expect to use the net
                                                  proceeds from the sale of the New Notes first to exercise our
                                                  option to redeem at par, on or after November 30, 2016, the total
                                                  remaining principal amount outstanding of U.S.$38.3 million, plus
                                                  accrued and unpaid interest thereon, of our 7.875% Senior




                                                             12
                                              Notes due 2017 (the “2017 Notes”), and then for general
                                              corporate purposes. See “Use of Proceeds.”
Risk Factors ........................................ Investing in the Notes involves substantial risks. See the “Risk
                                                      Factors” section beginning on page 21 for a description of certain
                                                      of the risks that you should consider before investing in the
                                                      Notes.
Trustee, Registrar, Transfer Agent
and Principal Paying Agent............... The Bank of New York Mellon.




                                                          13
             SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
        The following tables set forth our summary historical and other financial data as of and for the
periods indicated. The summary historical financial data for the years ended December 31, 2013, 2014
and 2015 were derived from the audited consolidated financial statements as of and for the years then
ended, as audited by Galaz, Yamakazi, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu
Limited. Our audited consolidated financial statements have been prepared in accordance with IFRS.
The summary historical financial data as of March 31, 2016 and for the three months ended March 31,
2015 and March 31, 2016 was derived from our unaudited condensed consolidated interim financial
statements as of and for the periods then ended. Our unaudited condensed consolidated interim financial
statements have been prepared in accordance with IAS No 34, Interim Financial Reporting.
         Our financial statements and other financial information included in this offering memorandum,
unless otherwise specified, are stated in pesos. The U.S. dollar amounts provided below are translations
from the peso amounts, solely for the convenience of the reader. See “Presentation of Financial and
Operating Information–Currency Information” for an explanation of the exchange rates used to translate
peso amounts into U.S. dollars. These translations should not be construed as representations that the
peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the
rate indicated or at any other rate.
        The following information is qualified by reference to, and should be read in conjunction with,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and related notes beginning on page F-1 of this offering
memorandum. The historical results are not necessarily indicative of results to be expected in any future
period.




                                                   14
Statements of Comprehensive (Loss) Income Data:

                                                                                             Year Ended                                 Three months ended
                                                                                           December 31,                                       March 31,
                                                                          2013           2014         2015           2015         2015          2016       2016
                                                                                   (in thousands                      (in           (in thousands           (in
                                                                                          of                      thousands                of           thousands
                                                                                  Mexican pesos)                  of U.S.$)(1)     Mexican pesos)       of U.S.$)(2)

Continuing operations
  Revenue.............................................................   8,550,358     5,848,278     6,901,221        401,082     1,761,095    2,048,486     119,063
  Cost of sales ......................................................   5,953,657     3,667,834     4,209,784        244,662     1,018,597    1,135,303      65,987
     Gross Profit ...................................................    2,596,701     2,180,444     2,691,437        156,420       742,498      913,183      53,077

    Administration expenses ....................................           703,104       745,305      815,126          47,373      239,773      260,934       15,166
    Sale and development expense ........................                  110,563       105,726      126,879           7,374       58,427       62,439        3,629

    Depreciation, amortization, real estate leasing .                    1,641,401       739,026       801,646         46,590      184,802      221,065       12,849
    Other expenses, net...........................................         183,213        45,669           479             28        3,596            0            0
    Interest expense ................................................      393,659       417,669       508,840         29,573      109,620      143,485        8,340
    Interest income ..................................................    (113,084)      (22,509)      (34,457)        (2,003)     (15,233)      (7,736)        (450)
    Commissions and financial expenses ...............                      57,711        60,763       100,080          5,816       16,062       18,141        1,054
    Exchange loss, net (3) .......................................          29,996       427,934       708,553         41,179      127,346        3,689          214
    Equity in losses of associates ............................              4,863        12,595           750             44            0            0            0
                                                                         3,011,426     2,532,178     3,027,896        175,974      724,393      702,017       40,803

    (Loss) profit before income tax ..........................            (414,725)     (351,734)     (336,459)       (19,554)      18,105      211,166       12,274

    Income tax expense (benefit) ............................             1,161,883    (1,061,257)     131,334          7,633        72,594       8,259          480
       (Loss) profit from continuing operations .......                  (1,576,608)      709,523     (467,793)       (27,187)      (54,489)    202,907       11,793

Discontinued operations
   (Loss) profit from discontinued operations ........                    (181,206)        8,718        (2,612)           (152)         (69)           0           0

    Consolidated (loss) income for the year ............                 (1,757,814)     718,241      (470,405)       (27,339)      (54,558)    202,907       11,793

Other comprehensive (loss) income
  Exchange differences on translating foreign
   operations ........................................................       2,049        10,844        7,516             437         (168)      (18,012)     (1,047)
  Remeasurement of defined benefit obligation ...                            8,795        (9,582)      12,664             736            0             0           0
                                                                            10,844         1,262       20,180           1,173         (168)      (18,012)     (1,047)

    Consolidated comprehensive (loss)
     income for the year ..........................................      (1,746,970)     719,503      (450,225)       (26,166)      (54,726)    184,895       10,747

    Consolidated (loss) income for the year
     attributable to:
    Controlling interest .............................................   (1,753,264)     716,817      (470,208)       (27,327)      (45,750)    199,827       11,614
    Non-controlling interest ......................................          (4,550)       1,424          (197)           (11)       (8,808)      3,080          179

    Consolidated (loss) income for the year ............                 (1,757,814)     718,241      (470,405)       (27,339)      (54,558)    202,907       11,793




                                                                                             15
         In 1979, Promotora opened the first hotel under the Fiesta Americana brand name in Puerto
Vallarta through a joint venture company called Operadora Mexicana de Hoteles, S.A. de C.V., or
Operadora. Americana Hotels Inc., a subsidiary of American Airlines, was Promotora’s joint venture
partner in Operadora.
         In 1982, Promotora acquired a 50% equity interest in Posadas de México, S.A. de C.V., or
Posadas de México, then a franchisee of a Holiday Inn hotel in Mexico. At the time of the acquisition,
Promotora was the largest hotel operator in Mexico, with a portfolio consisting of 12 Fiesta Americana
hotels and one Holiday Inn hotel. Throughout the 1980s, Promotora focused on the development of the
Fiesta Americana brand, although it continued as a Holiday Inn franchisee in a few select locations. In
1983, Promotora acquired Americana Hotels’ interest in Operadora and in 1990 it acquired the other 50%
interest in Posadas de México.
         In 1989, we launched our Fiesta Rewards customer loyalty program to help foster a loyal
customer base. The point-based program offers a certain number of points for every U.S. dollar spent on
stays and consumption in our hotels and in certain subscriber restaurants, bars and spas, among other
places. The points can, in turn, be redeemed for a variety of attractive rewards including, among other
things, free hotel stays, airline reservations, car rentals and fashion products.
        In 1992, Promotora changed its corporate name to Grupo Posadas, S.A.B. de C.V and we listed
our common stock on the Mexican Stock Exchange. In 1993, we began to target the business traveler
market through our Fiesta Inn brand when we opened our first Fiesta Inn hotel in an urban location.
        In 1998, we started our expansion into South America with the acquisition of the Caesar Park
chain. As part of the acquisition we added hotels in Brazil and Argentina to our portfolio and also
obtained the rights to the Caesar Park brand name throughout Latin America (except that the Caesar
Park hotel then operating in Panama City, Panama was not a part of this acquisition).
       We entered the vacation club business in 1999 when we opened our first Fiesta Americana
Vacation Club resort in Los Cabos. We have since added other vacation club resorts in Cancún,
Acapulco, Puerto Vallarta, Kohunlich and recently in Cozumel.
         In 2001, we opened our first Caesar Business hotel in Brazil and, in 2007, we opened our first
hotel in Chile, the Caesar Business hotel in Santiago. Also, in 2001, we started to deploy our Inventario
Central Posadas (Posadas Central Inventory), or ICP, to consolidate room inventory data from our hotel
portfolio into a single database. In 2003, we began the implementation of Conectum, our business
process outsourcing service company.
        In 2005, we launched Live Aqua, a deluxe, lifestyle brand with a resort in Cancún. In 2007 we
opened our first One Hotels, a 3-star tier budget brand catering to the business traveler who looks for
affordable, well-located accommodations. We also launched our Konexo and Ampersand businesses in
2007.
       In 2006, and in order to comply with the new provisions of the Mexican Securities Market Law we
adopted the form of “sociedad anónima bursátil” or S.A.B., therefore changing our corporate name to
Grupo Posadas, S.A.B. de C.V.
        In 2010, we acquired ownership of real property located on the Riviera Maya, with plans to
develop a tourism complex including resorts providing hotel services, vacation club and other types of
vacation properties. Likewise, we launched our product Kivac, which allows buyers to purchase points
redeemable within five years of purchase for lodging at any of our hotels. In 2010, we also initiated
conversion of three of our coastal hotels to the all-inclusive category, which we completed in 2011. We
also purchased ownership of the shares of one of our subsidiaries (Sudamérica en Fiesta S.A.) that was
owned by IFC.
        On August 13, 2010, we sold our participation in Nuevo Grupo Aeronáutico, S.A. de C.V.
(formerly Grupo Mexicana de Aviación, S.A. de C.V., or Mexicana) to third parties, for a nominal amount.
Before the sale and as of December 31, 2009, we held a 30.41% interest in Mexicana, accounting for
such investment under the equity method. As of December 31, 2008, our equity investment in Mexicana
was fully reserved and has had no material impact on the consolidated net income of the Company since
that date.


                                                   96
                                                                                                                    As of March 31,
                                                                                                             2016                    2016
                                                                                                              (Ps.)               (U.S.$)(2)
                                                                                                             (in thousands, except as
                                                                                                                otherwise indicated)
Assets
Current assets:
  Cash and cash equivalents ................................................................                  1,140,787                  66,306
  Investments in securities....................................................................                 450,000                  26,155
  Accounts and notes receivable – Net .................................................                       2,940,707                 170,922
  Inventories .........................................................................................          28,704                   1,668
  Prepaid expenses ..............................................................................               231,274                  13,442
  Vacation Club inventory .....................................................................                 176,634                  10,266
  Other current assets ..........................................................................                63,692                   3,702
  Assets classified as held for sale .......................................................                     57,944                   3,368
     Total current assets .......................................................................             5,089,742                 295,829

Non-current assets:
  Long-term notes receivable ...............................................................                  2,088,109                 121,366
  Vacation Club inventory in construction .............................................                         405,984                  23,597
  Property and equipment – Net ...........................................................                    6,266,310                 364,214
  Investment in shares of associated ....................................................                         1,129                      66
  Other assets ......................................................................................           467,182                  27,154
  Deferred tax assets............................................................................               197,326                  11,469
     Total non-current assets ................................................................                9,426,040                 547,866

Total assets ...........................................................................................     14,515,782                 843,696

Liabilities and stockholders’ equity
Current liabilities:
  Current portion of long-term debt .......................................................                       1,134                      66
  Trade accounts payable.....................................................................                   341,681                  19,859
  Other liabilities and accrued expenses ...............................................                      1,322,672                  76,877
  Income tax payable............................................................................                225,080                  13,082
  Deferred income of Vacation Club .....................................................                        601,084                  34,937
  Current portion of long-term value-added tax .....................................                             85,514                   4,970
  Liabilities directly associated with assets classified as held for sale ...                                     7,948                     462
     Total current liabilities ....................................................................           2,585,113                 150,253

   Long-term liabilities:
   Debt...................................................................................................    6,257,200                 363,685
   Accrued liabilities ...............................................................................          501,050                  29,122
   Value-added tax payable ...................................................................                  345,049                  20,055
   Deferred income of Vacation Club .....................................................                       709,717                  41,251
   Income tax payable............................................................................               310,240                  18,032
      Total long-term liabilities ................................................................            8,123,256                 472,145

       Total liabilities ................................................................................    10,708,369                 622,399

Stockholders’ equity:
Contributed capital:
  Capital stock ......................................................................................          495,881                  28,822
  Contributions for future capital increases ...........................................                          2,449                     142
  Share repurchase reserve .................................................................                     16,856                     980
  Additional paid-in capital ....................................................................               157,429                   9,150
                                                                                                                672,615                  39,094
Earned capital:
  Share repurchase reserve .................................................................                    535,000                  31,096
  Retained earnings..............................................................................             2,373,162                 137,934
  Other items of comprehensive income ...............................................                            29,412                   1,710
                                                                                                              2,937,574                 170,740

     Total controlling interest .................................................................             3,610,189                 209,834
   Non-controlling interest ......................................................................              197,224                  11,463
     Total stockholders’ equity ..............................................................                3,807,413                 221,297


   Total liabilities and stockholders’ equity .............................................                  14,515,782                 843,696



                                                                                                17
                                                          One Hotels
                 Hotel                   State            Urban/Coastal     Type       Rooms   Owned


Acapulco Costera                       Guerrero                Coastal    Managed       126     0%
Aguascalientes Ciudad Industrial    Aguascalientes             Urban      Managed       126     0%
Aguascalientes San Marcos           Aguascalientes             Urban      Managed       126     0%
Cancún Centro                        Quintana Roo              Coastal    Managed       126     0%
Celaya                                Guanajuato               Urban      Managed       126     0%
Ciudad de México Alameda           Ciudad de México            Urban      Managed       117     0%
Ciudad de México Patriotismo       Ciudad de México            Urban      Managed       132     0%
Ciudad del Carmen Concordia           Campeche                 Coastal    Managed       126     0%
Coatzacoalcos Forum                    Veracruz                Urban      Managed       126     0%
Cuernavaca                              Morelos                Urban      Managed       126     0%
Culiacán Forum                          Sinaloa                Urban      Managed       119     0%
Durango                                 Durango                Urban      Managed       126     0%
Gran Sur                           Ciudad de México            Urban      Managed       144     0%
Guadalajara Centro Histórico             Jalisco               Urban      Managed       146     0%
Guadalajara Periférico Norte             Jalisco               Urban      Managed       126     0%
Guadalajara Periférico Vallarta          Jalisco               Urban      Managed       121     0%
Guadalajara Tapatío                      Jalisco               Urban      Managed       126     0%
Irapuato                              Guanajuato               Urban      Managed       126     0%
La Paz                             Baja California Sur         Coastal    Managed       126     0%
León Poliforum                        Guanajuato               Urban      Managed       126     0%
Monclova                               Coahuila                Urban      Managed       66      0%
Monterrey Aeropuerto                  Nuevo León               Urban      Managed       126     0%
Oaxaca Centro                           Oaxaca                 Urban      Managed       109     0%
Playa del Carmen Centro              Quintana Roo              Urban      Managed       108     0%
Puebla FINSA                            Puebla                 Urban      Managed       126     0%
Querétaro Aeropuerto                   Querétaro               Urban      Managed       126     0%
Querétaro Centro Sur                   Querétaro               Urban      Managed       126     0%
Querétaro Plaza Galerías               Querétaro               Urban      Managed       126     0%
Reynosa Valle Alto                    Tamaulipas               Urban      Managed       135     0%
Salamanca                             Guanajuato               Urban      Managed       126     0%
Salina Cruz                             Oaxaca                 Urban      Managed       126     0%
Saltillo Derramadero                   Coahuila                Urban      Managed       126     0%
San Luis Potosí Glorieta Juárez     San Luis Potosí            Urban      Managed       126     0%
Silao                                 Guanajuato               Urban      Managed       126     0%
Toluca Aeropuerto                  Estado de México            Urban      Managed       126     0%
Villahermosa 2000                       Tabasco                Urban      Managed       126     0%
Villahermosa Centro                     Tabasco                Urban      Managed       110     0%
Xalapa Las Ánimas                      Veracruz                Urban      Managed       126     0%



                                                    Gamma
                 Hotel                   State         Urban/Coastal        Type       Rooms   Owned


Campeche                              Campeche                 Urban      Franchised    146     0%
Valle Grande Ciudad Obregón             Sonora                 Urban      Managed       135     0%
Mérida el Castellano                    Yucatán                Urban      Franchised    153     0%
Plaza Ixtapa                           Guerrero                Coastal    Franchised    153     0%
Fussion León                          Guanajuato               Urban      Managed       159     0%
Monterrey Gran Hotel Ancira           Nuevo León               Urban      Franchised    244     0%




                                                         106
       The following table sets forth the number of our hotels by type of hotel, the number of available
rooms by type of hotel, the number of our hotels by brand and the number of available rooms by brand, in
each case, as of December 31, 2013, 2014 and 2015, as of March 31, 2015 and 2016, and as of May 16,
2016:

                                                                                               As of                        As of                As of
                                                                                            December 31,                   March 31,            May 16,
                                                                                2013            2014        2015        2015        2016         2016
 Number of Hotels (1) ..............................................               110             127         141         131           142        145
      Owned hotels ........................................................            16              17       17             17         17         16
      Managed hotels ....................................................              79              97      105             98        105        109
      Leased hotels .......................................................            15              13       13             13         14         14
      Franchised hotels                                                                                          6              3          6          6
 Number of available rooms (1) ..............................                    18,943         21,094      23,259      21,742         23,324     23,826
      Owned hotels .......................................................        4,811          4,817       4,817       4,817          4,814      4,593
      Managed hotels ....................................................        11,575         14,002      15,349      14,169         15,214     15,937
      Leased hotels ......................................................        2,557          2,275       2,192       2,275          2,395      2,395
      Franchised hotels                                                                                        901         481            901        901
 Number of hotels (1) .............................................                110             127         141         131           142        145
      Live Aqua..............................................................          2               2           3           2           3              3
      Fiesta Americana and Grand Fiesta
        Americana (1)(2) ................................................              17              17          18          17          18           20
      Fiesta Americana Vacation Club ...........................                        6               7           7           7           7            7
      Fiesta Inn and Fiesta Inn LOFT .............................                     60              62          65          62          63           64
      One Hotels ............................................................          23              33          37          35          39           39
      Gamma Hotels ......................................................               0               4           9           6          10           10
      Other Brands (4) ...................................................              2               2           2           2           2            2
 Number of available rooms (1) .............................                     18,943         21,094      23,259      21,742         23,324     23,826
      Live Aqua..............................................................      506             506         566         506           566        566
      Fiesta Americana and Grand Fiesta
        Americana (1)(2) ................................................         4,865          4,889       5,333       4,889          5,352      5,698
      Fiesta Americana Vacation Club ...........................                  1,607          1,613       1,613       1,613          1,613      1,613
      Fiesta Inn and Fiesta Inn LOFT (3) .......................                  8,676          9,091       9,414       9,091          9,091      9,247
      One Hotels ............................................................     2,873          4,061       4,582       4,312          4,840      4,840
      Gamma Hotels ......................................................             0            518       1,335         915          1,449      1,449
      Other Brands (4) ...................................................          416            416         416         416            413        413


(1)     Includes the Fiesta Americana Hermosillo, which is expected to be transferred to FibraHotel in 2020 pursuant to a purchase
        agreement entered into in April 2016. See “Recent Developments.”
(2)     Includes hotels operating under the Grand Fiesta Americana brand.
(3)     The figures as of December 31, 2015, March 31, 2016 and as of May 16, 2016 do not include two hotels operating under the
        Fiesta Inn LOFT brand.
(4)     Hotels operating under the Holiday Inn and Ramada brands.




                                                                                   19
                                             RISK FACTORS

You should review and consider carefully the following risk factors, as well as all the other information
presented in this offering memorandum, before purchasing the Notes. The risks and uncertainties
described below are not the only ones that we face. Additional risks and uncertainties that we are not
aware of or that we currently think are immaterial, or that in our judgment do not reach the level of
materiality that merits disclosure, may also impair our business operations. Any of the following risks, if
they were to occur, could materially and adversely affect our business, results of operations, prospects
and financial condition. In that event, the market price and liquidity of the Notes could decline and you
could lose all or part of your investment. This offering memorandum also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors, including the following risks
faced by us and the risks described elsewhere in this offering memorandum.
Risks Relating to Our Hotel and Vacation Club Business
        Global economic conditions and their effects on global credit markets and the economies
        of Mexico and the countries of origin of our customers could adversely affect our
        business.
        A global economic crisis and its effects may adversely affect our business, financial condition and
operating results. An economic downturn may decrease demand for our services and products, prevent
our customers from meeting their commitments, or limit the ability of the owners of hotels we operate to
build the hotels we have agreed to operate, maintain ownership of their properties or make required
investments on a timely basis, thus impacting our results and profitability. In addition, substantial
increases in air and ground travel costs, and decreases in airline capacity arising primarily from reduced
or consolidated flights have also contributed to a reduction in demand for our hotel rooms and our
vacation club villas.
          These economic conditions may also negatively affect the financial markets, thereby causing high
volatility and an increase in the cost of available financing resources. Due to the above and for other
reasons, we may face higher financing costs or difficulties in raising financing to fund our operations,
investments and acquisitions or to refinance our indebtedness.
        In addition, these economic conditions may adversely affect the airlines, bus common carriers
and other transportation businesses which would negatively impact the lodging industry.
        Accordingly, our financial results were impacted by the economic slowdown in 2010, 2011 and
2012, and although we have substantially recovered, our financial results as well as our growth could be
impaired if a global economic crisis recurs, affecting the general condition and liquidity of our business.
         The risk of an economic downturn in the United States, Europe or other countries may cause the
residents of those countries to change their spending patterns, such as postponing or cancelling travel
plans, which may be reflected in lower occupancy rates in our hotels, especially in coastal destinations
with a greater influx of tourists from the United States, such as Cancún and Los Cabos. As of the date of
this offering memorandum, approximately 20% of our hotel rooms are located in coastal destinations, and
the remaining 80% in urban destinations. The gross domestic product growth rate of the United States in
2014 and 2015 was reported at 2.4% and 2.0%, respectively, and inflation was at 0.8% and 0.7%,
respectively. As of the date of this offering memorandum, we own one hotel in the United States, in
southern Texas.
        A high percentage of the hotel rooms we manage are in luxury hotels or in hotels in
        locations which have been particularly impacted by the recent economic slowdown, which
        has had and may continue to have a significant adverse effect on our results of operations
        and financial condition.
        Approximately 25% of the rooms we manage currently, excluding our Fiesta Americana Vacation
Club units, are in hotels that we classify as upper-scale, deluxe or luxury hotels. Deluxe or luxury hotels
generally command higher room rates. In an economic downturn, these hotels may be more susceptible
to a decrease in revenues, as compared to hotels in other categories that have lower room rates, since



                                                     20
       The vacation club division is responsible for the sales, operation and development of the Fiesta
Americana Vacation Club, Kivac and The Front Door business (which is being rebranded as Live Aqua
Residence Club).
         The franchise division is responsible for the development of brands and trademarks, the
implementation of standards applicable to the franchised hotels and our distribution channels. This
division is also responsible for the development of guidelines, policies and procedures that seek to ensure
brand consistency throughout all of the hotels in our portfolio. This division also provides support to our
franchisees.
         The finance division is responsible for overseeing and managing our finances. In particular, this
division manages our financial, treasury, tax, insurance, banking relationships, loan administration and
derivatives policies.
Systems and Technology
         We believe that investing in new systems and technology is critical to our growth and
distinguishes our enterprise from other companies in the Mexican and Latin American hotel and tourism
industry. Throughout our history we have developed new systems, technology and platforms that we
believe have allowed us to achieve success by optimizing our product distribution, managing our
operations more efficiently and cultivating the talents of our employees.
          One such capability is ICP, our centralized and consolidated room inventory solution for our entire
hotel portfolio. ICP updates in real-time as room availability changes and this information is furnished to
all distribution channels through which we sell rooms. We believe the ICP platform allows us to optimize
our earnings by allowing us to price our actual room inventory rapidly to meet fluctuations in customer
demand.
        We operate our IT platforms under strict international safety standards and certifications.
        Another such capability is CRM platform, our guest experience system that places our guests at
the very core of our operations by recognizing them and personalizing the service they receive before,
during and after their stay, systematizing their benefits and exerting rigorous control over their requests
and our responses to them over the course of their stay.
       See “Risk Factors—We are subject to risks related to stoppages or failures in informational
systems” and “Risk Factors—A network failure could cause delays or interruptions of service, which could
cause us to lose customers and revenues” for risks associated with our systems and technology.
Seasonality
         As of the date of this offering memorandum, of the 23,826 hotel rooms we operate, approximately
80% are in urban or suburban locations and cater primarily to business travelers. These hotel operations
have not experienced significant seasonal fluctuations aside from minor reductions in occupancy during
the holiday season from mid-December through mid-January. The remaining hotel rooms we operate are
in coastal resort locations. Our coastal hotel operations generally experience two peak seasons. The
first peak, the traditional winter season, occurs during the months of December through April and results
primarily from foreign tourism. The second peak occurs during the summer months of July through
August and results from Mexican and foreign tourism. This seasonality can be expected to cause
quarterly fluctuations in our revenues. See “Risk Factors—The hotel industry is seasonal.”
Competition
         The hotel industry in Mexico is highly competitive. Our hotels generally compete with a variety of
Mexican and international hotel operators, some of which, on an international basis, are substantially
larger than us and operate under well-known international brand names. In mid-size urban areas and
suburbs of large cities, our hotels primarily compete with Mexican and international chains as well as
independently owned and managed hotels. Depending upon the class of the hotel, competition is based
primarily upon price, quality of facilities and services offered, physical location within a particular market
and the ability to earn and redeem customer loyalty program points. Hotel owners must make continuing
expenditures for modernization, refurbishment and maintenance to prevent competitive obsolescence.



                                                     113
The competitiveness of the Company’s hotels has been enhanced by our frequent guest program (Fiesta
Rewards) the Fiesta Americana Vacation Club and Kivac.
        The main competitors of our Fiesta Americana hotels are other high-end international and
Mexican chains such as Camino Real, Crowne Plaza, Marriott, Hyatt, Westin, Hilton Sheraton and
Intercontinental. The competitors of our Fiesta Inn hotels are both independent local hotel operators and
moderately priced international and Mexican chains such as Holiday Inn, Holiday Inn Express, Best
Western, Mision, Hampton Inn, NH Hotels and City Express. Our One Hotels compete primarily with
other economy class and independent hotel operators. In our efforts to increase the number of hotel
properties we manage, we also compete with entities who seek the same opportunities to enter into
management contracts with hotel owners. Some of these entities have substantially greater marketing
and financial resources than we do, although few are as well situated as we are in the markets that we
serve. Our principal competitors for management opportunities include CityExpress, Riu and AMResorts,
Starwood and Marriott. We do not allow any competitors to operate hotels under our distinctive brands.
         The vacation club industry is also highly competitive. FAVC competes primarily with Palace
Resorts, Mayan Palace, Club Regina and Royal Holiday Club in Mexico, and generally with other
vacation club destinations in the Caribbean and other coastal resort areas. The Front Door competes
primarily with Mayan Grand Luxe and premium vacation real estate developments such as Inspirato.
Kivac does not have a direct competitor in the market it serves.
         We are also subject to competition in our services businesses. Konexo competes with many
large, multinational providers of call center and contact services. Conectum competes with many entities
offering similar business process outsourcing services and with accounting professionals who provide
some similar service.
Environmental Matters
         We are subject to certain legal requirements and potential liabilities under various federal, state
and municipal environmental laws and regulations, including the regulations for environmental impact,
hazardous waste and prevention and control for the contamination of water, air and soil, which we refer to
as “Environmental Laws.” Governmental authorities may impose certain administrative and criminal
penalties or fines for violation of Environmental Laws. Such authorities may also, among other things,
close, either indefinitely or temporarily, operations of any businesses located at any real properties found
in violation of any Environmental Laws. Such laws often impose liability without regard to whether the
owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances.
The punishment for infringement of the Environmental Laws might consist of remediation of the damaged
environment, administrative and criminal penalties and fines. The presence of hazardous or toxic
substances may adversely affect the owner’s ability to sell or rent such real property or to borrow using
such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic
wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or
disposal facility, regardless of whether such facility is owned or operated by such person. We do not
believe that we use substances or generate waste that may be deemed hazardous or toxic under
applicable Environmental Laws. We have not been subject to or suffered any civil liabilities or costs
related to cleaning up contamination resulting from historic uses of our current or former properties
owned, leased or managed by us.
         In addition to the above, owners and operators of real property may face civil liability for personal
injury or property damage because of various environmental conditions such as alleged exposure to
hazardous or toxic substances, poor indoor air quality, radon or poor drinking water quality.
        We are also subject to other laws and regulations relating to operation and closure of storage
tanks, and preservation of wetlands, coastal zones or endangered species, which could limit our ability to
develop, use, sell or rent our real property or use it as collateral. Future changes in environmental laws
or the discovery of currently unknown environmental conditions may have a material adverse effect on
our financial condition and results of operations. In addition, Mexican environmental regulations have
become increasingly stringent over the last decade. Accordingly, there can be no assurance that more
stringent enforcement of existing laws and regulations or the adoption of additional laws and regulations
would not have a material effect on our business and financial condition or prospects.



                                                     114
prior written consent of the relevant hotel owner. The termination of management contracts could have a
material adverse effect on our results of operations.
        Hotel owners may not have sufficient financial resources to maintain the standards of the brand
under which the hotels operate, which would adversely affect revenues from the hotels and the fees we
receive based on such revenues. In addition, in cases where the owners have control over the hotels’
cash flow, they may withhold the payment of operating and capital expenditures related to such hotels,
which would also affect the standards of the brand under which the hotels operate, adversely affecting the
revenues from the hotels and the fees we receive based on such revenues.
        We are exposed to risks related to our franchise contracts.
         Since 2015, we have begun to grow our business by granting franchises based on novel brands
backed by traditional brands. This represents an entry into a new market in which we are not a leader.
Therefore, we cannot guarantee our success in the execution and operation of franchise contracts. In
this franchise business, the hotel owner or a third party other than us will manage the hotel’s operation
under our brands and through our distribution platforms. We cannot provide assurance that we will
succeed in our franchising business nor can we guarantee that our franchisees in this new segment will
succeed.
        Our revenues may not be sufficient to cover our obligations under our lease agreements.
        Of the hotels we operate, we currently lease 14 hotels from third-party owners. We must comply
with our lease obligations, including lease payment obligations and other obligations that require us to
incur certain operating expenses, even if the hotel operation is not profitable. All 14 of our leased hotels
are current on their lease payments. However, for the three months ended March 31, 2016, two of our 14
leased hotels did not have positive EBITDA (including fees) and we covered the shortage with revenue
from other sources. As a result of such shortfalls, our financial and operating condition may be adversely
affected to the extent that our revenues and operating profits are not sufficient to cover our obligations
under our lease agreements.
        Our growth strategy may not result in improvement in our results of operations.
         We have implemented a growth strategy for our hotel, vacation club and other service businesses
in Mexico, the United States and, potentially, Latin America, which is primarily based on managing third-
party hotels, franchise contracts with respect to third-party operated hotels and the construction of new
buildings destined to be timeshare arrangements. Our ability to expand will depend on a number of
factors including, but not limited to, the economic conditions of Mexico and the Americas, the ability of
investors to construct new properties for us to lease and/or manage, the ability to enter into franchise
contracts with respect to third-party operated hotels, the selection and availability of suitable locations for
new hotels and the availability of financing. There can be no assurance that our expansion plans can be
achieved, or that new hotels or vacation club resorts will meet consumer acceptance or be operated
profitably.
        As part of our growth strategy, we have assumed obligations with respect to the development and
refurbishment of owned and leased properties. A number of factors, including financing, regulatory or
meteorological events, may affect their timely completion, which may in turn adversely affect our financial
condition.
         We may expand our operations to other Latin American countries and to the United States. In
2015, we entered into an exclusive license contract for use of the Live Aqua brand in the United States.
The risks that may affect our ability to succeed in the markets in which we currently operate may also be
present in and affect our ability to operate in new markets, and we may be exposed to additional risks
inherent to those markets. We do not have the same knowledge or familiarity with respect to the new
markets we may enter, which may affect our operating capacity and growth in such markets, thereby
affecting our overall profitability.




                                                      23
        Our acquisitions, dispositions and investments in new brands or businesses may
        ultimately not prove successful and we may not realize anticipated benefits.
          We consider corporate as well as property acquisitions and investments that complement our
business. In many cases, we compete for these opportunities with third parties who may have
substantially greater financial resources or different or lower acceptable financial metrics than we do.
There can be no assurance that we will be able to identify acquisition or investment candidates or
complete transactions on commercially reasonable terms or at all. If transactions are consummated, there
can be no assurance that any anticipated benefits will actually be realized. Similarly, there can be no
assurance that we will be able to obtain additional financing for acquisitions or investments, or that the
ability to obtain such financing will not be restricted by the terms of our debt agreements.

        We periodically review our business to identify properties or other assets that we believe either
are non-core, no longer complement our business, are in markets which may not benefit us as much as
other markets during an economic recovery or could be sold at significant premiums. We are focused on
restructuring and enhancing real estate returns and monetizing investments, and from time to time, may
attempt to sell these identified properties and assets. There can be no assurance, however, that we will
be able to complete dispositions on commercially reasonable terms or at all or that any anticipated
benefits will actually be received.
         We also continue to develop new businesses related to offering third-party services, such as
loyalty program management, management services and contact center services. We also entered into
an exclusive license contract for use of the Live Aqua brand in the United States. There can be no
assurance regarding the level of acceptance of this new brand or our investments in new businesses by
the development and consumer marketplaces, that the cost incurred in developing and integrating new
brands or investments will be recovered or that the anticipated benefits from these new brands or
investments will be realized.
        We may not be able to decrease costs and successfully obtain certain operating
        efficiencies.
         We implement strategies and make investments aimed at improving our operational procedures
and reducing our operating costs, including with respect to redirecting bookings at our properties from
third-party intermediaries which charge us booking fees to our own reservation systems and reduction of
headcount to avoid redundancy. We may be unable to reduce costs or attain efficiencies or be unable to
confront the issues that may arise from implementing such operating changes, which could negatively
affect our performance.
        The amount that we could be required to pay counterparties under the indemnifications
        and guarantees which we provide from time to time is uncertain. If these payments were
        to become significant, our future liquidity, capital resources or our credit risk profile could
        be adversely affected.
          From time to time, we enter into agreements that provide for indemnification and guarantees to
counterparties in transactions involving sales of assets, sales of services, purchases and development of
assets, securitization agreements and operating leases. The nature of many of these indemnifications
and guarantees prevents us from making a reasonable estimate of the maximum potential amount that
we could be required to pay counterparties. If these payments were to become significant, our future
liquidity, capital resources and our credit risk profile could be adversely affected.
        Our services businesses may be disruptive to our hotel business.
        The operation of certain services businesses, such as Ampersand, Konexo and Conectum have,
on a consolidated basis, represented less than 10% of our total revenues as of December 31, 2015 and
as of March 31, 2016. These services businesses grew from our core competencies, which we have
attempted to leverage to diversify our operations beyond the hotel industry. However, these companies
are operated independently of our other business operations and there can be no assurances that these
services businesses will continue to perform in accordance with our expectations. Moreover, our efforts
to maintain and expand these services businesses are likely to divert management attention and
resources.


                                                   24
         Ampersand, which previously managed our loyalty programs and those of third parties, is
currently transitioning into managing only our loyalty programs.
        We rely on several of these businesses to perform certain critical functions, such as administering
our Fiesta Rewards loyalty program, operating our call center and providing process outsourcing services
such as accounting, payroll and technology services. If any of these companies ceased to provide their
respective services to us, or if they provide them less effectively, our operations and financial condition
would be adversely affected.
        Our properties are subject to risks relating to force majeure and any such event could
        materially adversely affect our operating results.
        Our financial and operating performance may be adversely affected by force majeure, such as
natural disasters, particularly in locations where we own and/or operate significant properties. Some
types of losses, such as those from earthquakes, hurricanes, tsunamis, epidemics, terrorism and
environmental hazards, may be either uninsurable or too expensive to justify insuring against and there
may also be significant deductibles and certain caps on coverage. Any of these events could increase
our capital expenditures for repairs of the properties we own. Should an uninsured loss or a loss in
excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property,
as well as the anticipated future revenue from the property. In that event, we might nevertheless remain
obligated for any mortgage debt or other financial obligations related to the property.
        Although we believe that our properties are properly insured to a commercially reasonable extent,
the damage that force majeure events may cause to our properties and the cost of the associated
deductibles may materially affect our operations and revenue.
        We operate 25 hotels in locations which are and whose business is at risk of hurricanes (9 of
them in Cancún, Cozumel and the Riviera Maya). In 2005, damage caused by Hurricane Wilma to one of
the hotels which we lease in Cancún forced the owner to close the hotel and suspend our lease
agreement until repairs were completed. The owner’s insurance policy did not cover consequential
losses relating to a covered event, so we did not receive any income from that hotel during the two years
it was closed. In September 2014, Hurricane Odile damaged part of the Grand Fiesta Americana Los
Cabos hotel and the Fiesta Americana Vacation Club Villas. The hotels were reopened on November 15,
2014, after having been completely repaired and remodeled for operations. On December 17, 2015, the
Company received payment for the claims submitted to the insurance company in the amount of
U.S.$10.6 million, net of deductible, of which U.S.$8.6 million stemmed from damages to real estate
property and U.S.$2.0 million from consequential losses.
        The coastal areas of Mexico are prone to hurricanes and flooding, such as the flooding that
occurred in Acapulco in 2013 due to the tropical storm Manuel and in Cabo San Lucas in 2014 due to
Hurricane Odile, and our financial condition will be affected if our hotels suffer damage from hurricanes or
flooding, as well as from the loss of business due to hurricane activity or flooding in these areas.
        High criminality rates and the threat of violence may adversely and materially affect our
        results.
        High criminality rates, violence resulting from drug-trafficking activities and kidnappings have
been experienced in several areas of Mexico, including areas in which we operate, and have been widely
covered in the international media. Both tourists and business travelers have been and may continue to
be deterred from traveling to Mexico or certain areas within Mexico in which we operate based on the
current crime rates and our revenues and results of operations would be materially and adversely
affected due to decreased travel and reduced demand for our businesses, especially in areas affected by
such events.
        We have significant amounts of indebtedness coming due in each of the next several
        years, and we may not be able to secure refinancing on favorable terms or at all.
         We currently have a substantial amount of indebtedness. As of March 31, 2016, we had directly
or indirectly Ps.6,258.3 million (U.S.$363.7 million) of total indebtedness. Of our total indebtedness as of
March 31, 2016, Ps.6,258.3 million (U.S.$363.7 million) was long-term indebtedness. We have a
substantial amount of indebtedness maturing in the next several years. As of March 31, 2016, we had


                                                     25
                                             MANAGEMENT
Board of Directors
         Pursuant to our estatutos sociales (by-laws), our management is the responsibility of our Board of
Directors. Members of our Board of Directors are elected annually at the ordinary general shareholders’
meeting by our shareholders and serve one year terms. Our by-laws provide that our Board of Directors
meet at least every three months. Our Board of Directors takes all major decisions concerning the
management of Grupo Posadas, S.A.B. de C.V. Our by-laws provide that the Board of Directors must be
comprised of at least five but no more than 21 members (plus their respective alternates) and that at least
25% of the members must be independent. The permanent and alternate Secretaries are not part of our
Board of Directors. Our by-laws also require that a majority of the members of our Board of Directors be
Mexican citizens. Our current Board of Directors, as appointed pursuant to the resolutions adopted in our
shareholders’ annual meetings dated March 15, 2016, is comprised of 10 permanent members and two
alternates.
        The following table lists the current members of our Board of Directors:
                                                                                              Date of
               Name                Age                          Position                     Original
                                                                                            Designation
  Pablo Azcárraga Andrade          57    Chairman of the Board of Directors                April 29, 1997
  José Carlos Azcárraga Andrade    50    Chief Executive Officer of Grupo Posadas          April 30, 2008
  Enrique Azcárraga Andrade        51    Director                                          May 31, 1991
  Fernando Chico Pardo             63    Director                                          July 26, 1995
  Juan Servitje Curzio             58    Director                                          April 30, 2012
  Luis Alfonso Nicolau Gutiérrez   54    Independent Director                              April 30, 2012
  Jorge Soto y Gálvez              72    Independent Director                              April 28, 2006
  Silvia Sisset Harp Calderoni     44    Director                                          April 5, 2010
  Carlos Levy Covarrubias          54    Director                                          April 27, 2006
  Benjamín Clariond Reyes-Retana 67      Independent Director                              March 15, 2013

       Mr. Pablo Azcárraga Andrade, Mr. Enrique Azcárraga Andrade and Mr. Jose Carlos Azcárraga
Andrade are brothers. Mr. Juan Servitje Curzio is married to Cecilia Azcárraga Andrade. The alternate
members of the Board of Directors are Alfredo Loera Fernández and Charbel Christian Francisco Harp
Calderoni, to represent indistinctly Silvia Sisset Harp Calderoni and Carlos Levy Covarrubias at the board
meetings.
        Set forth below is a brief summary of the business experience of our directors:
Pablo Azcárraga Andrade
         Mr. Azcárraga is currently the Chairman of the Board of Directors. Since Mr. Azcárraga’s arrival
at Grupo Posadas, S.A.B. de C.V., in 1986, he has held various positions within Grupo Posadas, such as
General Director of Fiesta Americana Condesa Cancún, General Director of the Fiesta Americana Hotel
Division, and he has been in charge of numerous hotel openings, development and management projects
such as Holiday Inn Crowne Plaza (today Fiesta Americana Reforma) and Fiesta Americana Condesa
Cancún, among others. From 1992 through late 2008, Mr. Azcárraga led the supervision, management,
development and aggressive expansion of the Posadas’ hotels and brands, including Fiesta Americana,
Grand Fiesta Americana, Fiesta Inn in Mexico and Posadas’ prior Caesar Park and Caesar Business
hotels in South America.
        Mr. Azcárraga holds an accounting degree from Universidad Anáhuac, Mexico City and a
master’s degree in hotel management from Cornell University. He also holds an executive degree in




                                                    119
advanced management from Harvard University.         Mr. Azcárraga is also involved in the charitable
activities of Fundación Posadas, A.C.
José Carlos Azcárraga Andrade
        José Carlos Azcárraga is Chief Executive Officer for Grupo Posadas since November 11, 2011.
He holds a degree in Industrial Engineering from Anáhuac University, Mexico City Campus, and an MBA
from the J.L. Kellogg Graduate School, Northwestern University, in Evanston, Illinois.
        Prior to Grupo Posadas, Mr. Azcárraga worked for Booz Allen & Hamilton, and Chase Manhattan
Bank in New York City.
         He started his career at Posadas in 1994, leading various areas as Director of the Real Estate
division, CEO of Fiesta Americana Vacation Club and VP of Sales & Marketing for Posadas Hotel
Management Division.
        Mr. Azcárraga is member of our Executive Committee since 2001 and part of our Board of
Directors since 2008.
        Also, Mr. Azcárraga was elected in 2008 for a 2-year term as Chairman of AMDETUR (the
Mexican Resort Development Association) and since 2010 he has been a member of the Board of
Directors of the American Resort Development Association.
Enrique Azcárraga Andrade
        Mr. Azcárraga is an industrial engineer with MBA studies from Harvard University. He has
worked in several prestigious Mexican companies such as Operadora de Bolsa, S.A. de C.V., Grupo
Posadas, S.A.B. de C.V., DESC–Sociedad de Fomento Industrial, GBM–Grupo Bursátil Mexicano, S.A.B.
de C.V., and is currently the General Director of Exio, S.C., an investment consulting and family office
company.
Fernando Chico Pardo
        Mr. Chico holds a college degree in business and a master’s degree in business administration
from Northwestern University. Mr. Chico has held several positions in the following companies: Bimbo,
S.A. de C.V., Anderson Clayton, Bank of America, Salomon Brothers, Standard Chartered Bank, Mocatta
Metals Corporation, Casa de Bolsa Acciones y Asesoría Bursátil, Inversora Bursátil, Grupo Financiero
Inbursa and is currently the President of Promecap, S.C. and ASUR, S.A.B. de C.V. Mr. Chico is also an
active member of the Board of Directors of: Grupo Financiero Inbursa, Condumex, S.A. de C.V., Grupo
Carso, S.A.B. de C.V., Sanborns, S.A. de C.V., Sears Roebuck de Mexico, United Pension Fund,
Quantum Group of Funds and Papalote Museo del Niño, among others.
Juan Servitje Curzio
        Mr. Servitje is an industrial engineer who graduated from Universidad Anahuac and holds a
master’s degree in business administration with honors from Northwestern University’s J.L. Kellogg
School of Management. He is the Chairman of the Board of Directors of Productos Rich, S.A. de C.V.,
and since 2000, he has been the Chairman of Rich Products Corporation for Latin America. He is also a
member of the Board of Grupo FRIALSA, a leading company in Mexico in controlled temperature storage
and distribution. He also participates in various nonprofit organizations such as ENACTUS where he is
also Chairman of the Board, SIFE (Students in Free Enterprise), among others.
Luis Alfonso Nicolau Gutiérrez
        Mr. Nicolau is a lawyer who graduated from the Escuela Libre de Derecho and he holds a
Master’s Degree in Law from Columbia University. He is a partner of the Law Firm Ritch, Mueller, Heather
y Nicolau, S.C. Mr. Nicolau is a director for Morgan Stanley México and Shakey’s Pizza México, chairman
of the Fulbright Trust, a member of the Museo del Niño Trust and a member of the Oversight Committee
of the Mexican Stock Exchange. Mr. Nicolau is the author of various legal publications.
Jorge Soto y Gálvez
        Mr. Soto holds an accounting degree from Universidad Nacional Autónoma de México. Prior to
joining Grupo Posadas, S.A.B. de C.V., Mr. Soto worked at Arthur Andersen and managed some of the


                                                  120
held responsible for the claimed compensation. We do not currently maintain reserves for any legal
proceedings.
         In addition, we are currently, and may in the future be, involved in other litigation or proceedings
arising from claims with respect to our assets and operations, including claims on behalf of suppliers,
neighbors and governmental authorities and labor issues. We cannot predict with certainty the ultimate
outcome and related damages and costs of litigation and other proceedings filed by or against us.
Adverse results in litigation and other proceedings may materially and adversely affect our business,
operating results and financial condition.
        We are exposed to currency and interest rate risk on our debt, and we have entered into
        derivatives contracts in the past.
         In recent years, substantially all of our indebtedness has been denominated in U.S. dollars. As of
March 31 2016, substantially all of our indebtedness was denominated in U.S. dollars (Ps.6,258.3 million
(U.S.$363.8 million)). In addition, as of the date of this offering memorandum, substantially all of our
indebtedness bears interest at fixed rates. However, we have contracted indebtedness at variable interest
rates in the past and may do so in the future. As a result, we have been, are and might be exposed to
risks from fluctuations in exchange rates and interest rates.
         To help minimize our exposure to high volatility in peso interest rates, we have sought to maintain
a significant percentage of our indebtedness in U.S. dollars. At times when we issue debt in peso or other
non-U.S. dollar markets, we enter into derivative financial instruments with financial institutions, to
balance our debt in alignment with our revenues, specifically, revenues from certain hotels in Mexico
whose room rates are typically quoted in U.S. dollars, as well as the sale and financing of vacation club
memberships, which are also typically quoted in U.S. dollars. We have not entered into derivative
financial instruments for any other purpose, although we may do so in the future. The types of derivative
instruments we have typically entered into in recent periods principally include cross-currency swaps
under which we generally pay U.S. dollar amounts based on fixed interest rates and receive peso
amounts based on peso floating interest rates. As of March 31, 2016 we have no derivative financial
instruments in effect. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Market Risk Disclosure—Derivative Financial
Instruments.”
         Our use of derivative instruments is primarily intended to provide protection against the exchange
rate risk of our indebtedness. Our use of derivative instruments for interest rates is primarily intended to
mitigate risk. We may determine that such risks are acceptable or that the protection available through
derivative instruments is insufficient or too costly. These determinations depend on many factors,
including market conditions, the specific risks in question and our expectations concerning future market
developments. We review our derivatives positions regularly, and our hedging policies change from time
to time. Notwithstanding such review, our derivative positions may be insufficient to cover our exposure.
        When the financial markets experience periods of heightened volatility, as they have recently, our
results of operations may be substantially affected by variations in exchange rates and, to a lesser
degree, interest rates. These effects include foreign exchange gain and loss on assets and liabilities
denominated in U.S. dollars, fair value gain and loss on derivative instruments, and changes in interest
income and interest expense.
         Although we attempt to match the cash flows on our derivative transactions with the cash flows
on our indebtedness, the net effects on our reported results in any period are difficult to predict and
depend on market conditions and our specific derivatives positions. Although we seek to enter into
derivatives that are not affected by volatility to a significant extent, in the event of volatile market
conditions our exposure under derivative instruments may increase to a level that impacts our financial
condition and results of operations. In addition, volatile market conditions may require us to post
collateral to counterparties to our derivatives, which affects our cash flow position, the availability of cash
for our operations and may impact our financial condition and results of operations.
        Our derivative transactions are also subject to the risk that counterparties will default or seek
bankruptcy protection. The instability and uncertainty in the financial markets has made it more difficult to
assess the risk of counterparties to derivatives contracts. Moreover, in light of the greater volatility in the


                                                      28
global securities and exchange markets, there may be fewer financial entities available with which we
could continue entering into derivative financial instruments to protect against currency and interest rate
risk and the financial condition of our counterparties may be adversely affected under stressful conditions.
See “—Risks Relating to Mexico.”
        Fluctuations in foreign currency exchange rates could negatively affect our operating
        results and net income.
         For the year ended December 31, 2015, approximately 25% of our revenues was denominated in
U.S. dollars. However, our operating expenses are generally in pesos. As we customarily do not hedge
against exchange rate fluctuations other than with respect to our indebtedness, a weak U.S. dollar in
relation to the peso may have a material adverse effect on our business, results of operations and
financial condition. In addition, because substantially all of our debt is denominated in U.S. dollars, and
our financial results are reported in pesos, a strong U.S. dollar relative to the peso would increase the
amount of our interest payments, which could negatively impact our net income.
        We are exposed to third-party claims with respect to industrial or intellectual property
        rights.
         During the course of our business activities, third parties may perceive that we violate or infringe
their industrial or intellectual property rights. Although we take measures to mitigate exposure to these
claims, the measures taken could be insufficient or ineffective and, in the future, litigation may be
necessary to defend use of industrial or intellectual property rights and so determine the validity and
scope of the intellectual property rights of third parties. Litigation of this nature may result in substantial
cost and we may be obligated to allocate monetary resources for such purposes, which may result in
counterclaims or other claims against us, distract the attention of our officers, and may significantly affect
the income of our operations.
        External perception of our hotels could harm our brands and reputation as well as reduce
        our revenues and lower our profits.
         Our brands and our reputation are among our most important assets. Our ability to attract
development partners and franchisees and to attract and retain customers depends, in part, upon the
external perceptions of Grupo Posadas and our brands, the quality of our hotels and services and our
corporate and management integrity. There is a risk to our brands and our reputation if we fail to act
responsibly or comply with regulatory requirements in a number of areas, such as safety and security,
sustainability, responsible tourism, environmental management, human rights and support for local
communities. The considerable increase in the use of social media over recent years has greatly
expanded the potential scope and scale, and increased the speed of the dissemination, of the negative
publicity that could be generated by any such adverse incident or failure. An adverse incident involving
our associates or our customers, or in respect of our third-party vendors or owners and the industry, and
any media coverage resulting therefrom, may harm our brands and reputation, cause a loss of consumer
confidence in Grupo Posadas, our brands or the industry, and negatively impact our results or operations.
        Costs of compliance with employment laws and regulations could adversely affect
        operating results.
         Union contracts for hotel employees in several major markets and for employees in certain
corporate offices are up for renewal periodically. Although under the terms of the management contracts
the employees and service providers at our managed hotels are employed by the hotel owners, such
employees may, nevertheless, direct their claims against us. In such circumstances, if we are not
successful in defending our position before a labor court, we could be held liable for those employee
claims. A similar situation would occur in the case of franchised hotels. We also have a great number of
suppliers of, among others, outsourcing, labor, security, promotion or intermediation services whose
employees may, despite legal and contractual provisions, file claims against us. Under such
circumstances, if we are not successful in defending our position before a labor court, we might be held
liable for those claims. In addition, we have a significant number of employees working at our wholly
owned hotels. Although we have not experienced labor stoppages or disruptions in the past, the failure to
timely renegotiate the contracts that are expiring could result in labor stoppages or disruptions, which
could adversely affect our revenues and profitability. Labor costs, including indemnities and severance


                                                      29
payments, are significant and could also escalate beyond our expectations which could have a material
adverse effect on our operating margins.
        We depend on our key employees.
         We depend to a significant degree on the talent, abilities and experience of the members of our
Executive Committee and other key members of our executive management staff, each of whom would
be difficult to replace due to his or her extensive experience in the hotel industry and the technical
knowledge relating to our operations. The loss of any of these individuals or failure to attract adequate
replacements could have a material adverse effect on our business and future operations. See
“Management.”
        Our insurance coverage may be insufficient to cover potential losses we face.
        We carry insurance coverage for general civil liability, damage to property, business interruption
and other risks with respect to our owned and leased hotels. Likewise, the owners of managed and
franchised hotels are contractually bound to have the same coverage for similar risks. However, the
owners may fail to contract and maintain such insurance. Our policies offer coverage terms and
conditions that we believe are usual and customary for our industry. Generally, our “all-risk” policies
provide that coverage is available on a per occurrence basis and that, for each occurrence, there is a limit
as well as various sub-limits on the amount of insurance proceeds we will receive in excess of applicable
deductibles. In addition, there may be overall limits under the policies. Sub-limits exist for certain types
of claims such as service interruption, debris removal, expediting costs or landscaping plant material
replacement, and the covered amounts of these sub-limits are significantly lower than the covered
amounts of the overall coverage limit. Our policies also provide that, for the coverage of earthquakes,
hurricanes and floods, all claims from any hotel resulting from a covered event must be combined for
purposes of the annual aggregate coverage limits and sub-limits. In addition, any such claims will be
combined with claims by the owners of managed and franchised hotels that participate in our insurance
program. Therefore, if covered events occur that affect more than one of our owned hotels and/or
managed and/or franchised hotels that participate in our insurance program, the claims from each
affected hotel will be added together to determine whether, depending on the type of claim, the per
occurrence limit, annual aggregate limit or sub-limits have been reached. If the limits or sub-limits are
exceeded, then each affected hotel would only receive a proportional share of the amount of insurance
proceeds provided for under the policy. In addition, under those circumstances, claims by third-party
owners would reduce the coverage available for our owned and leased hotels.
         There are also other risks including, but not limited to, non-conventional war, certain forms of
terrorism such as nuclear, biological or chemical terrorism, certain forms of political risks, some
environmental hazards and/or certain events of force majeure that may be deemed outside of the general
coverage limits of our policies, uninsurable or for which carrying insurance coverage is cost-prohibitive.
         We may also encounter challenges from insurance providers regarding payment on a particular
claim that we believe to be covered under our policy. Should an uninsured loss or a loss in excess of our
insured limits occur, we could lose all or a portion of the capital we have invested in a hotel owned,
managed, franchised or leased by us, as well as the anticipated future revenue from any such hotels. In
that event, we might nevertheless remain obligated for any lease payments or other financial obligations
related to the hotel.
          Our insurance program includes a single insurance carrier per risk classification. Disruptions in
the global financial markets in recent years have resulted in the deterioration in the financial condition of
many financial institutions, including insurance companies. We are not currently aware of any information
that would indicate that our insurer is unlikely to perform in the event of a covered incident. However, in
light of this uncertainty, we can make no assurances that we will be able to obtain the full amount of our
insurance coverage for insured events.
         When we hire third parties for certain services, such as construction services, we normally require
them to contract insurance or bonds for our benefit. Such insurances and bonds may be insufficient or
ineffective with respect to certain events or certain events may be uninsurable.




                                                     30
        We could be adversely affected by violations of the relevant Mexican and foreign anti-
        corruption legislation.
          Our business operations in countries inside and outside Mexico are subject to anti-corruption
legislation. The relevant anti-corruption legislation generally prohibits companies and their intermediaries
from making improper payments to government officials or any other person for the purpose of obtaining
or retaining business. We operate in parts of the world where government corruption has existed to some
degree and, in certain circumstances, our compliance with anti-corruption laws may conflict with local
customs and practices. We train our employees concerning compliance with anti-corruption laws. We also
have policies in place applicable to our employees in order to enforce and monitor internal compliance
with anti-corruption laws. We cannot provide assurance that our internal controls and procedures will
always protect us from reckless or criminal acts committed by our employees or third parties with whom
we work. If we are found liable for violations of the relevant anti-corruption legislation in Mexico or in other
jurisdictions, either due to our own acts or out of inadvertence, or due to the acts or inadvertence of
others, we could suffer criminal or civil penalties which could have a material and adverse effect on our
results of operations, financial condition and cash flows.
        We are required to comply with the Federal Law on the Prevention and Identification of
        Operations with Illicit Resources due to our operating activities.
          On October 17, 2012, the Federal Law on the Prevention and Identification of Operations Using
Illicit Resources (Ley Federal para la Prevención e Identificación de Operaciones con Recursos de
Procedencia Ilícita or the “Anti-Money Laundering Act”) was published in the Federal Official Gazette and
entered into force on July 17, 2013. Additionally, the Regulation of the Anti-Money Laundering Act
(Reglamento de la Ley Federal para la Prevención e Identificación de Operaciones con Recursos de
Procedencia Ilícita) was published in the Federal Official Gazette on August 16, 2013, and the Agreement
2/2013 regarding the application of the Anti-Money Laundering Act was published on August 23, 2013 (in
conjunction with the Anti-Money Laundering Act and the Regulation of the Anti-Money Laundering Act,
the “Anti-Money Laundering Provisions”). Under the Anti-Money Laundering Provisions, we are required
to compile and maintain records of certain transactions that we execute for the creation of property rights
and rights for the use or enjoyment of real-estate, prepaid services cards, certain promotional gifts and
management of third-party properties. Furthermore, we are obligated to submit certain notices before the
Ministry of Finance in connection with such transactions if certain thresholds are met. If we do not to
comply with the abovementioned obligations, we might become subject to various penalties, including
fines, which could negatively impact our results of operations.
        Our vacation club business is subject to regulation.
         We develop and operate vacation club resorts and we market and sell memberships in our
vacation club. We generally sell the memberships pursuant to interest-accruing installment payment
arrangements. These activities are all subject to regulations, including the standards established by the
Normas Oficiales Mexicanas (Official Mexican Standards). For example, Mexican regulations grant the
purchaser of a vacation club membership the right to rescind the purchase contract at any time within a
minimum statutory rescission period of five business days that begins upon the signing of the contract. In
addition, the Procuraduría Federal del Consumidor (the Mexican Consumer Protection Agency) must
authorize our model contract for the sale of vacation club memberships. Although we believe that we are
in material compliance with all applicable laws and regulations to which vacation club marketing, sales
and operations are currently subject, including the terms of our agreements, changes in these
requirements or a determination by a regulatory authority that we were not in compliance could adversely
affect us and the manner through which we operate our vacation club business.
        The vacation club business is subject to risk of member defaults.
         We develop and operate vacation club resorts by marketing vacation club memberships in such
resorts and we bear the risk of defaults under purchase contracts for vacation club memberships.
Vacation club members buy a “40-year-right-to-use” evidenced by an annual allocation of vacation club
points. We typically charge an initial payment of between 10% and 30% of the total price of the
membership and offer monthly installment payment plans that comprise both payments of capital and
interest which accrues on the unpaid balance of the purchase price. We recognize the entire value of a



                                                      31
purchase contract as revenue when 10% of the purchase price is paid and we create a reserve for future
uncollectible accounts based on our experience. When a purchaser enters into a loan agreement with us
for the remaining balance, defaults under such loans are covered by the reserve. Our reserves may not
be sufficient to offset non-performing receivables which could negatively affect our financial results.
         Although historically a substantial portion of our vacation club sales were denominated in U.S.
dollars, as of March 31, 2016, approximately 75% of our vacation club receivables portfolio including The
Front Door (which is being rebranded as Live Aqua Residence Club) is denominated in pesos, albeit at a
higher interest rate, as a result of the requests by certain members who wanted to convert their
installment payment obligations from U.S. dollars to pesos. We expect to continue to offer peso-
denominated payment plans to Mexican residents who wish to manage their exposure to fluctuations in
the peso exchange rate.
         Notwithstanding our re-denomination of a significant portion of our vacation club receivables
portfolio, many outstanding vacation club sales and loans to purchasers remain denominated in U.S.
dollars. Accordingly, our results will still be affected by U.S. dollar-peso exchange rate fluctuations. As
payments are made in U.S. dollars over the term of the loan, sales revenues recognized in U.S. dollars at
the time of purchase may ultimately be discounted to the extent the U.S. dollar has weakened against the
peso. We do not completely hedge against our exposure to exchange rate risk. Traditionally, we have
not hedged this exposure.
        Vacation club members pay annual maintenance fees that are allocated to the operation and
maintenance of vacation club resorts. Failure by members of the vacation club to pay maintenance fees
may require us to allocate funds to cover such operation and maintenance expenses, which could
negatively impact our business, results of operations and financial condition.
        We are subject to all of the operating risks common to the hotel and vacation club
        industries.
        Operating risks common to the hotel and vacation club industries include:
            •   changes in general economic conditions, including the timing and robustness of a
                recovery from the current economic slowdown;
            •   impact of public safety, armed encounters, war and terrorist activity on travel desirability;
            •   domestic and international political and geopolitical conditions, including civil uprising and
                unrest, expropriation, nationalization and repatriation;
            •   travelers’ fears of exposure to contagious diseases;
            •   decreases in demand or increases in supply for vacation interests;
            •   the impact of internet intermediaries on pricing and our continuing reliance on technology;
            •   cyclical over-building of hotel and vacation club properties;
            •   restrictive changes in laws or regulations or the interpretations thereof and other
                governmental actions, including those relating to zoning and land use, health and safety,
                the environment, hotel operation, taxation, travel and immigration;
            •   changes in travel patterns;
            •   changes in operating costs including, but not limited to, energy, labor and labor-related
                costs, insurance and unanticipated costs incurred due to disasters such as acts of nature
                and their consequences;
            •   disputes with third-parties which may result in litigation;
            •   disputes relating to the right to use brands and brand names or other industrial property
                rights;
            •   the availability of capital to fund construction, renovations and other investments;



                                                     32
        (iii)   sales, transfers or other dispositions of assets with a Fair Market Value not in excess of
    U.S.$5.0 million in any transaction or series of related transactions,

        (iv)    the sale or other disposition of Temporary Cash Investments,

        (v)    any sale, transfer, assignment or other disposition of any property or equipment that has
    become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business
    of Posadas or its Subsidiaries,

       (vi)    the sale, conveyance or other transfer of accounts receivable in connection with a
    Receivables Transaction,

       (vii)  the issuance of Capital Stock by a Restricted Subsidiary of Posadas to Posadas or a
    Wholly Owned Restricted Subsidiary, or

       (viii)   any sale or disposition by Posadas or any Restricted Subsidiary to Posadas or any
    Restricted Subsidiary.

    “Attributable Indebtedness” in respect of a Sale and Leaseback Transaction means, as at the time of
determination, the greater of:

        (i)     the fair value of the property subject to such arrangement; and

        (ii)    the present value (discounted at the rate of interest implicit in such transaction,
    determined in accordance with IFRS) of the total obligations of the lessee for rental payments during
    the remaining term of the lease included in such Sale and Leaseback Transaction (including any
    period for which such lease has been extended).

    “Average Life” shall mean, when applied to any Indebtedness at any date, the number of years
obtained by dividing (a) the original aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each scheduled installment, sinking
fund, serial maturity or other required payment of principal including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such
date and the making of such payment.

    “Board of Directors” means, with respect to any Person, the board of directors of such Person (or
other similar governing body) or any duly authorized committee thereof.

    “Board Resolution” means, with respect to any Person, a copy of a resolution certified by the
Secretary or an Assistant Secretary (or equivalent officer) of such Person to have been duly adopted by
the Board of Directors of such Person and to be in full force and effect on the date of such certification,
and delivered to the Trustee.

    “Business Day” has the meaning set forth under “—General.”

     “Capital Stock” means, (i) with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated, whether voting or non-voting) in the
equity of such Person, whether now outstanding or issued after the date of the Indenture, including,
without limitation, all common stock and preferred stock and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.

    “Capitalized Lease” means, as applied to any Person, any lease of any property (whether real,
personal or mixed) which, in conformity with IFRS, is required to be accounted for as a capital lease.

    “Capitalized Lease Obligations” means, as at any date of determination, the capitalized amount
shown as a liability in respect of all Capitalized Leases on the balance sheet of such Person prepared in
conformity with IFRS.



                                                    154
        The hotel industry is seasonal.
         The hotel industry is seasonal. However, the periods during which our properties experience
higher hotel revenue vary from property to property and depend principally on location. As of the date of
this offering memorandum, of the 23,826 hotel rooms we operate, approximately 80% are in urban or
suburban locations and cater primarily to business travelers. These hotel operations have not
experienced significant seasonal fluctuations aside from minor reductions in occupancy during the holiday
season from mid-December through mid-January. The remaining 20% hotel rooms we operate are in
coastal resort locations. Generally, our resort hotel revenues are greater in the first and fourth quarters
than in the second and third quarters. This seasonality can be expected to cause quarterly fluctuations in
our revenues.
        Concentration in Internet distribution channels may negatively impact our distribution
        costs.
         A significant and increasing number of our hotel rooms are booked through internet travel
intermediaries such as Travelocity.com®, Expedia.com®, Priceline.com®, Hotels.com® and Orbitz.com®.
As the percentage of internet bookings increases, these intermediaries may be able to obtain higher
commissions, reduced room rates or other significant contract concessions from us. Moreover, some of
these internet travel intermediaries are attempting to commoditize hotel rooms, by increasing the
importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense
of brand identification. Over time, consumers may develop loyalties to these reservations systems rather
than to our lodging brands. Although we expect to derive most of our business from our direct channels
(our call center, our corporate sales booking tools and our websites) and traditional channels, if the
amount of sales made through internet intermediaries increases significantly, our business and
profitability may be harmed as we would have to use a higher percentage of our profit margin to pay for
higher commissions.
        The hotel industry places significant dependence on technology.
        The hospitality industry continues to demand the use of sophisticated technology and systems
including solutions utilized for property management, revenue management, brand assurance and
compliance, procurement, reservation systems, operation of our customer loyalty program, distribution
and guest amenities. These technologies can be expected to require enhancements and new interfaces,
including those to comply with legal requirements such as privacy regulations and specifications
established by third parties such as the payment card industry. Further, the development and
maintenance of these technologies may require significant capital. There can be no assurance that as
various systems and technologies become outdated or new technology is required we will be able to
replace or introduce them as quickly as our competition or within budgeted costs and adequate
timeframes for such technology. Further, there can be no assurance that we will achieve the benefits that
may have been anticipated from any new technology or system.
        The hotel and vacation club industries are capital-intensive, and degradation in the quality
        or reputation of our brands could adversely affect our financial results and growth.
          For our owned, leased, managed and franchised properties to remain attractive and competitive,
we and the property owners have to spend money periodically to keep the properties well maintained,
modernized and refurbished. This creates an ongoing need for cash. Third-party property owners may be
unable to access capital or unwilling to spend available capital when necessary, even if required by the
terms of our management or franchise agreements. To the extent that we and property owners cannot
fund expenditures from cash generated by operations, funds must be borrowed or otherwise obtained.
Recent events, including the failures and near failures of financial services companies and the decrease
in liquidity and available capital, have negatively impacted the capital markets for hotel and vacation club
investments. Accordingly, our financial results have been and may continue to be impacted by the cost
and availability of funds. Failure to make the investments necessary to maintain or improve such
properties, to act in accordance with applicable brand standards or to project a consistent brand image
could adversely affect the quality and reputation of our brands. Moreover, third-party owners or
franchisees may be unwilling or unable to incur the cost of complying with brand standards for new and
existing brands as such brands may evolve from time to time. If the reputation or perceived quality of our



                                                    34
    “Consolidated Net Tangible Assets” of any Person means the aggregate amount of assets (less
applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities
and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense (to the
extent included in said aggregate amount of assets) and other like intangibles, as shown on the balance
sheet of such Person for the most recently ended fiscal quarter for which financial statements are
available, determined on a consolidated basis in accordance with IFRS. Consolidated Net Tangible
Assets shall be determined as of the time of the occurrence of the event(s) giving rise to the requirement
to determine Consolidated Net Tangible Assets and after giving effect to such event(s).

   “Consolidated Revenues” means, for any period, revenues of a Person and its Subsidiaries
(Restricted Subsidiaries in the case of the Issuer), determined on a consolidated basis in accordance with
IFRS.

    “Consolidated Total Indebtedness” means, with respect to a Person as of any date of determination,
an amount equal to the aggregate amount (without duplication) of all Indebtedness of such Person and its
Subsidiaries (Restricted Subsidiaries in the case of the Issuer) outstanding at such time.

    “Covenant Defeasance” has the meaning set forth under “—Defeasance.”

    “Credit Agreements” means, collectively (i) the Ps.200.0 million revolving credit agreement between
Banco Santander, S.A. and Posadas and (ii) the loan agreement among Inmobiliaria del Sudeste, S.A. de
C.V., Palace Holding, S.A. de C.V. and Promotora Inmobiliaria Hotelera, S.A. de C.V. (as successor to
Inmobiliaria Hotelera Posadas, S.A. de C.V.) dated as of December 10, 2003.

     “Credit Facilities” means one or more debt facilities (which may be outstanding at the same time and
including, without limitation, the Credit Agreements) providing for revolving credit loans, term loans or
letters of credit and, in each case, as such agreements may be amended, refinanced or otherwise
restructured, in whole or in part from time to time with respect to all or any portion of the Indebtedness
under such agreement or agreements or any successor or replacement agreement or agreements and
whether by the same or any other agent, lender or group of lenders.

     “Currency Agreements” mean any spot or forward foreign exchange agreements and currency swap,
currency option or other similar financial agreements or arrangements entered into by Posadas or any of
its Subsidiaries.

    “Debt to EBITDA Ratio” means, with respect to any Person as of any date of determination, the ratio
of the aggregate amount of Consolidated Total Indebtedness for such Person as of such date to
Consolidated EBITDA for such Person for the Test Period; provided that, for purposes of this definition,
Consolidated Total Indebtedness and Consolidated EBITDA shall be calculated after giving effect on a
pro forma basis for such Test Period to:

        (i)     the incurrence of any Indebtedness by such Person or any of its Subsidiaries (Restricted
    Subsidiaries in the case of the Issuer) or the issuance of any Preferred Stock by any such Subsidiary
    (Restricted Subsidiary in the case of the Issuer) (and the application of the proceeds thereof) and any
    repayment of other Indebtedness by such Person or any of its Subsidiaries (Restricted Subsidiaries in
    the case of the Issuer) or redemption of other Preferred Stock by any such Subsidiary (Restricted
    Subsidiary in the case of the Issuer) (and the application of the proceeds therefrom) (other than the
    incurrence or repayment of Indebtedness in the ordinary course of business for working capital
    purposes pursuant to any revolving credit arrangement) occurring during the applicable Test Period
    for which Consolidated EBITDA or Consolidated Total Indebtedness is being calculated or at any time
    subsequent to the last day of such Test Period and on or prior to the date of determination, as if such
    incurrence, issuance, repayment, or redemption, as the case may be (and the application of the
    proceeds thereof), occurred on the first day of the Test Period (except that, in making such
    computation, the amount of Indebtedness under any revolving credit facility outstanding on the date
    of such calculation will be computed based on (i) the average daily balance of such Indebtedness
    during such quarter or such shorter period for which such facility was outstanding or (ii) if such facility



                                                     159
    (k)     Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed money);

    (l)     easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course
of business of Posadas and the Subsidiaries taken as a whole;

    (m)     leases or subleases granted to others that do not materially interfere with the ordinary course
of business of Posadas and the Subsidiaries, taken as a whole;

   (n)    Liens encumbering property or assets under construction arising from progress or partial
payments by a customer of Posadas or the Subsidiaries relating to such property or assets;

     (o)     Liens on property of, or on shares of Capital Stock or Indebtedness of any Person existing at
the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens
do not extend to or cover any property or assets of Posadas or any Restricted Subsidiary other than the
property or assets acquired;

    (p)     Liens in favor of Posadas or any Guarantor;

   (q)      Liens arising from the rendering of a final judgment or order against Posadas or any
Subsidiary that does not give rise to an Event of Default;

   (r)    Liens securing reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the products and proceeds thereof;

   (s)     Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;

     (t)      Liens on any assets acquired by Posadas or any Restricted Subsidiary after the Closing
Date, which Liens were in existence prior to the acquisition of such assets (to the extent that such Liens
were not created in contemplation of or in connection with such acquisition); provided that such Liens are
limited to the assets so acquired and the proceeds thereof;

    (u)      Liens arising by virtue of any statutory, regulatory, contractual or warranty requirements of
Posadas or any Restricted Subsidiary, including, without limitation, provisions relating to rights of offset
and set-off, bankers’ liens or similar rights and remedies;

   (v)      Liens upon specific items of inventory or other goods and proceeds of any Person securing
such Person’s obligations in respect of banker’s acceptance issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such inventory or other goods;

    (w)    Liens arising under any Permitted Vacation Club Financing Facilities and Liens in effect on
the Closing Date securing Indebtedness permitted under clause (xiii) of the second paragraph of the
covenant described under “—Certain Covenants—Limitation on Indebtedness.”

    (x)     Liens securing any Hedging Obligations so long as the Lien is incurred in the ordinary course
of business, and not for speculative purposes and pursuant to customary collateral provisions for Hedging
Obligations of such type; and

   (y)     Liens on accounts receivable or assets related to such accounts receivable incurred in
connection with a Receivables Transaction.

    “Permitted Vacation Club Financing Facilities” means one or more debt facilities the proceeds of
which are used in the Vacation Club Business; provided that such Indebtedness is not:



                                                    166
third parties, and there can be no assurances that we will be able to obtain from such third parties the
licenses we need in the future.
        Any failure to protect our trademarks could have a negative impact on the value of our
        brand names and adversely affect our business.
          We believe our trademarks are an important component of our business. We rely on trademark
laws to protect our proprietary rights. The success of our business depends in part upon our continued
ability to use our trademarks to increase brand awareness and further develop our brand in both the
Mexican and international markets. Monitoring the unauthorized use of our intellectual property is difficult
and burdensome. In the future, litigation may be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Litigation of this type could result in
substantial costs and diversion of resources, may result in counterclaims or other claims against us, divert
management attention and could significantly harm our results of operations. From time to time, we apply
to have certain trademarks registered. There is no guarantee that such trademark registrations will be
granted. We cannot assure you that all of the steps we have taken to protect our trademarks will be
adequate to prevent imitation of our trademarks by others. The unauthorized reproduction of our
trademarks could diminish the value of our brand and its market acceptance, competitive advantages or
goodwill, which could adversely affect our business.
        Our ability to provide our customers with competitive services is dependent on our ability
        to attract, train and retain qualified personnel.
         Our ability to grow and provide our customers with competitive services is partially dependent on
our ability to attract, train and retain highly motivated people with the skills to serve our customers. The
markets we serve are highly competitive and competition for skilled employees is intense. During 2014,
we started a project aimed at attracting and retaining talent for key positions at our various business units.
However we cannot predict or guarantee the success of such project.
        Our customers may experience financial difficulties and we may not be able to collect our
        receivables, materially and adversely affecting our profitability.
        Over the course of a contract, our customers’ financial fortunes may change affecting their ability
to pay their obligations and our ability to collect our fees for services rendered. While we may resort to
other methods to pursue our claims or collect our receivables, these methods are expensive and time
consuming and success is not guaranteed. Failure to collect our receivables or prevail on our claims
would have an adverse effect on our profitability.
        A network failure could cause delays or interruptions of service, which could cause us to
        lose customers and revenues.
         We rely on our telecommunication network and infrastructure to provide our hotel customers,
vacation club members and service business clients with reliable access to our reservation system,
customer contact and other services, including internet and telephone. Some of the risks to our network
and infrastructure include physical damage, natural disasters such as hurricanes, earthquakes, floods
and storms, among others, and other disruptions beyond our control. Although we carry casualty
insurance against loss and we have implemented redundancy in our network and installed backup
technologies, disruptions may cause interruptions in service or reduced capacity for customers, either of
which could cause us to lose customers and revenues or incur additional expenses and will adversely
affect our operations, financial condition and results of operation.
        Cyber threats and the risk of data breaches or disruptions of our information technology
        systems could harm our brand and adversely affect our business.
          Our business involves the processing, use, storage and transmission of personal information
regarding our employees, customers, hotel owners, and vendors for various business purposes, including
marketing and promotional purposes. The protection of personal as well as proprietary information is
critical to us. We are dependent on information technology networks and systems to process, transmit
and store proprietary and personal information, and to communicate among our various locations in
Mexico and the United States, which may include our reservation systems, vacation exchange systems,
hotel/property management systems, customer and employee databases, call centers, administrative


                                                     37
   (7)       Investments in money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (1) through (6) above and (9) below;

    (8)      demand deposit accounts with U.S. banks or Mexican banks specified in clause (9) of this
definition maintained in the ordinary course of business; and

    (9)      certificates of deposit, bank promissory notes and bankers’ acceptances denominated in
pesos, maturing not more than 365 days after the acquisition thereof and issued or guaranteed by any
one of the four largest banks, based on assets as of the immediately preceding December 31, organized
under the laws of Mexico and which are not under intervention or controlled by the Instituto para la
Protección al Ahorro Bancario or any successor thereto or any banking subsidiary of a foreign bank which
has capital, surplus and undivided profits aggregating in excess of U.S.$200.0 million, or the foreign
currency equivalent thereof, and has outstanding debt which is rated “A,” or such similar equivalent rating,
or higher by S&P or Moody’s.

    “Test Period” has the meaning set forth in the definition of Consolidated Interest Coverage Ratio.

    “Trustee” has the meaning set forth in the first paragraph under “Description of the Notes.”

   “Unrestricted Subsidiary” of Posadas, means, initially Fundación Posadas, A.C., its successors and
Subsidiaries, and

    (1)    any Subsidiary of Posadas that at the time of determination shall be or continue to be
designated as such pursuant to and in compliance with the covenant described under “—Certain
Covenants—Limitation on Designations of Unrestricted Subsidiaries”; and

    (2)     any Subsidiary of an Unrestricted Subsidiary.

   “Vacation Club Business” means the vacation ownership business of Posadas and its Subsidiaries
described in this offering memorandum, and any related business involving the sale and operation of
membership interests, time share right of use, or full or fractional ownership interests.

    “Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having
the power to vote for the election of directors, managers or other voting members of the governing body
of such Person.

    “Wholly Owned” means, with respect to any Subsidiary of any Person, such Subsidiary if all of the
outstanding Capital Stock in such Subsidiary (other than any shares required that the relevant company
has two shareholders at all times as mandated by applicable law) is owned directly or indirectly by such
Person or one or more Wholly Owned Subsidiaries of such Person.




                                                    170
affected by fluctuations in the value of the peso against the U.S. dollar and any depreciation or
devaluation of the peso against the U.S. dollar results in net foreign exchange losses. In the first three
months of 2016, the peso did not depreciate against the U.S. dollar; however, the peso has experienced
considerable volatility in recent years. In 2015, the peso depreciated against the U.S. dollar by
approximately 16.9%. In 2014, the peso depreciated by approximately 12.6% against the U.S. dollar.
          Severe devaluation or depreciation of the peso may also result in disruption of the international
foreign exchange markets and may limit our ability to transfer or to convert pesos into U.S. dollars and
other currencies for the purpose of making timely payments of interest and principal on our non-peso-
denominated indebtedness, including on the Notes. Although the Mexican government currently does not
restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities
to convert pesos into U.S. dollars or transfer foreign currencies out of Mexico, the Mexican government
could, as in the past, institute restrictive exchange rate policies that could affect us in the future.
Devaluation or depreciation of the peso against the U.S. dollar may also adversely affect U.S. dollar
prices for the Notes. Currency fluctuations are likely to continue to have an effect on our financial
condition, results of operations and cash flows in future periods.
            See “—Fluctuations in foreign currency exchange rates could negatively affect our operating
results.”
               Inflation and interest rates may adversely affect our business and results of
               operations.
            High inflation rates can adversely affect our business and results of operations in the
following ways:
               •   to the extent that a significant portion of our operating costs are denominated in pesos, a
                   considerable inflation increase may in turn cause an increase in our operating costs;
               •   inflation can adversely affect consumer purchasing power, thereby adversely affecting
                   demand for hotel rooms and vacation club memberships;
               •   to the extent inflation exceeds our price increases, our prices and revenues will be
                   adversely affected in “real” terms;
               •   if the rate of Mexican inflation exceeds the rate of the depreciation of the peso against the
                   U.S. dollar, our U.S. dollar-denominated sales will decrease in relative terms when stated
                   in constant pesos; and
               •   inflation and its effect on domestic interest rates can lead to reduced liquidity in the
                   domestic capital and lending markets, which could affect our ability to refinance our
                   indebtedness in those markets.
        According to the National Consumer Price Index (“INPC”) published by INEGI (Instituto Nacional
de Estadística, Geografía e Informática), annual inflation rates have been 4.0%, 4.1% and 2.1% for the
years ended December 31, 2013, 2014 and 2015, respectively.
         Interest rates in Mexico have also undergone volatility periods. The adverse situations that have
affected the Mexican economy in the past, including inflation increases, have resulted in significant
interest rate increases in the Mexican market during such periods. High interest rates in Mexico may
significantly increase our financing costs and thereby impair our financial condition, results of operations
and cash flows.
            Political, social and other developments in Mexico could affect our business.
        Currently, no single party has an absolute majority in any chamber of the Mexican Federal
Congress. The absence of a clear majority and misalignment between the legislature and the
administration could result in deadlock and affect the legislative process, which in turn could have an
adverse effect on the Mexican economy. Recent changes in laws, regulations and governmental policies
with respect to key issues such as tax, energy, financial markets, telecommunications and antitrust, may
contribute to economic uncertainty or cause heightened volatility of the Mexican capital markets and



                                                       39
         Holders or beneficial owners of the New Notes may be requested to, subject to specified
exceptions and limitations, provide certain information or documentation necessary to enable us to apply
the appropriate Mexican withholding tax rate on interest payments under the New Notes made by us, to
such holders or beneficial owners. In the event that the specified information or documentation
concerning the holder or beneficial owner, if requested and required, is not timely provided completely or
at all, we may withhold Mexican tax from interest payments on the New Notes to that non-Mexican holder
or beneficial owner at the maximum applicable rate, but our obligation to pay Additional Amounts relating
to those withholding taxes will be limited as described under “Description of the Notes—Additional
Amounts.”
       We have agreed, subject to certain limitations and exceptions, to pay additional amounts
in respect of the above-mentioned Mexican withholding taxes in connection with interest
payments on the Notes. See “Description of the Notes—Additional Amounts.”
        Payments of Principal. Under existing Mexican law and regulations, payments of principal made
by us or any Mexican guarantor in respect of the New Notes to a non-resident of Mexico holding the New
Notes, will not be subject to Mexican withholding or similar taxes.
        Gains obtained from the Disposition of the New Notes. Pursuant to the Mexican Income Tax
Law, in certain cases gains realized by a non-Mexican resident from the disposition of New Notes may be
subject to income tax in Mexico. In this regard, if New Notes are transferred by a non-Mexican resident
investor to a Mexican resident or to a permanent establishment in Mexico for tax purposes of a non-
Mexican resident, gains, if any, would be subject to Mexican withholding tax pursuant to the rules
described above in respect of interest payments. The amount of deemed interest income will be
determined according to the rules established in the Mexican income tax law.
        Gains realized by a non-Mexican resident investor from the sale or other disposition of New
Notes transferred to another non-Mexican resident, would not be subject to Mexican withholding tax,
provided that neither transferor nor transferee have a permanent establishment in Mexico for tax
purposes.
         Imputed Interest on the Acquisition of New Notes. Under the Mexican Income Tax Law, any
discount received by a non-Mexican resident upon purchase of the New Notes, if acquired from a
Mexican resident or a non-Mexican resident with a permanent establishment in Mexico, is treated as
deemed interest income, and therefore, subject to taxes in Mexico. Such interest income is calculated as
the difference between the face value (plus accrued interest not yet subject to withholding) and the
purchase price of such New Notes. The Mexican seller must determine, pay and collect the tax on behalf
of the non-resident purchaser within 15 days after the sale. In such case, the applicable income tax rate
would be 10%.
         New Notes acquired at a discount by a non-Mexican resident with no permanent establishment in
Mexico from another non-Mexican resident with no permanent establishment in Mexico would not be
subject to income tax on imputed interest on the acquisition of the New Notes.
         Other Mexican Taxes. Under current Mexican tax laws and regulations, non-Mexican holders of
the New Notes are not subject to estate, gift, inheritance or similar taxes in connection with the holding or
disposition of the New Notes, nor will they be liable for Mexican stamp, registration or similar taxes with
respect to purchase or holding of the New Notes.
      THE ABOVE SUMMARY IS INTENDED TO OUTLINE CERTAIN MEXICAN FEDERAL TAX
LAWS AND REGULATIONS AND IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP OR DISPOSITION OF
THE NEW NOTES. PURSUANT TO ARTICLE 89 OF THE MEXICAN TAX CODE, RECIPIENTS OF
THIS OFFERING MEMORANDUM ARE HEREBY ADVISED THAT THE INFORMATION CONTAINED
HEREIN MAY BE CONTRARY TO THE INTERPRETATION OF THE MEXICAN FISCAL AUTHORITIES.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.




                                                    177
                                         PLAN OF DISTRIBUTION
          Subject to the terms and conditions in the purchase agreement among us, the guarantors and
J.P. Morgan Securities LLC (the “initial purchaser”), we have agreed to sell to the initial purchaser, and
the initial purchaser has agreed to purchase from us, the entire principal amount of the New Notes.

        The purchase agreement provides that the initial purchaser will purchase all the New Notes if any
of them are purchased.
        The initial purchaser initially proposes to offer the New Notes for resale at the issue price that
appears on the cover of this offering memorandum. After the initial offering, the initial purchaser may
change the offering price and any other selling terms. The initial purchaser may offer and sell the New
Notes through certain of their affiliates.
        We will indemnify the initial purchaser and its controlling persons against certain liabilities,
including liabilities under the Securities Act, or contribute to payments that the initial purchaser may be
required to make in respect of those liabilities.
         The New Notes have not been registered under the Securities Act or the securities laws of any
other place. In the purchase agreement, the initial purchaser has agreed that:
            •    The New Notes may not be offered or sold within the United States or to U.S. persons
                 except pursuant to an exemption from the registration requirements of the Securities Act
                 or in transactions not subject to those registration requirements.
            •    During the initial distribution of the New Notes, it will offer or sell New Notes only to
                 qualified institutional buyers in compliance with Rule 144A and outside the United States
                 in compliance with Regulation S.
         In addition, until 40 days following the commencement of this offering, an offer or sale of New
Notes within the United States by a dealer (whether or not participating in the offering) may violate the
registration requirements of the Securities Act unless the dealer makes the offer or sale in compliance
with Rule 144A or another exemption from registration under the Securities Act.
         The Notes are an issue of securities for which there may not be an established trading market. In
addition, the New Notes are subject to certain restrictions on resale and transfer as described under
“Transfer Restrictions”. We have applied to increase the principal amount of Notes listed on the official list
of the Luxembourg Stock Exchange and trading on the Euro MTF Market so as to include the principal
amount of the New Notes. However, we cannot assure you that the listing application will be approved.
The initial purchaser has advised us that it intends to make a market in the Notes, but it is not obligated to
do so. The initial purchaser may discontinue any market making in the Notes at any time in their sole
discretion. Accordingly, we cannot assure you that a liquid trading market will exist for the Notes after this
opening, that you will be able to sell your Notes at a particular time or that the prices that you receive
when you sell will be favorable.
         Delivery of the New Notes was made on May 23, 2016, which was the fifth business day following
the date of pricing of the New Notes (such settlement cycle being herein referred to as “T+5”). Under Rule
15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market
generally are required to settle in three business days, unless the parties to any such trade expressly
agree otherwise. Accordingly, purchasers who wished to trade New Notes prior to closing were required,
by virtue of the fact that the New Notes initially settled T+5, to specify an alternate settlement cycle at the
time of any such trade to prevent a failed settlement.
        You should be aware that the laws and practices of certain countries require investors to pay
stamp taxes and other charges in connection with purchases of securities.
          In connection with the offering of the Notes, the initial purchaser may engage in overallotment,
stabilizing transactions and syndicate covering transactions. Overallotment involves sales in excess of the
offering size, which creates a short position for the initial purchaser. Stabilizing transactions involve bids
to purchase the Notes in the open market for the purpose of pegging, fixing or maintaining the price of the
Notes. Syndicate covering transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover short positions. Stabilizing transactions and syndicate

                                                     181
COUNSEL IF WE SO REQUEST), OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED
STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THIS LEGEND CAN ONLY BE REMOVED AT THE OPTION OF THE ISSUER.
         7. It understands that the Regulation S notes will bear a legend substantially to the following
effect unless otherwise agreed by us:
      PRIOR TO EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS
DEFINED IN REGULATION S (“REGULATION S”) UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), THIS SECURITY MAY NOT BE REOFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN
REEGULATION S) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED
IN REGULATION S) EXCEPT TO A “QUALIFIED INSTITUTIONAL BUYER” IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF
THE INDENTURE REFERRED TO HEREIN.
        8. It acknowledges that the foregoing restrictions apply to holders of beneficial interests in the
Notes, as well as holders of the Notes.
          9. It acknowledges that the trustee will not be required to accept for registration of transfer any
Notes acquired by it, except upon presentation of evidence satisfactory to us and the trustee that the
restrictions set forth herein have been complied with.
         10. It acknowledges that we, the initial purchaser and others will rely upon the truth and accuracy
of the foregoing acknowledgments, representations and agreements and agrees that if any of the
acknowledgments, representations or agreements deemed to have been made by its purchase of the
Notes is no longer accurate, it shall promptly notify us and the initial purchaser. If it is acquiring the Notes
as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment
discretion with respect to each such account and it has full power to make the foregoing
acknowledgments, representations, and agreements on behalf of each account.




                                                     187
        Despite our current indebtedness levels, we may still be able to incur substantially more
        debt. This could exacerbate further the risks associated with our substantial leverage.
         We and our subsidiaries may be able to incur substantial additional indebtedness, including
secured indebtedness, in the future. The terms of the indenture will restrict, but will not completely
prohibit, us from doing so. In addition, the indenture will allow us to issue additional notes under certain
circumstances, which will also be guaranteed by the guarantors. The indenture will also allow us to incur
certain secured debt which would be effectively senior to the Notes. In addition, the indenture will not
prevent us from incurring other liabilities that do not constitute indebtedness. See “Description of the
Notes.” If new debt or other liabilities are added to our current debt levels, the related risks that we now
face could intensify.
        The Notes and the guarantees will be structurally subordinated to our secured debt and to
        certain claims preferred by statute.
         Our obligations under the Notes, and the obligations of the guarantors under the guarantees, are
unsecured. As a result, the Notes will be structurally subordinated to all of our and the guarantors’
secured debt to the extent of the value of the collateral securing such debt. As of March 31, 2016, after
giving pro forma effect to the sale of the Notes offered hereby and the application of the gross proceeds
thereof, we and the guarantors would have no secured debt outstanding. However, we currently have a
Ps.200 million twelve-month revolving credit facility with Banco Santander, S.A., which we renewed on
September 29, 2015 and which is secured by a mortgage on the Fiesta Inn Aeropuerto hotel, owned by
our subsidiaries Gran Inmobiliaria Posadas, S.A. de C.V., Operadora del Golfo de México, S.A de C.V.,
and YIPA, S.A. de C.V. We may draw amounts under our revolving credit facility or incur additional
secured indebtedness in the future as permitted under the indenture governing the Notes. In the event
that we or our subsidiaries are not able to repay amounts due under such secured debt obligations,
creditors could proceed against the collateral securing such indebtedness. In that event, any proceeds
upon a realization of the collateral would be applied first to amounts due under the secured debt
obligations before any proceeds would be available to make payments on the Notes. If there is a default,
the value of this collateral may not be sufficient to repay both our secured creditors and the holders of the
Notes. Additionally, the claims of holders of the Notes will rank effectively junior to certain obligations that
are preferred by statute, including certain claims relating to taxes and labor.
        Certain of our subsidiaries are not guarantors and our obligations with respect to the
        Notes will be structurally subordinated to all liabilities of these non-guarantor
        subsidiaries. We have incurred and may incur further secured debt in the future.
         The guarantors of the Notes include only some of our subsidiaries. However, our financial
information (including our financial statements included herein) is presented on a consolidated basis. As
of and for the three months ending March 31, 2016, our non-guarantor subsidiaries represented 5.9% and
8.3% of our total revenues and assets, respectively. As of March 31, 2016, after giving pro forma effect
to the sale of the Notes offered hereby, and the application of the gross proceeds thereof (other than our
expected redemption of the 2017 Notes), our total consolidated indebtedness would have been
U.S.$451.3 million, our guarantor subsidiaries would have no debt outstanding and our non-guarantor
subsidiaries would have approximately U.S.$1.4 million outstanding debt, which is structurally senior to
the Notes. In addition, the indenture will, subject to certain limitations, permit these subsidiaries to incur
indebtedness and will not contain any limitation on the amount of other liabilities, such as trade payables,
that these subsidiaries may incur. Any right that we or the subsidiary guarantors have to receive assets
of any of the non-guarantor subsidiaries upon the liquidation or reorganization of those subsidiaries, and
the consequent rights of holders of Notes to realize proceeds from the sale of any of those subsidiaries’
assets, will be structurally subordinated to the claims of that subsidiary’s creditors, including trade
creditors and holders of debt of that subsidiary.
        We have entered into a Ps.200 million twelve-month revolving credit facility with Banco
Santander, S.A. (renewed on September 29, 2015) which is secured by a mortgage on the Fiesta Inn
Aeropuerto hotel, owned by our subsidiaries Gran Inmobiliaria Posadas, S.A. de C.V., Operadora del
Golfo de México, S.A de C.V., and YIPA, S.A. de C.V. In addition, we may incur additional debt in the
future which may, subject to the terms of the contractual restrictions binding on us at that time, be
secured with mortgages or other liens on our assets (including liens on our hotel properties). Secured


                                                      43
creditors will be preferred to the holders of the Notes in respect of the assets provided as collateral and
such assets may not be available to holders of the Notes for collection or foreclosure.
        We may be unable to make a change of control offer required by the indenture governing
        the Notes which would cause defaults under the indenture governing the Notes.
         The terms of the Notes will require us to make an offer to repurchase the Notes upon the
occurrence of a change of control at a purchase price equal to 101% of the principal amount of the Notes,
plus accrued interest to the date of the purchase. Any financing arrangements we may enter may require
repayment of amounts outstanding in the event of a change of control and limit our ability to fund the
repurchase of the Notes in certain circumstances. It is possible that we will not have sufficient funds at
the time of the change of control to make the required repurchase of Notes, or that restrictions in our
credit facilities and other financing arrangements will not allow the repurchases. See “Description of the
Notes—Repurchase at the Option of Holders—Change of Control.”
        The guarantees may not be enforceable.
         The guarantees provide a basis for a direct claim against the guarantors; however, it is possible
that the guarantees may not be enforceable under Mexican law. While Mexican law does not prohibit the
making of guarantees and, as a result, does not prevent the guarantees from being valid, binding and
enforceable against the guarantors, in the event that a guarantor becomes subject to a concurso
mercantil (reorganization proceeding) or to quiebra (bankruptcy), the relevant guarantee may be deemed
to have been a fraudulent transfer and declared void, based upon the guarantor being deemed not to
have received fair consideration in exchange for such guarantee. If any such event were to occur, the
creditworthiness of the Notes and the market value of the Notes in the secondary market may be
materially and adversely affected.
        The collection of interest on interest may not be enforceable in Mexico.
         Mexican law does not permit the collection of interest on interest and, as a result, the accrual of
default interest on past due ordinary interest accrued in respect to the Notes may be unenforceable in
Mexico.
        If we or any of the subsidiary guarantors were to be declared insolvent or bankrupt,
        holders of the Notes may find it difficult to collect payment on the Notes.
         Under the Ley de Concursos Mercantiles (Mexican Bankruptcy Law), if we or the subsidiary
guarantors are declared bankrupt or become subject to concurso mercantil (judicial reorganization), our
obligations and the obligations of the subsidiary guarantors in respect of the Notes, (i) would be converted
into pesos and then from pesos into Unidades de Inversión (inflation indexed units), or UDIs, and would
not be adjusted to take into account any devaluation of the peso relative to the U.S. dollar occurring after
such conversion, (ii) would be satisfied at the time claims of all our creditors are satisfied, (iii) would be
subject to the outcome of, and priorities recognized in, the relevant proceedings, (iv) would cease to
accrue interest from the date a concurso mercantil is declared and (v) would be subject to certain
statutory preferences, including tax, social security and labor claims and claims of secured creditors.
        In addition, creditors of the Company and/or the subsidiary guarantors may hold negotiable
instruments or other instruments governed by Mexican law that grant rights to attach the assets of ours
and/or the subsidiary guarantors at the inception of judicial proceedings in the relevant jurisdiction, which
attachment is likely to result in priorities benefitting those creditors when compared to the rights of holders
of the Notes.
        Provisions of Mexican law may make it difficult for holders of the Notes to convert
        payments they receive in pesos into U.S. dollars or to recognize the full value of payments
        to them.
        We are required to make payments in respect of the Notes in U.S. dollars. However, under the
Ley Monetaria de los Estados Unidos Mexicanos (Mexican Monetary Law), obligations to make payments
in Mexico in foreign currency, whether by agreement or upon enforcement of a judgment, may be
discharged in pesos at the exchange rate for pesos prevailing at the time and place of payment or
judgment. Accordingly, we will be legally entitled to make payment of amounts due on the Notes in pesos



                                                      44
if payment of the Notes is sought in Mexico through the enforcement of a non-Mexican judgment or
otherwise. If we elect to make payments due on the Notes in pesos in accordance with the Mexican
Monetary Law, we can make no assurance that the amounts paid may be converted by the payee into
U.S. dollars or that, if converted, such amounts would be sufficient to purchase U.S. dollars equal to the
amount of principal, interest or additional amounts due on the Notes.
        An active trading market may not develop for the Notes, which may hinder your ability to
        liquidate your investment.
        The New Notes are a new issue of securities with no established trading market. We have
applied to increase the principal amount of Notes listed on the Official List of the Luxembourg Stock
Exchange and trading on the Euro MTF Market so as to include the principal amount of the New Notes.
We cannot assure you, however, that the application will be approved or that an active trading market for
the New Notes will develop or be sustained. The initial purchaser has informed us that it intends to make
a market in the New Notes after the completion of this offering. However, the initial purchaser is not
obligated to do so and may cease their market-making at any time. In addition, the liquidity of the trading
market in the New Notes, and the market price quoted for the New Notes, may be adversely affected by
changes in the overall market for fixed income securities and by changes in our financial performance or
prospects or in the prospects for companies in our industry in general. As a result, we cannot assure you
that an active trading market will develop for the New Notes. If no active trading market develops, you
may not be able to resell the New Notes at their fair market value or at all. The reoffering and resale of
the Notes is subject to significant legal restrictions.
        The Notes may not be freely transferred.
          The Notes have not been registered under the Securities Act or any U.S. state securities laws or
any other jurisdiction’s securities laws and, unless so registered, may not be offered or sold within the
U.S., or to, or for the benefit of, a U.S. citizen, except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act and applicable U.S. state securities
laws. Prospective investors should be aware that investors may be required to bear the financial risks of
this investment for an indefinite period of time. See “Transfer Restrictions” for a full explanation of such
restrictions.




                                                     45
                                         USE OF PROCEEDS
        After deducting the discount and fees to the initial purchaser and the estimated offering
expenses, we expect to use the net proceeds from the sale of the New Notes first to exercise our option
to redeem at par, on or after November 30, 2016, the total remaining principal amount outstanding of
U.S.$38.3 million, plus accrued and unpaid interest thereon, of the 2017 Notes, and then for general
corporate purposes.




                                                   46
                                                    EXCHANGE RATES
          Since November 1991, Mexico has had a free market for foreign exchange. From November
1991 to December 21, 1994, Banco de México kept the peso-U.S. dollar exchange rate within a range
prescribed by the government through intervention in the foreign exchange market. Within the band,
Banco de México generally intervened to reduce day-to-day fluctuations in the exchange rate. In
December 1994, the government suspended intervention by Banco de México and allowed the peso to
float freely against the U.S. dollar. The peso declined sharply in December 1994 and continued to fall
under conditions of high volatility in 1995. In 1996, the peso fell more slowly and was less volatile.
Relative stability characterized the foreign exchange markets during the first three quarters of 1997. The
fall of the Hang Seng Index of the Hong Kong Stock Exchange on October 24, 1997 marked the
beginning of a period of increased volatility in the foreign exchange markets with the peso falling
approximately 10.0% in just a few days. During 1998, the foreign exchange markets experienced
volatility as a result of the financial crisis in Asia and Russia and the financial turmoil in countries such as
Brazil and Venezuela. For the last few years, the Mexican government has maintained a policy of non-
intervention in the foreign exchange markets, other than conducting periodic auctions for the purchase of
U.S. dollars, and has not had in effect any exchange controls (although such controls have existed and
have been in effect in the past). We cannot assure you that the Mexican government will maintain its
current policies with regard to the peso or that the peso will not depreciate or appreciate significantly in
the future
         Solely for the convenience of the reader, certain amounts presented in Mexican pesos in this
offering memorandum as of and for the year ended December 31, 2015 and the three months ended
March 31, 2016 have been converted into U.S. dollars at specified exchange rates. Unless otherwise
indicated, the exchange rate used for purposes of these convenience translations is the Official Exchange
Rate as of such dates. You should not construe our conversions as representations that the Mexican
peso amounts actually represent the U.S. dollar amounts presented, or that they could be converted into
U.S. dollars at the specified rate or at the dates indicated or at all.
       The following table sets forth, for the periods indicated, the high, low, average and period-end
exchange rates for the Official Exchange Rate, all expressed in nominal pesos per U.S. dollar.

                                                                                         Exchange rate(1)
            Year ended December 31,                                         High      Low    Average(2) Period end
            2011………………………………………………………………                                    14.24    11.50     12.43      13.99
            2012 ………………………………………………………………                                   14.39    12.63     13.17      13.01
            2013 ………………………………………………………………                                   13.44    11.98     12.77      13.08
            2014 ………………………………………………………………                                   14.79    12.85     13.30      14.72
            2015………………………………………………………………                                    17.38    14.56     15.88      17.21
            Month ended
            December 31, 2015 ………………………………………………..                          17.38    16.51      17.07         17.21
            January 31, 2016 ………………………………………………..                           18.61    17.35      18.07         18.45
            February 29, 2016 …………………………………………….....                        19.18    18.06      18.47         18.17
            March 31, 2016 …………………………………………………..                            17.94    17.24      17.65         17.40
            April 30, 2016 …………………………………………………….                            17.89    17.18      17.49         17.40
            May 31, 2016 (through May 16, 2016) ……………………….…                 18.18    17.23      17.87         18.18

(1)   The exchange rates are the exchange rate published by the Banco de México in the Federal Official Gazette for the payment of
      obligations denominated in non-Mexican currency payable in Mexico.
(2)   The average rate means the daily average of the exchange rates on each day during the relevant period.




                                                               47
2.   Significant events

     a.    Issue of “Senior Notes 2022 “

           On June 30, 2015 the Entity completed a debt issue for US$350 million in notes known as “Senior
           Notes 2022” through the Luxembourg Stock Exchange. The initial intention was to substitute the issue
           of US$310 million known as “Senior Notes 2017” which the Entity held as of December 31, 2014 and
           for which US$1,060 was offered for each US$1,000 of the previous issue.

           As a result of the offering it was possible to buy back US$271.7 million of “Senior Notes 2017”,
           equivalent to 87.63% of principal, and the remaining balance of this program decreased to US$38.3
           million, while the notes representing the remaining balance were held outstanding; also, the funds that
           were not used for such buyback were applied by the Entity mainly for the payment of the commercial
           euro paper at maturity. The “Senior Notes 2022” generate interest of 7.875% a year with maturity of
           principal on June 30, 2022. The interest is payable semiannually in the months of June and December,
           beginning as of December 30, 2015.

           The amount of the issue expenses was $339,538, which is being amortized based on the life of the new
           issue using the effective interest rate method, which includes US$16.1 million of premium for
           prepayment of the previous issue.

     b.    Additional issue of “Senior Notes 2017” and payment of “Senior Notes 2015”

           On February 20, 2014 the Entity completed an additional issue of US$35 million of the “Senior Notes
           2017” program at a rate of 7.875% a year, maturing in 2017. The “Senior Notes 2017” were issued
           based on a private swap for US$31.6 million of the principal amount of certain notes denominated
           “Senior Notes 2015”. With the additional issue, the “Senior Notes 2017” reached a total amount of
           US$310 million. As previously discussed, a significant portion of the “Senior Notes 2017” were
           repurchased during 2015.

           As a result of the cancellation of the “Senior Notes 2015” which were swapped, the remaining
           principal amount of “Senior Notes 2015” was US$51.7 million, which was paid at maturity on January
           15, 2015 with the resources obtained from the commercial euro paper as discussed in the following
           subsection.

     c.    Issuance of Euro-Commercial Paper

           On November 28, 2014, the Entity obtained US$47.2 million through a program known as “Euro-
           Commercial Paper”, which bear interest at a rate of 6% annually and matured on November 18, 2015.
           On November 17, 2015, the Entity made the payment of the commercial euro paper for the amount of
           US$50 million, which includes principal and interest accrued as of that date.

     d.     “Gamma” brand

           During May 2014, the Entity launched its new “Gamma” brand, geared to owners of independent
           hotels with less than 100 rooms, operating under the franchise model through two options: i) an
           operating and licensing scheme, in which Posadas absorbs the operation of the hotels, or ii) the pure
           franchise scheme, in which Posadas offers the know-how of its Fiesta Americana and Fiesta Inn
           brands.

     e.    Hurricane Odile

           Due to the land fall of hurricane “Odile” on the Baja California peninsula during September 2014, the
           facilities of the hotels owned by the Entity suffered significant damage. These hotels have insurance
           policies which cover damages to real estate and consequential damages. The hotels were reopened on
           November 15, 2014, after having been totally repaired and remodeled for operations.




                                                     F-13
                      SELECTED FINANCIAL AND OPERATING INFORMATION
        The following tables set forth our summary historical and other financial data as of and for the
periods indicated. The summary historical financial data for the years ended December 31, 2013, 2014
and 2015 were derived from the audited consolidated financial statements as of and for the years then
ended, as audited by Galaz, Yamakazi, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu
Limited. Our audited consolidated financial statements have been prepared in accordance with IFRS.
The summary historical financial data as of March 31, 2016 and for the three months ended March 31,
2015 and March 31, 2016 was derived from our unaudited condensed consolidated interim financial
statements as of and for the periods then ended. Our unaudited condensed consolidated interim financial
statements have been prepared in accordance with IAS No 34, Interim Financial Reporting.
        The following information is qualified by reference to, and should be read in conjunction with,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and related notes beginning on page F-1 of this offering
memorandum. The historical results are not necessarily indicative of results to be expected in any future
period.




                                                   49
     This transaction resulted in a loss which was recorded in the 2013 consolidated statement of
     comprehensive (loss) income as follows:

          Selling price                                                  $         677,000
          Less -
           Net book value of the plot of land in Chemuyil                         (535,875)
           Working capital to repay (i)                                           (143,395)
           Other                                                                      (281)

          Loss                                                           $           (2,551)

     (i) The working capital was paid to the buyer on January 7, 2014.

     The Chemuyil land was acquired in 1998 through the execution of an Irrevocable Trust contract with
     Instituto del Patrimonio Inmobiliario de la Administración Pública del Estado de Quintana Roo
     (IPAE), whereby ownership of the land was transferred to the Entity in exchange for a payment of
     US$10.4 million, subject to certain obligations, including the construction of 250 hotel rooms and their
     respective shared facilities, at an estimated cost of US$97.4 million. Subsequently, several amendment
     agreements were executed to extend the original compliance term until June 30, 2013. The new
     extension included a clause whereby the Entity was obligated to pay the IPAE a contractual penalty of
     US$10 million in the event of default. It also established a guarantee trust in favor of the IPAE, to
     which as of December 31, 2012 the Entity had contributed 8,799,000 Series “A” to cover the
     contractual penalty amount.

     On June 30, 2013, the IPAE considered that the commitments had not been fulfilled by the Entity, and
     the guarantee trust sold 5,803,976 shares for $138,488 of which $6,510 is recorded as common stock
     and $131,978 as additional paid in capital. The trust paid the IPAE $127,321 as a contractual penalty.
     Consequently, the Entity recorded in 2013 an expense of $144,225, which includes related costs under
     “other expenses” in the consolidated statement of comprehensive (loss) income.

i.   Tax effects of 2013

     i.          Up to December 31, 2012, there were several tax lawsuits originated from 2004 to 2008, in
                 which Posadas and its subsidiaries acted as plaintiffs or defendants, whose outcomes could not
                 be assured as of that date. The tax authorities alleged the non-payment of federal taxes, mainly
                 income tax, value-added tax, and asset tax. The amount claimed added up to $1,120,965,
                 including restatement, penalties, and surcharges as of the date of the tax liability assessment. In
                 addition to the proceedings for annulment filed, sureties had been granted through joint
                 obligations and foreclosures of real property, for the equivalent of the amount claimed plus the
                 applicable restatement and surcharges. The lawsuits were in different stages and the Entity had
                 filed several administrative procedures and annulment proceedings against the tax authority’s
                 claims.

                 During the first half of 2013, the Entity applied for the forgiveness benefits established in
                 various rules and criteria published in the Federal Income Law, better known as “tax amnesty”.
                 Consequently, there were several rulings in favor of the Entity forgiving all of the amounts
                 claimed in exchange for a sole payment of $142,908, of which $125,585 is recorded in the
                 consolidated statement of comprehensive (loss) income under “income taxes” and refers to
                 income tax and $17,323 is recorded under “other expenses”, and is associated to local and
                 value-added taxes. The above actions concluded the aforementioned lawsuits.

     ii.         Under the new Income Tax Law (LISR) in effect in 2014, the tax consolidation scheme was
                 eliminated and, therefore, Posadas became obligated to pay the deferred tax up to December 31,
                 2013, during the following five years beginning in 2014. This tax on deconsolidation was
                 determined by the Entity’s management and recognized in the consolidated statement of
                 comprehensive (loss) income as of December 31, 2013, under the heading of income tax
                 expense, for the amount of $882,262; also, the short and long-term liability as of December 31,
                 2015 is $219,650 and $310,240, respectively. The determination of such tax is subject to review
                 by the tax authorities.



                                                     F-15
     iii.   Similarly, the 2014 LISR eliminates the incentive that allowed for the contribution of real
            property to Real Estate Companies (SIBRAS) and the accrual of the gain on sale of these
            properties at the time the shares of such companies were sold. Consequently, if the above
            assumptions for accrual of the gain have not been fulfilled as of December 31, 2016, it must be
            accrued on that date. The liability for this gain was not fully recorded previously because the
            Entity had no plans to sell the shares or the assets. Consequently, due to the change in
            circumstances, the Entity recorded a deferred tax in the consolidated statement of financial
            position of $1,297,422 as of December 31, 2013. Due to a series of additional analyses and
            considering the tax attributes of the Entity, during 2014 tax losses of $304,090 were carried
            forward. As of December 31, 2015, the liability derived from this gain is $1,006,396 (see Note
            18c.)

j.   Assets available for sale - FibraHotel

     During the third quarter of 2012, a trust called FibraHotel was established mainly to acquire, own, and
     develop hotels of various categories in Mexico. In late November 2012, FibraHotel acquired 12 hotels
     of the Entity of which, 10 were owned by Fondo Inmobiliario Posadas, S.A. de C.V., Sociedad de
     Inversión de Capitales (SINCA).

     The execution of the sale was subject to the fulfillment of certain conditions, that were subsequently
     fulfilled on January 21, 2013 and 11 of the Entity’s hotels were sold for $1,486,594; generating a profit
     of approximately $331,103, which was recorded in January 2013.

     Three more hotels were sold during February, April, and June 2013, as part of secondary offers of
     FibraHotel, at a selling price of $406,696, generating profit of $115,632 recorded in 2013, practically
     with the same sale conditions used for the first 12 hotels.

     Prior to the sale of the three hotels the Entity acquired, through a share purchase and sale contract, the
     percentage relative to the non-controlling interest in the equity of those entities, for the amount of
     $101,893. This transaction generated a spread between the book value of the shares and the purchase
     price of $6,137, which was recorded in the consolidated statement of changes in stockholders’ equity,
     because these investments were already being consolidated.

k.   Corporate office sale and leaseback

     The Entity executed a purchase-sale agreement for its corporate property located in Mexico City with
     Fibra Uno on June 27, 2013 at a selling price of US$14.9 million and a book value of $86,226 at the
     selling date, resulting in a favorable difference of $108,169.

l.   Discontinued operations - South America’s segment

     On July 16, 2012, the Entity announced that it had reached an agreement with Accor, S.A. (Accor), to
     sell its operations in South America.

     On October 10, 2012, the sale was completed, upon fulfillment the conditions. A portion of the sale
     price remained subject to adjustment for certain variables referred to in the sale contract, and on that
     date the Entity received proceeds in the amount of US$238.7 million. In order to ensure possible
     damages as a result of the sale, the remaining amount of the sale a balance of US$32 million remained
     in an escrow account in which Accor was the primary beneficiary. These funds would be released to
     the Entity on various dates from 2014 through 2019, only when certain precedent conditions,
     established in the sale contract, had been met. On December 31, 2013, the Entity estimated that it
     would recover approximately US$22.6 million, equivalent to $294,679, which was presented under the
     heading of “long-term account receivables” in the consolidated statement of financial position.

     On August 29, 2014, the Entity reached agreement with Accor on the final selling price, which
     generated additional revenue of $8,718 due to different adjustments to the price and funds previously
     released. Such revenue was recorded as income from discontinued operations in the consolidated
     statement of comprehensive (loss) income. Of the US$32 million in the guaranteed deposit account,
     the Entity recovered approximately US$22 million, and the difference was released to Accor.


                                                F-16
                                                                                                                            As of December 31,
                                                                                                       2013                2014              2015             2015
                                                                                                       (Ps.)               (Ps.)             (Ps.)           (U.S.$)
                                                                                                               (in thousands, except as otherwise indicated)
Stockholders’ equity:
Contributed capital:
  Capital stock ....................................................................................     495,937             495,937           495,881          28,819
  Contributions for future capital increases .........................................                    12,516              12,516             4,828             281
  Share repurchase reserve ...............................................................               133,509              16,800            16,856             980
  Shares held in trust..........................................................................          (3,322)                  0                 0               0
  Additional paid-in capital ..................................................................          157,429             157,429           157,429           9,149
                                                                                                         796,069             682,682           674,994          39,229
Earned capital:
  Share repurchase reserve ...............................................................                559,371            535,556           535,556         31,125
  Retained earnings ...........................................................................         1,776,394          2,645,031         2,172,779        126,277
  Other items of comprehensive income .............................................                        25,982             27,244            47,424          2,756
                                                                                                        2,361,747          3,207,831         2,755,759        160,158
     Total controlling interest ...............................................................         3,157,816          3,890,513         3,430,753        199,387
   Non-controlling interest ....................................................................          230,401            218,697           196,750         11,435
     Total stockholders’ equity ............................................................            3,388,217          4,109,210         3,627,503        210,822
   Total liabilities and stockholders’ equity ...........................................              12,519,377         13,317,951        13,776,963        800,684




                                                                                            52
                                                                                                                    As of March 31,
                                                                                                             2016                    2016
                                                                                                              (Ps.)               (U.S.$)(2)
                                                                                                             (in thousands, except as
                                                                                                                otherwise indicated)
Assets
Current assets:
  Cash and cash equivalents ................................................................                  1,140,787                  66,306
  Investments in securities....................................................................                 450,000                  26,155
  Accounts and notes receivable – Net .................................................                       2,940,707                 170,922
  Inventories .........................................................................................          28,704                   1,668
  Prepaid expenses ..............................................................................               231,274                  13,442
  Vacation Club inventory .....................................................................                 176,634                  10,266
  Other current assets ..........................................................................                63,692                   3,702
  Assets classified as held for sale .......................................................                     57,944                   3,368
     Total current assets .......................................................................             5,089,742                 295,829

Non-current assets:
  Long-term notes receivable ...............................................................                  2,088,109                 121,366
  Vacation Club inventory in construction .............................................                         405,984                  23,597
  Property and equipment – Net ...........................................................                    6,266,310                 364,214
  Investment in shares of associated ....................................................                         1,129                      66
  Other assets ......................................................................................           467,182                  27,154
  Deferred tax assets............................................................................               197,326                  11,469
     Total non-current assets ................................................................                9,426,040                 547,866

Total assets ...........................................................................................     14,515,782                 843,696

Liabilities and stockholders’ equity
Current liabilities:
  Current portion of long-term debt .......................................................                       1,134                      66
  Trade accounts payable.....................................................................                   341,681                  19,859
  Other liabilities and accrued expenses ...............................................                      1,322,672                  76,877
  Income tax payable............................................................................                225,080                  13,082
  Deferred income of Vacation Club .....................................................                        601,084                  34,937
  Current portion of long-term value-added tax .....................................                             85,514                   4,970
  Liabilities directly associated with assets classified as held for sale ...                                     7,948                     462
     Total current liabilities ....................................................................           2,585,113                 150,254

   Long-term liabilities:
   Debt...................................................................................................    6,257,200                 363,685
   Accrued liabilities ...............................................................................          501,050                  29,122
   Value-added tax payable ...................................................................                  345,049                  20,055
   Deferred income of Vacation Club .....................................................                       709,717                  41,251
   Income tax payable............................................................................               310,240                  18,032
      Total long-term liabilities ................................................................            8,123,256                 472,145

       Total liabilities ................................................................................    10,708,369                 622,399

Stockholders’ equity:
Contributed capital:
  Capital stock ......................................................................................          495,881                  28,822
  Contributions for future capital increases ...........................................                          2,449                     142
  Share repurchase reserve .................................................................                     16,856                     980
  Additional paid-in capital ....................................................................               157,429                   9,150
                                                                                                                672,615                  39,094
Earned capital:
  Share repurchase reserve .................................................................                    535,000                  31,096
  Retained earnings..............................................................................             2,373,162                 137,934
  Other items of comprehensive income ...............................................                            29,412                   1,710
                                                                                                              2,937,574                 170,740

     Total controlling interest .................................................................             3,610,189                 209,834
   Non-controlling interest ......................................................................              197,224                  11,463
     Total stockholders’ equity ..............................................................                3,807,413                 221,297


   Total liabilities and stockholders’ equity .............................................                  14,515,782                 843,696




                                                                                                53
                                                                                                    As of March 31, 2016
                                                                                                   Ps.                (U.S.$)(2)
                                                                                                 (in thousands, except as
                                                                                                    otherwise indicated)

        Total liabilities and stockholders’ equity ..........................                  14,515,782              843,696

  Other Financial Data:
     EBITDA (7) .....................................................................            464,572                 27,002

  Other Operating Data:(8)
     ADR (9) ..........................................................................             1,307                    76
     RevPAR (10) ..................................................................                   859                    50
     Occupancy (11) ..............................................................                 65.7%                 65.7%



 (1)   Converted into U.S. dollars, solely for the convenience of the reader, using an exchange rate of Ps.17.2065 per U.S. dollar, the
       Official Exchange Rate in effect on December 31, 2015. These conversions should not be construed as representations that
       the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the specified rate or at
       the dates indicated or at all. See “Exchange Rates.”
 (2)   Converted into U.S. dollars, solely for the convenience of the reader, using an exchange rate of Ps.17.2050 per U.S. dollar, the
       Official Exchange Rate in effect on March 31, 2016. These conversions should not be construed as representations that the
       peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the specified rate or at the
       dates indicated or at all. See “Exchange Rates.”
 (3)   With respect to our historical financial data, we have the following currencies:

                                                                                                       Currency
                          Country                                         Recording                   Functional                   Reporting

                          Mexico                                         Mexican pesos               Mexican pesos            Mexican pesos
                          United States of America                        U.S. dollar                 U.S. dollar             Mexican pesos




 (4)   Net of accumulated depreciation.
 (5)   Current liabilities include bank loans and current portion of long-term debt and other payable and accrued liabilities.
 (6)   Long-term debt does not include equity instruments.
 (7)   We calculate EBITDA by subtracting administration, sales and development and real estate leasing expenses and other
       expenses, net from gross profit, as determined in accordance with IFRS, as applicable. EBITDA is not a measure of financial
       performance under IFRS and should not be considered as an alternative to net income as a measure of operating performance
       or to cash flow from operations as a measure of liquidity. The following table sets forth the reconciliation between EBITDA to
       operating (loss) income under IFRS, as applicable, for each of the periods presented.
                                                                  Year Ended December 31,                                        Three months ended March 31,
                                               2013                    2014             2015                  2015             2015            2016        2016
                                                Ps.                     Ps.              Ps.                  U.S.$             Ps.             Ps.       U.S.$
                                                                         (in thousands)                                                 (in thousands)
Gross profit .......................          2,596,701              2,180,444            2,691,437         156,420          742,496           913,183   53,077
Administration expenses ...                     110,563                105,726              126,879           7,374           58,427            62,439    3,629
Sale and development
expenses ..........................             703,104                745,305              815,126           47,373         239,773           260,933   15,166
Real estate leasing ...........                 326,513                329,761              386,969           22,490          96,980           125,238    7,279
Other expenses, net..........                   183,213                 45,669                  479               28           3,596                 0        0
EBITDA ............................           1,273,308                953,983            1,361,984           79,155         343,722           464,572   27,002

 (8)  Includes only data for hotels in Mexico.
 (9)  ADR, or average daily rate per room, is determined by dividing total room revenues for the period indicated by total room nights
      sold during such period.
 (10) RevPAR is calculated as ADR multiplied by the occupancy rate (equivalent to dividing total room revenues by total room nights
      available for sale).
 (11) Occupancy is determined for a period by dividing total room nights sold during the period by total rooms available for each day
      during the period.




                                                                                          54
     For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
     projected unit credit method, with actuarial valuations being carried out at the end of each annual
     reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to
     the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected
     immediately in the statement of financial position with a charge or credit recognized in other
     comprehensive income in the period in which they occur. Remeasurement recognized in other
     comprehensive income is reflected immediately in retained earnings and will not be reclassified to
     profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net
     interest is calculated by applying the discount rate at the beginning of the period to the net defined
     benefit liability or asset. Defined benefit costs are categorized as follows:

     x      Service cost (including current service cost, past service cost, as well as gains and losses on
            curtailments and settlements).
     x      Net interest expense or income.
     x      Remeasurement.

     The retirement benefit obligation recognized in the consolidated statement of financial position
     represents the actual deficit or surplus in the Entity’s defined benefit plans. Any surplus resulting from
     this calculation is limited to the present value of any economic benefits available in the form of refunds
     from the plans or reductions in future contributions to the plans.

     A liability for a termination benefit is recognized at the earlier of when the Entity can no longer
     withdraw the offer of the termination benefit and when the entity recognizes any related restructuring
     costs.

     Short-term and other long-term employee benefits

     A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual
     leave and sick leave in the period the related service is rendered at the undiscounted amount of the
     benefits expected to be paid in exchange for that service.

     Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
     amount of the benefits expected to be paid in exchange for the related service.

     Liabilities recognized in respect of other long-term employee benefits are measured at the present
     value of the estimated future cash outflows expected to be made by the Entity in respect of services
     provided by employees up to the reporting date.

     Statutory employee profit sharing (PTU)

     As result of the tax reform, as of December 31, 2015 and 2014, PTU is recorded in the results of the
     year in which it is incurred and is presented in administration expenses line item in the consolidated
     statement of comprehensive (loss) income.

     As result of the 2014 Income Tax Law, as of December 31, 2015 and 2014, PTU is determined based
     on taxable income, according to Section I of Article 10 of such Law.

q.   Income taxes

     Income tax expense represents the sum of the tax currently payable and deferred tax.

     1.     Current tax

            Current income tax (ISR) is recognized in the results of the year in which is incurred.




                                                F-28
            The effective interest method is a method of calculating the amortized cost of a financial
            liability and of allocating interest expense over the relevant period. The effective interest rate is
            the rate that exactly discounts estimated future cash payments (including all fees and points
            paid or received that form an integral part of the effective interest rate, transaction costs and
            other premiums or discounts) through the expected life of the financial liability, or (where
            appropriate) a shorter period, to the net carrying amount on initial recognition.

     5.     Derecognition of financial liabilities

            The Entity derecognizes financial liabilities when, and only when, the Entity’s obligations are
            discharged, cancelled or they expire. The difference between the carrying amount of the
            financial liability derecognized and the consideration paid and payable is recognized in profit or
            loss.

t.   Derivative financial instruments

     The Entity enters into a variety of derivative financial instruments to manage its exposure to foreign
     exchange rate risks, including foreign exchange forward contracts. Further details of derivative
     financial instruments are disclosed in Note 21c.

     Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and
     are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain
     or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a
     hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature
     of the hedge relationship.

u.   Revenue recognition

     The Entity recognizes its revenues as follows:

     i.     From the hotel operation, which includes the operation of proprietary hotels and leased hotels,
            are recognized as the hotel services are rendered to the guests, which include the rental of
            guestrooms and rooms for events, sale of food and beverages, etc.;

     ii.    From the operation of the Vacation Club, are recognized as leasing revenue, where the rental
            which refers to the land is recognized as a deferred liability, and the part allocated to the
            construction is recognized as revenue from capital leasing;

     iii.   From the sale of Kívac points, are recognized once the hospitality service is rendered, plus an
            estimate of those points which will not be used by the program members at their expiration
            date. The amount of the unused services contracted is presented under the heading “Deferred
            income of Vacation Club”, as short-term and long-term in the consolidated statement of
            financial position;

     iv.    From management and brand fees, are recognized as they are accrued based on a percentage of
            the revenues and the profit from hotel operation, as established in the respective contracts; and

     v.     Revenues derived from loyalty programs with third parties, are recognized when the
            management service of the programs is rendered or due to the redemption of prizes in
            conformity with the contracts signed.

v.   Classification of costs and expenses

     Costs and expenses presented in the consolidated statements of comprehensive (loss) income were
     classified according to their function.




                                                 F-31
       Profit or loss and each component of other comprehensive income are attributed to the owners of
Grupo Posadas, S.A.B. de C.V. and to the non-controlling interests.
        All intragroup amounts and transactions between members of Grupo Posadas, S.A.B. de C.V.
and the subsidiaries we control are eliminated in full on consolidation.
        Overview of Macroeconomic Conditions
        Almost all of our operations and our sales are in Mexico. As a result, our business, results of
operations, financial condition and prospects are, to a great extent, tied to the general condition of the
Mexican economy and the purchasing power of the Mexican population. In the past, the Mexican
economy has been affected by adverse factors, including:
            •    exchange rate instability and devaluations of the peso against the U.S. dollar and other
                 currencies;
            •    inflation and high interest rates;
            •    uncertainty about Mexico's political, social and economic future, especially in the years
                 immediately preceding and following presidential and congressional elections;
            •    volatility and uncertainties in the global stock and credit markets; and
            •    economic and political uncertainties in emerging or developing economies.
         If inflation or interest rates in Mexico increase significantly, or if the economies of Mexico or the
United States fall into a recession or political conditions deteriorate, our business, results of operations,
financial condition and prospects could suffer material adverse consequences because, among other
things, demand for our hotel rooms and vacation club products may be reduced. See “Risk Factors—
Risks relating to Mexico.”
        Factors Affecting Our Results of Operations
         Our revenues are primarily derived from the following sources: (1) hotel revenues at our owned
and leased properties; (2) management, brand and other revenues, which include revenues from
businesses which are ancillary to our hotel operations and comprise services rendered both to related
parties and unrelated parties; and (3) vacation club membership revenues.
        In general, our hotel and management business line results are affected by:
             •   occupancy and room rates achieved by our hotels that we operate,
             •   our ability to manage costs,
             •   the respective percentages in our portfolio of our owned, leased managed and
                 franchised hotels,
             •   changes in the number of available hotel rooms,
             •   quantity and pricing of vacation club membership sales, and
             •   timing of revenue recognition from ongoing vacation club projects.
        The following factors, which are not within our control, affect our revenues:
            •    global economic conditions affecting the travel and hospitality industry,
            •    supply and demand change for hotel rooms in our markets,
            •    the financial condition of the airline industry, whether airlines will continue to serve the
                 geographic markets where we operate and the impact of the airline industry on the
                 lodging industry in our markets,
            •    the effects of general health alerts, epidemics and virulent outbreaks,
            •    natural phenomena such as hurricanes or earthquakes;



                                                      57
                  •     terrorism, violence or other public safety risks that may affect travel and demand for
                        lodging,
                  •     competition from within our industry, including new competitors in our markets, and
                  •     the availability of capital resources, including equity investment and financing on
                        acceptable terms, to finance growth.
         Unfavorable changes in these factors could negatively impact hotel room demand and pricing,
our ability to manage costs and our capacity to continue with our expansion plans.
         The following table sets forth, for the periods indicated, our average daily rate per room, or ADR,
for hotels in Mexico, calculated by dividing total room revenues over such period by total room nights sold
during such period; revenue per available room, or RevPAR, calculated by multiplying ADR by the
occupancy rate; and occupancy, calculated for a period by dividing total room nights sold during the
period by total rooms available for each day during the period. Our ADR, RevPAR and occupancy for
hotels in Mexico is set forth on a consolidated basis by our urban and coastal properties for the last three
years and for the three months ended March 31, 2015 and March 31, 2016.
                                        ADR, RevPAR and Occupancy Data(1)

                                                    For the years ended                         For the three months ended
                                                      December 31,                                       March 31,
                                        2013                2014               2015               2015             2016
                                                            (Amounts in pesos, except percentages)
            Total
            (1)
      ADR                               1,040              1,108               1,167              1,208              1,307
                  (2)
      RevPAR                             670                703                765                 754                859
      Occupancy                         64.4%              63.5%              65.5%               62.4%              65.7%

            Urban(5)
            (1)
      ADR                                962               1,014              1,042               1,035              1,086
             (2)
      RevPAR                             612                635                678                 622                696
      Occupancy                         63.6%              62.7%              65.0%               60.2%              64.1%

            Coastal
            (1)
      ADR                               1,495              1,633               1,881              2,057              2,340
                  (2)
      RevPAR                            1,045              1,112              1,293               1,576              1,745
      Occupancy                         69.9%              68.1%              68.7%               76.6%              74.6%


(1)   Includes only data for hotels in Mexico.
(2)   ADR means average daily rate per room and is determined by dividing total room revenues by total room nights sold during a
      period.
(3)   RevPAR means revenue per available room and is the product of multiplying ADR by the occupancy rate.
(4)   Occupancy is determined by dividing total room nights sold by total rooms available.
(5)   Includes the Fiesta Americana Hermosillo, which is expected be transferred to FibraHotel in 2020 pursuant to a purchase
      agreement entered into in April 2016. See “Summary — Recent Developments.”



        In addition to our core hotel and vacation club management business, we have also marketed our
management skills and technology platforms developed to support our hotel operating business by
establishing a number of related businesses:
                  •     Soluciones de Lealtad, S.A. de C.V., or Ampersand, which previously managed our
                        loyalty programs and those of third parties, but is currently transitioning into managing
                        only our loyalty programs;



                                                               58
            •    Konexo Centro de Soluciones, S.A. de C.V., or Konexo, provides call center and contact
                 services; and
            •    Conectum, S.A. de C.V., or Conectum, offers business process outsourcing services, or
                 shared services.
      Our current plan is to use such service businesses to provide support services to our owned and
managed properties.
        The following is a more detailed explanation of our revenues:
         Hotel operation. We generate revenues from our owned and leased hotels which include
revenues from room rentals, food and beverage sales and other sources, including telephone, guest
services, conference room rentals, gift shops and other amenities. With one exception, we do not have,
nor do we seek to acquire, equity interests in hotels that we do not or will not operate. Revenues from
hotel operation include revenues generated by those hotels to which we hold title or in which we have an
equity interest of 50% or greater in the titleholder. Revenues from hotels and other businesses in which
we have less than a 50% equity interest are presented under the line item Equity in results of associated
companies net of all related expenses. Revenues from hotel operation also include revenues from our
leased hotels. We operate and derive profits from our leased hotels as if such hotels were owned by us.
Under our lease contracts, we pay a fixed rent to the hotel owner and, under the majority of such
contracts, the owner benefits from the successful operation of the hotel through additional variable rent
payments.
         Hotel management, brand and other. We receive fees pursuant to long-term management
contracts for all of the hotels we operate. Our management contracts provide for the payment of fees for
our operation based on certain specified criteria and the payment of expenses for the provision of
services, and are structured according to three different models (i) traditional, (ii) fixed fee and (iii)
percentage of gross operating profits. Our traditional management contracts typically involve (i) a base
fee calculated as a percentage of a hotel’s gross operating profit, (ii) a management fee calculated as a
percentage of a hotel’s total revenue, (iii) a brand fee calculated as a percentage of a hotel’s room
revenue, (iv) several variable charges for the provision of different services such as reservations,
technology, procurement and collections and (v) the payment of other expenses such as a common
advertising fund, loyalty programs and sales fees. Our fixed fee management contracts typically involve
(i) a base fee calculated as a percentage of a hotel’s gross operating profit, (ii) a management fee
calculated as a percentage of a hotel’s total revenue, (iii) a brand fee calculated as a percentage of a
hotel’s room revenue, (iv) a single fixed charge for the provision of different services such as reservations,
technology, procurement, collections and (v) the payment of other expenses such as a common
advertising fund, loyalty programs and sales fees. Our percentage of gross operating profits management
contracts typically involve (i) a fee calculated as a percentage of a hotel’s gross operating profit and (ii)
the payment of other expenses such as a common advertising fund, loyalty programs and sales fees.
Revenues from hotel management may also include payments we receive in connection with early
termination of management contracts. As of March 31, 2016, the fees we received pursuant to long-term
management contracts for the hotels we operate were divided as follows: (i) 47% traditional model, (ii)
11% fixed fee model and (iii) 42% percentage of gross operating profits model.
         Because we have entered into management contracts with all of the hotels we operate, we
receive management and other fees from our owned and leased hotels. Fees we receive from our owned
and leased hotels are paid to us on substantially the same basis as the management fees we receive
from unrelated third parties. Under IFRS, pursuant to criteria established in IAS 27, Consolidated and
Individual Financial Statements, such transactions are eliminated in consolidation, as well as other
significant intercompany balances.
       We receive fees pursuant to our long-term franchise contracts for all of the hotels we franchised.
In general, our franchise contracts provide for the payment of fees and expenses based on (i) a
percentage of a hotel’s room revenues, (ii) a fixed reservation fee, (iii) a fee for personnel training and (iv)
the payment of other expenses such as a common advertising fund, loyalty programs and sales fees.
       Also our services businesses historically supported our hotel management business and we have
separately marketed these services to third parties. We consolidate revenues from Ampersand and


                                                      59
Konexo and include such consolidated revenues in our hotel management, brand and other revenues line
item.
        Vacation Club. Revenues from our Vacation Club line item consist primarily of revenues from the
operation of FAVC and The Front Door (which is being rebranded as Live Aqua Residence Club) which
generate revenues from selling and financing vacation club memberships. Revenues from Kivac are also
included.
        Other revenues. Revenues from our other revenues line item consist primarily of revenues from
other ancillary activities.
        Effect of Devaluation and Inflation on Our Revenues, Costs and Operating Margins
         Historically, when the rate of devaluation in any fiscal period exceeds the rate of inflation for such
period, the value of transactions denominated in U.S. dollars increases when converted to constant
pesos. The effect of a sharply lower value of the peso against the U.S. dollar is to increase the revenues
from our coastal hotels and vacation club business (from which we derive revenues primarily
denominated in U.S. dollars). Generally, costs associated with our coastal hotels and our vacation club
business do not increase proportionally during such periods, because (i) the substantial majority of our
operating costs at our coastal hotels and our vacation club business are peso-denominated and (ii) the
increase in our labor costs generally lags behind the rate of inflation. However, we also have lease
agreements payable in U.S. dollars and, in the context of a devaluation of the peso, the lease payment
obligations become relatively more burdensome for us. The combined effect of these factors is to
increase our operating margins and operating cash flows during such periods, offsetting negative effects
that lower occupancy levels or a recessionary climate may have on the margins of urban hotels.
         In contrast, during periods in which the rate of inflation exceeds the rate of devaluation, U.S.
dollar denominated revenues decrease when converted to constant pesos, while peso-denominated costs
increase proportionately to inflation. With the addition of more urban hotels (from which we derive
revenues primarily denominated in pesos), we have managed to achieve a more balanced portfolio than
in the past, providing a partial hedge against negative effects on operating margins which may be caused
either by a devaluation or by an appreciation of the peso.
        Effect of Devaluation on Our Indebtedness
         In periods of peso devaluation, our net foreign exchange losses on our U.S. dollar denominated
indebtedness tend to be higher and our costs of servicing such indebtedness tend to increase. In
contrast, in periods of peso appreciation, the improvement in the value of the peso relative to the U.S.
dollar results in a net foreign exchange gain for us. Historically, our policy has been to maintain a
significant portion of our debt in U.S. dollars, see “—Liquidity and Capital Resources.” Of our total debt
as of December 31, 2015 and March 31, 2016, respectively, 100% of our debt was denominated in U.S.
dollars. During 2015, we recognized a Ps.708.6 million foreign exchange loss and, over the three months
ended March 31, 2015, we recognized a Ps.3.7 million foreign exchange loss. From time to time we have
and may enter into foreign currency exchange derivative contracts to balance our currency exposure or to
hedge our exposure to fluctuations in the value of the peso against the U.S. dollar. As of December 31,
2015, we had a forward contract of U.S.$14.0 million equivalent to Ps.242.8 million that matured on
January 11, 2016. However, as of March 31, 2015 and March 31, 2016, we had no derivative contract
positions. See “Risk Factors—We are exposed to currency and interest rate risk on our debt, and we
have entered into derivatives contracts in the past.”
        Seasonality
         As of the date of this offering memorandum, of our 23,826 hotel rooms, approximately 80% are in
urban or suburban locations and cater primarily to business travelers. These hotel operations have not
experienced significant seasonal fluctuations aside from minor reductions in occupancy during the holiday
season from mid-December through mid-January. The remaining hotel rooms we operate are in coastal
resort locations. Our coastal hotel operations generally experience two peak seasons. The first peak, the
traditional winter season, occurs during the months of December through April and results primarily from
foreign tourism. The second peak occurs during the summer months of July through August and results




                                                      60
      Foreign currency transactions made by entities located in Mexico are mainly income from hotel operations,
      certain sales of Vacation Club memberships and inventory and interest expense.


24.   Revenue, cost of sales and operating expenses

      a.    Revenue:

                                                          2015                  2014                  2013

              Hotel operation                      $      3,103,775      $      2,691,647      $      2,673,704
              Vacation Club                               2,619,816             1,996,686             1,894,629
              Administration fee, brand and
               other expenses                             1,123,243             1,107,921             1,200,437
              Sales of non-strategic properties             -                      26,197             2,781,588
              Other income                                    54,387               25,827              -

                                                   $      6,901,221      $      5,848,278      $      8,550,358


      b.    Cost of sales:

                                                          2015                  2014                  2013

              Hotel operation                      $      1,106,447      $      1,004,529      $      1,007,563
              Vacation Club                               1,993,289             1,520,736             1,429,250
              Administration fee, brand and
               other expenses                             1,110,048             1,116,372             1,300,426
              Sales of non-strategic properties            -                       26,197             2,216,418

                                                   $      4,209,784      $      3,667,834      $      5,953,657


      c.    Administration expenses:

                                                          2015                  2014                  2013

              Salaries, defined benefits and
                others                             $          399,619    $        354,390      $        319,429
              Electricity                                     149,763             159,352               160,266
              Maintenance                                      88,538              75,587                77,856
              Professional fees                                39,395              36,252                43,240
              Credit card commissions                          35,841              34,115                33,723
              Property taxes and duties                        33,063              24,778                25,363
              Office rentals                                   22,273               9,572                 5,182
              Services and supplies                            14,469              16,130                13,525
              Insurance and bonds                              11,813              13,242                11,627
              Equipment leasing                                 6,175               5,346                 5,170
              Doubtful accounts                                 3,759            -                          146
              Others                                           10,418              16,541                 7,577

                                                   $          815,126    $        745,305      $        703,104




                                                       F-48
    asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
    amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
    impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at
    a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
    Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
    value in use, the estimated future cash flows are discounted to their present value using a pre-tax
    discount rate that reflects current market assessments of the time value of money and the risks
    specific to the asset for which the estimates of future cash flows have not been adjusted.
•   The future benefit of tax losses. The carrying amount of deferred tax assets is reviewed at the
    end of each reporting period and reduced to the extent that it is no longer probable that sufficient
    taxable profits will be available to allow all or part of the asset to be recovered. Projections of
    taxable income are prepared for purposes of making this analysis, which include estimates of
    revenue growth projections, discounted using an appropriate discount rate.
•   The effects of our contingencies faced by the issuer. We apply judgment in determining the
    impact of potential losses that may arise out of litigation and regulatory proceedings. We assess
    the probability of an unfavorable outcome, including based on advice from our internal and
    external counsel. To the extent a loss is probable, we estimate the potential outcome based on
    the most likely estimate of the potential loss and a provision is recognized. Final settlement
    amounts for contingencies may differ materially from those estimates we have recognized.
•   Labor obligations. For defined benefit retirement benefit plans, the cost of providing benefits is
    determined using the projected unit credit method, with actuarial valuations carried out at the end
    of each annual reporting period. Actuarial assumptions include return on investments within the
    plans, the rate of increase in pensionable salaries, the rate of increase in the consumer price
    index, and the discount rate applied in discounting liabilities. For each of these assumptions there
    is a range of possible values and, in consultation with our actuaries, management decides the
    point within that range that most appropriately reflects our circumstances. Changes in these
    assumptions can have a significant impact on the net liability or asset recognized in our statement
    of financial position.
•   Redemption of loyalty program points. We record a liability for the estimated cost of providing
    awards for our Loyalty Program members. The amount of the liability is determined annually by
    independent actuaries, in close consultation with management. Variables reviewed include
    comparison of the cost estimates to actual costs incurred and the redemption assumptions to
    actual redemption experience. Changes in the minimum award levels or in the lives of the awards
    would also require us to reevaluate the liability, potentially resulting in a significant impact in the
    year of change as well as in future years.
•   The useful life and residual value of properties. The charge of periodic depreciation is derived
    after determining an estimate of an asset’s expected useful life and the expected residual value at
    the end of its life. The residual values of our assets are determined by management at the time
    assets are acquired and reviewed annually for appropriateness. Increasing an asset’s residual
    value would result in a reduced depreciation charge in the consolidated income statement.
    Historically, changes in the residual value of our properties have not resulted in material changes
    to our depreciation charge.
•   Classification criteria of the operating segments of the issuer. The operating segment
    information is presented according to the information presented to and analyzed by our
    management, which they use to assess performance of our segments and allocation of
    resources.




                                                 62
    •   The estimated amount of investments in securities other than cash equivalents. Judgment
        is applied in determining whether an investment meets the criteria as a cash equivalent or an
        investment in securities, based on the liquidity of the investment and management’s intention to
        use the resources generated from the investment to meet short-term commitments or to maintain
        such resources to obtain benefits from capital appreciation.
        We believe the estimates used and assumptions made were adequate under the circumstances.
        IFRS
       Our consolidated financial statements for the years ended December 31, 2013, 2014 and 2015
were prepared under IFRS.
         In 2015, we applied a number of amendments to IFRS and new Interpretations issued by the
International Accounting Standards Board (IASB) that are mandatorily effective for accounting periods
that begin on or after January 1, 2015.
    •   Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
        We applied the amendments for the first time in 2015. Prior to the amendments, we accounted for
        discretionary employee contributions to defined benefit plans as a reduction of the service cost
        when contributions were paid to the plans, and accounted for employee contributions specified in
        the defined benefit plans as a reduction of the service cost when services are rendered. The
        amendments require us to account for employee contributions as follows:
                Discretionary employee contributions are accounted for as reduction of the service cost
                upon payments to the plans.
                Employee contributions specified in the defined benefit plans are accounted for as
                reduction of the service cost, only if such contributions are linked to services. Specifically,
                when the amount of such contribution depends on the number of years of service, the
                reduction to service cost is made by attributing the contributions to periods of service in
                the same manner as the benefit attribution. On the other hand, when such contributions
                are determined based on a fixed percentage of salary (that is, independent of the number
                of years of service), we recognize the reduction in the service cost in the period in which
                the related services are rendered.
        The application of these amendments has had no material impact on the disclosure or the
        amounts recognized in our consolidated financial statements.
    •   Annual Improvements to IFRS 2010 - 2012 Cycle and 2011 - 2013 Cycle
        We applied the amendments to IFRS included in the Annual Improvements to IFRS 2010-2012
        Cycle and 2011 - 2013 Cycle for the first time in 2015. One of the annual improvements requires
        entities to disclose judgments made by management in applying the aggregation criteria set out in
        paragraph 12 of IFRS 8 Operating Segments.
        The application of these improvements has had no impact on the disclosures or amounts
        recognized in our consolidated financial statements.
        Taxes
         In accordance with Mexican federal tax laws, we are subject to income taxes (ISR) and were
subject, until 2013, to Business Flat Rate Tax (IETU).
        ISR takes into account the taxable and deductible effects of inflation, among other items. The
ISR rate has been 30% since 2012. Until 2013, we filed our ISR tax returns and paid ISR on a
consolidated basis with our Mexican subsidiaries. As of December 31, 2013, the tax consolidation rules
were repealed, and as a consequence we must pay the income tax determined that was monetarily
deferred until December 31, 2013, in a term of five fiscal years that started in 2014. This tax attributable
to the termination of the consolidation regime was recorded in the consolidated statement of
comprehensive (loss) income for the year ended December 31, 2013, under the category of income tax
expense and amounts to Ps.882.3 million. As of December 31, 2015 and March 31, 2016, the balance of


                                                     63
the liability related to this tax obligation was Ps.529.8 million and Ps.511.7 million, respectively. The short
and long-term liabilities as of December 31, 2015, amount to Ps.219.6 million and Ps.310.2 million,
respectively.
        Likewise, pursuant the new 2014 Income Tax Law (Ley del Impuesto Sobre la Renta), we must
continue paying the tax that under the tax consolidation regime we deferred in the fiscal years prior to and
including 2007. This is a consequence of (i) our holding company structure which was recognized for tax
purposes until December 31, 2013, and (ii) the fact that we were subject to the payment scheme
contained in Article 4, Section VI of the transitional provisions of the Income Tax Law of December 7,
2009, or article 70-A of the Income Tax Law of 2013 which was repealed.
        IETU was a tax imposed on cash flows resulting from the sale of goods, the rendering of
independent services and the granting of temporary use or enjoyment of goods, under the terms of the
IETU Law, less certain authorized deductions. IETU was repealed as of January 1, 2014. Therefore, this
tax was applicable until December 31, 2013 with respect to revenues, deductions and certain tax credits
with respect to cash flows of each fiscal year. The IETU rate was 17.5%. Until December 31, 2013, the
tax payable on our earnings was the greater of ISR or IETU.
         Until December 31, 2012, based on financial projections, we estimated that the tax we would
effectively pay would be ISR. However we recognized both deferred ISR and deferred IETU in our
accounting records given that we incurred a small portion of IETU related to certain subsidiary entities.
Since December 31, 2013, we only calculate deferred ISR as a result of the elimination of IETU.
         The Income Tax Law of 2014 also provided an option for corporate groups to jointly calculate ISR
in accordance with tax integration rules. The new rules allow “integrated” companies that are 80%
directly or indirectly owned by an “integrating” company, to obtain certain benefits with respect to the
payment of ISR, if the entities within the same corporate group register gains or losses within the same
fiscal year. In that case, payment of ISR may be deferred for three years and ISR, as updated pursuant
to the applicable rules, may be paid on the date on which the tax return corresponding to the fiscal year
following such three-year period must be filed. Although we decided to take advantage of these new
rules, we have not yet benefited from such regime.
         In December 2013, the 0% rate for VAT (Impuesto al Valor Agregado or IVA) which was
applicable to the rendering of hotel services to groups of foreigners was repealed and was replaced by a
tax incentive which has been in effect since January 1, 2014. This tax incentive requires charging 16% of
IVA to services provided to such groups. The tax incentive permits a credit of such 16% of IVA if certain
specific requirements are met.
       In addition to ISR and IVA, our activities may be subject to local taxes, such as the Tax on
Accommodation (Impuesto sobre Hospedaje), and other taxes levied on other taxable activities which we
may occasionally carry out, such as gambling and lottery activities, contests or others.




                                                      64
Results of operations for the three months ended March 31, 2016 compared to the three months
ended March 31, 2015
             Events influencing our performance in the first three months of 2016
        In the three months ended March 31, 2016, we had a 35.2% growth in EBITDA compared to the
three months ended March 31, 2015. The increase in EBITDA is mainly attributable to better performance
of our hotels, particularly those in coastal locations. Our net debt to EBITDA leverage ratio improved 0.6
times for the three months ended March 31, 2016 against the comparable period of the previous year.
       The net income for the three months ended March 31, 2016 was Ps.202.9 million and was due to
system-wide improvement in hotel operations.
       The following table sets forth our results of operations derived from our three principal operating
business lines and certain other data for the periods specified:

                                                                                                         Three months ended March 31,
                                                                                                      2015               2016           2016
                                                                                               (in thousands of Mexican pesos)          U.S.$

 Continuing operations
    Revenue ...........................................................................             1,761,095         2,048,486         119,063
    Cost of sales ....................................................................              1,018,597         1,135,303          65,987
       Gross Profit..................................................................                 742,498           913,183          53,077

       Administration expenses ...................................................                    239,773           260,934          15,166
       Sale and development expense .......................................                            58,427            62,439           3,629
       Depreciation, amortization, real estate leasing and
         impairment of assets .....................................................                   184,802           221,065          12,849
       Other expenses, net .........................................................                    3,596                 0               0
       Interest expense ..............................................................                109,620           143,485           8,340
       Interest income ................................................................               (15,233)           (7,736)           (450)
       Commissions and financial expenses ...............................                              16,062            18,141           1,054
       Exchange loss, net ..........................................................                  127,346             3,689             214
                                                                                                      724,393           702,017          40,803

           Profit before income tax ...............................................                    18,105           211,166          12,274

       Income tax expense .........................................................                    72,594             8,259             480
          (Loss) profit from continuing operations .......................                            (54,489)          202,907          11,793

 Discontinued operations
     (Loss) profit from discontinued operations ........................                                  (69)                0                 0

          Consolidated (loss) income for the year ........................                            (54,558)          202,907          11,793




                                                                                          65
Information by reportable segment for the three months ended March 31, 2016



                                                                     Hotel
                                                       Hotel      management,                  Vacation      Other                                           Total
                                                                                 Corporate                                   Total       Eliminations
                                                     operation     brand and                     Club      businesses                                     consolidated
                                                                     other
 Statement of comprehensive
 income:
 Total revenues ...............................       1,103,803       365,755         1,414      680,389       106,063      2,257424         (208,938)       2,048,486
 Cost and general expenses ...........                 900,618        190,603                    506,797       116,290      1,714,308        (208,938)       1,505,370
 Corporate expenses .......................                                          78,544                          0        78,544                            78,544
 Depreciation and amortization .......                                               95,827                                   95,827                            95,827
 Operating income (loss) ..............                203,185        175,152     (172,957)      173,592       (10,227)      368,745                 0         368,745

                                                                                                              Financial expenses and other expenses net      (157,579)
                                                                                                                            Income before income taxes         211,166




Information by reportable segment for the three months ended March 31, 2015


                                                                     Hotel
                                                       Hotel      management,                  Vacation      Other                                           Total
                      2015                                                       Corporate                                   Total       Eliminations
                                                     operation     brand and                     Club      businesses                                     consolidated
                                                                     other
 Statement of comprehensive
 income: .........................................
 Total revenues ...............................         890,823        298,956       11,730      540,086       218,994      1,960,589         (199,494)       1,761,095
 Cost and general expenses ...........                  745,171        170,161                   400,463       214,442      1,530,237         (199,494)       1,330,743
 Corporate expenses .......................                                          83,034                          0         83,034                           83,034
 Depreciation and amortization .......                                               87,822                                    87,822                           87,822
 Other expenses..............................                                         3,596                                     3,596                            3,596
 Operating income (loss) .................              145,652        128,795     (162,722)     139,623          4,552       255,900            0             255,900

                                                                                                              Financial expenses and other expenses net      (237,795)
                                                                                                                            Income before income taxes          18,105




         The tables above reflect our financial information by operating segment. The information for each
individual segment does not include the effects of elimination of intercompany transactions; such
eliminations are provided in a separate column to arrive at the consolidated totals. For this reason,
amounts in the individual segment information above do not tie directly to the information for those
segments in the consolidated statements of comprehensive (loss) income. The discussions below
generally refer to the results of our segments as presented net of eliminations, as within the consolidated
statement of comprehensive (loss) income. When we provide information or discussion of amounts prior
to the effect of intercompany eliminations, as reported within the tables herein, we refer to such tables.
Total Revenue
          Our total revenues increased for the three months ended March 31, 2016 by 16.3% to Ps.2,048.5
million from Ps.1,761.1 million in the three months ended March 31, 2015. This increase is primarily
attributable to hotels with better operational statistics across the board as well as a stronger pace in
membership sales in our vacation club membership business. The increase in RevPAR to Ps.859 for the
first three months ended March 31, 2016 from Ps.754 for the first three months ended March 31, 2015
primarily resulted from a better mix in the ADR and occupancy indicators accompanied by more visits to
Mexico by international tourists.
Hotel operation
        Hotel operation includes revenues and expenses derived from the operation of owned and leased
hotels. The operating data under hotel operation is only for owned and leased hotels in Mexico.
Revenues for the three months ended March 31, 2016 increased by 23.9% from Ps.890.8 million in the


                                                                                        66
first three months ended March 31, 2015 to Ps.1,103.8 million in the first three months ended March 31,
2016, mainly as a result of higher RevPAR.
        The revenue increase is primarily attributable to a 5.2 percentage point increase in occupancy
and a 21.7% increase in the RevPAR (effective rate) to Ps.1,205 for the first three months ended March
31, 2016 from Ps.990 for the first three months ended March 31, 2015 with 5,596 average number of
rented rooms for the first three months ended March 31, 2016, 3.5% more rooms than the 5,407 rented
rooms for the first three months ended March 31, 2015.
          The results of urban hotels showed an improvement in comparison to those recorded during the
first three months ended March 31, 2015. The RevPAR rate was higher by 26.0% for the first three
months ended March 31, 2016, Ps.973 for the first three months ended March 31, 2016, compared to
Ps.772 for the first three months ended March 31, 2015. This increase was due to a (i) an increase of
11.6% in the ADR to Ps.1,334 for the first three months ended March 31, 2016 compared to Ps. 1,195for
the first three months ended March 31, 2015, (ii) a 8.3 percentage point increase in the occupancy factor
to 72.9% for the first three months ended March 31, 2016 compared to 64.6% for the first three months
ended March 31, 2015, accompanied by (iii) a 3.1% increase in the average number of managed rooms,
4,262 for the first three months ended March 31, 2016 compared to 4,133 for the first three months ended
March 31, 2015.
          Coastal hotels operated on average 4.7% more rooms, 1,334 for the first three months ended
March 31, 2016 and 1,274 for the first three months ended March 31, 2015. These hotels recorded a
20.9% ADR increase to Ps.2,403 for the first three months ended March 31, 2016 compared to Ps.1,987
for the first three months ended March 31, 2015, partially offset by a 4.7 percentage point decrease in
occupancy to 79.6% for the first three months ended March 31, 2016 compared to 84.3% for the first
three months ended March 31, 2015. This resulted in a 14.2% increase in RevPAR in comparison with
the first three months ended March 31, 2015 to Ps.1,913 for the first three months ended March 31, 2016
compared to Ps.1,675 for the first three months ended March 31, 2015.
       Departmental costs and expenses in our hotel operation business consist of wages related to
room staff and food and beverage personnel, food and beverage costs and other expenses such as
commissions to agencies, reservation fees, room amenities and laundry services. Departmental costs
and expenses were Ps.386.1 million during the three months ended March 31, 2016, representing an
18.5% increase as compared to Ps.325.7 million during the three months ended March 31, 2015.
Departmental costs and expenses increased as a result of higher occupancy in comparison with the
same period in 2015. Departmental profits (revenues minus departmental costs and expenses) were
Ps.717.7 million for the three months ended March 31, 2016, representing a 27.0% increase when
compared to Ps.565.2 million in the comparable period in 2015.
          General expenses related to our hotel operation business consist of administrative expenses,
sales, advertising and promotional expenses as well as maintenance and energy costs. In the aggregate,
such expenses increased by 14.0% to Ps.226.5 million during the three months ended March 31, 2016
from Ps.133.3 million in the comparable period of 2015. By category, such expenses changed as follows:
(i) administrative expenses, which were Ps.74.1 million for the first three months ended March 31, 2016
and Ps.60.3 million for the three months ended March 31, 2015, increased by 22.9%, (ii) sales,
advertising and promotion expenses, which were Ps.62.4 million for the first three months ended March
31, 2016, and Ps.58.4 million for the first three months ended March 31, 2015, increased by 6.9%, and
(iii) maintenance and energy expenses, which were Ps.90.0 million for the first three months ended March
31, 2016 and Ps.80.0 million for the first three months ended March 31, 2015. Maintenance and energy
costs increased by 12.5% due to higher occupancy despite improved operational practices such as the
implementation of programs to increase efficiency in energy use and investments in more efficient
equipment, which have been in place for several years. While these expenses appear to have important
percentage increases, they continue to represent similar percentages of total revenues for the three
months ended March 31, 2016, and March 31, 2015, respectively. Administrative expenses represented
3.6% and 3.4% of our total revenues for the three months ended March 31, 2015 and March 31, 2014.
Sales expenses represented 3.6% and 3.0% of our total revenues for the three months ended March 31,
2016, and March 31, 2015, respectively, while maintenance and energy expenses represented 4.4% of




                                                   67
our total revenues for three months ended March 31, 2016 and 4.4% of our total revenues for the three
months ended March 31, 2015.
        Expenses related to our hotel operation business include property taxes, payment of insurance
premiums and other (income) expenses. When applicable, gains or losses derived from the sale of
assets are also included in this line item. No assets were sold during the three months ended March 31,
2016. These expenses increased by 19.3% to Ps. 22.9 million in the three months ended March 31, 2016
from Ps.19.2 million in the comparable period of 2015. However when these expenses are compared as
a percentage of total revenues, they remain unchanged, representing 1.1% of the total revenues for the
three months ended March 31, 2016 and 1.1% of total revenues for the three months ended March 31,
2015.
Hotel management, brand and other
        Hotel management, brand and other includes management fees for all the hotels we operate, as
well as revenues from franchises and brand services along with our loyalty management (Ampersand)
and call center (Konexo). The operating data under hotel management, brand and other is for all the
hotels we manage in Mexico.
         Revenues increased 21.9% to Ps.218.1 million in the three months ended March 31, 2016 from
Ps.178.9 million in the three months ended March 31, 2015. Higher revenues were primarily attributable
to better performance of all of our hotels.
          The revenue increase is primarily attributable to a 3.3 percentage point increase in occupancy
and a 13.9% increase in the RevPAR to Ps.859 for the first three months ended March 31, 2016 from
Ps.754 for the first three months ended March 31, 2015 with 20,669 average number of managed rooms
for the first three months ended March 31, 2016, 6.0% more rooms than the 19,507 managed rooms for
the first three months ended March 31, 2015.
          The results of urban hotels showed an improvement in comparison to those recorded during the
first three months ended March 31, 2015. The RevPAR of urban hotels was greater by 11.4% for the first
three months ended March 31, 2016 at Ps.694 for the first three months ended March 31, 2016 compared
to Ps.623 for the first three months ended March 31, 2015. This was due to a (i) 3.9% increase in the
average number of available rooms to 17,512 for the first three months ended March 31, 2016 compared
to 16,854 for the first three months ended March 31, 2015, (ii) an increase of 4.9% in the ADR to
Ps.1,086 for the first three months ended March 31, 2016 compared to Ps. 1,035 for the first three
months ended March 31, 2015 and (iii) a 3.7 percentage point increase in the occupancy factor to 63.9%
% for the first three months ended March 31, 2016 compared to 60.2% for the first three months ended
March 31, 2015.
        Coastal hotels room operation increased by 19.0% to 3,157 for the first three months ended
March 31, 2016 compared to 2,653 for the first three months ended March 31, 2015. These hotels
registered a 13.1% ADR increase to Ps.2,329 for the first three months ended March 31, 2016 compared
to Ps.2,058 for the first three months ended March 31, 2015 and a 0.9 percentage point decrease in
occupancy, 75.9% for the first three months ended March 31, 2016 and 76.8% for the first three months
ended March 31, 2015. This resulted in a 11.8% increase in RevPAR in comparison with the first three
months ended March 31, 2015 to Ps.1,767 for the first three months ended March 31, 2016 compared to
Ps.1,581 for the first three months ended March 31, 2015.
        Two new hotels opened under management contracts during the three months ended March 31,
2016. For the three months ended March 31, 2015, revenues from Ampersand and Konexo increased
95.9% when compared to the three months ended March 31, 2014, representing less than 10% of total
revenues for our hotel management, franchise brand and other business line during the three months
ended March 31, 2015. For a more detailed discussion about these businesses see "Business– Other
Related Services Businesses."
         Direct costs and corporate expenses relating to our hotel management, brand and other business
line include primarily the costs and expenses of our corporate sales, hotel operations and administration
and hotel human resources departments and of our Ampersand and Konexo businesses. Such costs and
expenses decreased 12.8% to Ps.268.5 million during the three months ended March 31, 2016 from



                                                   68
Ps.308.0 million in the comparable period of 2015. The increase in these costs and expenses represents
only one third of the increase recorded in revenues for this business segment. When we compare the
margins in the “Information by operating segment tables according to IFRS”, which are prior to giving
effect to the intercompany eliminations of revenues and expenses, in the three month period of 2016 a
30.2% margin was recorded versus a 22.1% margin for the same period of 2015.
Vacation Club
         Our Vacation Club business line primarily includes our vacation properties comprised of the
Fiesta Americana Vacation Club, The Front Door (which is being rebranded as Live Aqua Residence
Club) and Kivac programs. Revenues for our Vacation Club business line increased 26.0% during the
three months ended March 31, 2016 to Ps.680.4 million from Ps.540.1 million during the comparable
period for 2015. The increase was primarily propelled by a better pace in the volume of membership’s
sales in all programs mentioned above, higher occupancy in our vacation club properties accompanied by
higher food and beverage revenues. Expenses for our Vacation Club business line mainly include
expenses relating to vacation club sales, financing, administration and resort operation expenses. These
expenses increased 24.9% to Ps.480.7 million during the three months ended March 31, 2016 from
Ps.384.9 million in the comparable period of 2015. Expenses for our Vacation Club business line have
been stable, representing 23.5% of total revenues for the three months ended March 31, 2016, and
21.9% for the comparable period of 2015. During the three months ended March 31, 2016, cancellation
rates from the sale of memberships have remained at the same level as 2015 period due to stable market
conditions and approximately 90% of total outstanding receivables are current.
Other revenues
        Revenues from ancillary activities Ampersand, Konexo and Conectum are presented together in
the other revenues line item in order to facilitate monitoring of their performance. Revenues for the three
months ended March 31, 2016, decreased by 67.9% from Ps.139.6 million in the three months ended
March 31, 2015, to Ps.44.7 million in the first three months ended March 31, 2016. The revenue
decrease is primarily attributable to Ampersand not renewing third-party contracts.
Corporate expenses
         Corporate expenses include our corporate overhead such as salaries, administrative expenses,
legal fees and severance payments of our corporate finance, corporate human resources and technology
departments, as well as the office of the Chief Executive Officer. Corporate expenses amounted to
Ps.74.0 million during the three months ended March 31, 2016, a 7.9% decrease when compared to
Ps.80.3 million for the three months ended March 31, 2015. As a percentage of total revenue, corporate
expenses represented 3.6% of total revenues during the three months ended March 31, 2016, 1.1% less
than during the three months ended March 31, 2015.
Depreciation, amortization and real estate leasing
         We had depreciation, amortization and real estate leasing expenses of Ps.221.1 million during
the three months ended March 31, 2016, an increase of 19.6% from Ps.184.8 million in the comparable
period of 2015. The increase in these expenses was primarily attributable to the impact of the
depreciation of the peso against the U.S. dollar with respect to the U.S. dollar-denominated leases of
hotels in which we are the lessee.
Operating income
        Our operating income consolidates the operating income of our hotel operation; hotel
management, brand and other; Vacation Club revenues business lines and deducts our corporate
expenses and depreciation, amortization and real estate leasing expenses. Accordingly, as a result of
the foregoing, consolidated operating income was Ps. 368.7 million during the three months ended March
31, 2016, a 44.1% increase when compared to Ps. 255.9 million during the three months ended March
31, 2015.
Other expenses, net
       Other expenses, net include primarily all amortized commissions, premiums and fees related to
new loans or debt issuances, pre-operating expenses and other.


                                                    69
         Our other expenses net decreased during the three months ended March 31, 2016 to Ps.0.0
million when compared to Ps.3.6 million during the three months ended March 31, 2015.
Net financing result
         Our net financing result was Ps. 157.6 million for the three months ended March 31, 2016, a
33.7% decrease when compared to Ps. 237.8 million for the three months ended March 31, 2015. Net
interest expense increased 30.9% to Ps.143.5 million during the three months ended March 31, 2016
from Ps.109.6 million in the comparable period of 2015, mainly due to the depreciation of the peso
against the U.S. dollar. The exchange and conversion effects related to transactions denominated in
foreign currency was a loss of Ps.3.7 million during the three months ended March 31, 2016 when
compared to a loss of Ps.127.3 million during the comparable period of 2015. This is due to devaluation
of the peso against the U.S. dollar.
Taxes
        Taxes accrued were Ps.8.3 million for the three months ended March 31, 2016, compared to
Ps.72.6 million for the comparable period of 2015 as a result of the application of tax net operating losses
from previous years and the effect of deferred income taxes for the first quarter of 2016.
Consolidated (loss) income for the year
        As a result of the factors described above, our net consolidated income for the three months
ended March 31, 2016 was Ps.202.9 million driven by the strong performance of the hotels system-wide
and to the same peso-dollar exchange rate as of December 31, 2015, which compares favorably to our
Ps.54.6 million net loss for the three months ended March 31, 2015.




                                                    70
      Results of operations for the year ended December 31, 2015 compared to the year ended
December 31, 2014
       The following table sets forth our results of operations derived from our three principal operating
business lines and certain other data for the periods specified:

                                                                                                       Year Ended December 31,
                                                                                                        2014               2015
                                                                                                   (in thousands of Mexican pesos)

              Continuing operations
                Revenue .....................................................................          5,848,278           6,901,221
                Cost of sales ...............................................................          3,667,834           4,209,784
                  Gross Profit .............................................................           2,180,444           2,691,437

                 Administration expenses .............................................                   745,305             815,126
                 Sale and development expense ..................................                         105,726             126,879
                 Depreciation, amortization, real estate ........................
                    leasing ....................................................................         739,026             801,646
                 Other expenses, net ....................................................                  45,669                 479
                 Interest expense .........................................................              417,669             508,840
                 Interest income ...........................................................             (22,509)            (34,457)
                 Commissions and financial expenses..........................                              60,763            100,080
                 Exchange loss, net ......................................................               427,934             708,553
                 Equity in losses of associates .....................................                      12,595                 750
                                                                                                       2,532,178           3,027,896

                 Loss before income tax ...............................................                (351,734)           (336,459)

                 Income tax (benefit) expense ......................................                 (1,061,257)             131,334
                    Profit (loss) from continuing operations
                      operations ...........................................................             709,523           (467,793)

              Discontinued operations
                Profit (loss) from discontinued operations....................                             8,718              (2,612)

                 Consolidated income (loss) for the year ......................                          718,241           (470,405)




                                                                                 71
Information by operating segment for the year ended December 31, 2015 is as follows:

                                                                   Hotel
                                                                                                         State of non-
                                                     Hotel      management,                 Vacation                                                        Total
                   2015                                                        Corporate                   strategic        Total       Eliminations
                                                   operation     brand and                    Club                                                       consolidated
                                                                                                            assets
                                                                   other
 Statement of comprehensive
 income:
 Total revenues ................................    3,133,685      1,948,043      54,387     2,619,816               0     7,755,931        (854,710)       6,901,221
 Cost and general expenses ............             2,626,431      1,365,002                 2,080,891               0     6,072,324        (854,710)       5,217,614
 Corporate expenses ........................                                     321,114                             0      321,114                           321,114
 Depreciation and amortization ........                                           414677                                    414,677                           414,677
 Other expenses...............................                                                                                  479                               479
 Operating income (loss) ...............              507,254        583,041    (681,883)     538,925                0      947,337                 0         947,337


                                                                                                             Financial expenses and other expenses net     (1,283,766)
                                                                                                                             Loss before income taxes       (336,459)



Information by operating segment for the year ended December 31, 2014 is as follows:

                                                                   Hotel
                                                                                                         State of non-
                                                     Hotel      management,                 Vacation                                                        Total
                   2016                                                        Corporate                   strategic        Total       Eliminations
                                                   operation     brand and                    Club                                                       consolidated
                                                                                                            assets
                                                                   other
 Statement of comprehensive
 income:
 Total revenues ................................    2,746,820      1,822,798      25,827     1,970,489         26,197      6,592,131        (743,853)       5,848,278
 Cost and general expenses ............             2,350,664      1,394,370                 1,565,046         26,197      5,336,277        (743,853)       4,592,424
 Corporate expenses ........................                                     256,202                                    256,202                           256,202
 Depreciation and amortization ........                                          409,265                                    409,265                           409,265
 Other expenses...............................                                    45,669                                     45,669                            45,669
 Operating income (loss) ...............              396,156        428,428    (685,309)     405,443                0      368,745                 0         544,718


                                                                                                             Financial expenses and other expenses net      (896,452)
                                                                                                                             Loss before income taxes       (351,734)



         The tables above reflect our financial information by operating segment. The information for each
individual segment does not include the effects of elimination of intercompany transactions; such
eliminations are provided in a separate column to arrive at the consolidated totals. For this reason,
amounts in the individual segment information above do not tie directly to the information for those
segments in the consolidated statements of comprehensive (loss) income. The discussions below
generally refer to the results of our segments as presented net of eliminations, as within the consolidated
statement of comprehensive (loss) income. When we provide information or discussion of amount prior to
the effect of intercompany eliminations, as reported within the tables herein, we refer to such tables.
                Total Revenue
       Our total revenue increased by 18.0% from Ps.5,848.3 million in 2014 to Ps.6,901.2 million in
2015, mainly due to the performance of the hotels system-wide.
                Hotel operation
        Hotel operation includes revenues and expenses derived from the operation of owned or leased
hotels. The operating data under hotel operation is only for owned and leased hotels in Mexico.
Revenues for the year ended December 31, 2015 increased by 14.2% to Ps.3,103.8 million from
Ps.2,717.8 million in the year ended December 31, 2014.
        From an operating standpoint, the revenue increase is primarily attributable to (i) a 3.6
percentage point increase in occupancy, (ii) a 20.7% increase in the RevPAR to Ps.1,005 for the year
ended December 31, 2015 from Ps.832 for the year ended December 31, 2014, partially offset by (iii) a
2.9% decrease in the average of available rooms from 5,607 for the year ended December 31, 2014 to
5,443 for the year ended December 31, 2015.



                                                                                      72
       The results of urban hotels showed an improvement in comparison to those recorded during the
year ended December 31, 2014. The RevPAR of urban hotels was greater by 15.7% for the year ended
December 31, 2015, Ps.860 for the year ended December 31, 2015 compared to Ps.744 for the year
ended December 31, 2014. This was due to an increase of 10.2% in the ADR to Ps.1,213 for the year
ended December 31, 2015 compared to Ps.1,101 for the year ended December 31, 2014, (ii) a 3.4
percentage point increase in the occupancy factor to 70.9% for the year ended December 31, 2015
compared to 67.6% for the year ended December 31, 2014, partially offset by a 3.9% decrease in the
average of available rooms to 4,164 for the year ended December 31, 2015 compared to 4,333 for the
year ended December 31, 2014.
        Coastal hotels operated on average 1,279 rooms for the year ended December 31, 2015
compared to 1,275 rooms for the year ended December 31, 2014. These hotels recorded a 23.3% ADR
increase to Ps.1,867 for the year ended December 31, 2015 compared to Ps.1,514 for the year ended
December 31, 2014, accompanied by a 4.0% increase in occupancy to 78.0% for the year ended
December 31, 2015 from 74.0% for the year ended December 31, 2014. This resulted in a 30.1%
increase in RevPAR compared to Ps.1,456 for the year ended December 31, 2015 from Ps.1,119 for the
year ended December 31, 2014, which was driven by the consolidation of the hotels in the all-inclusive
format (which provides for food and beverage and other related costs to be included in the base room
rate paid by the guest), as well as an increase in tourist flow to beach destinations, mainly from the United
States.
        Departmental costs and expenses in our hotel operation business consist of food and beverage
costs, wages related to room staff and food and beverage personnel and other expenses such as
commissions to agencies, reservation fees, room amenities and laundry services. Departmental costs
and expenses were Ps.1,106.4 million during the year ended December 31, 2015, representing a 10.1%
increase compared to Ps.1,004.5 million during the year ended December 31, 2014. Departmental costs
and expenses increased at a slower rate than revenues from hotel operation, as a result of higher
occupancies compared to the year ended December 31, 2014. Departmental profits (revenues minus
departmental costs and expenses) were Ps.1,997.3 million in the year ended December 31, 2015,
representing a 18.4% increase from Ps.1,687.1 million in the year ended December 31, 2014.
         General expenses related to our hotel operation business consist of administrative expenses,
sales, advertising and promotion expenses and maintenance and energy costs. In aggregate, such
expenses increased 2.8% to Ps.588.0 million during the year ended December 31, 2015 from Ps.571.7
million during the year ended December 31, 2014. By category, such expenses increased as follows: (i)
administrative expenses, which were Ps.167.4 million in the year ended December 31, 2015 and
Ps.177.3 million in the year ended December 31, 2014, a decrease of 5.6%, (ii) sales, advertising and
promotion expenses, which were Ps.126.9 million in the year ended December 31, 2015 and Ps.105.7
million in the year ended December 31, 2014, an increase of 20.0% and (iii) maintenance and energy
expenses, which were Ps.293.7 million in the year ended December 31, 2015 and Ps.288.7 million in the
year ended December 31, 2014, slight increase of 1.7%. Sales, advertising and promotion and
maintenance and energy expenses increased primarily as a result of higher occupancies despite
improved operational practices such as the implementation of programs to increase efficiency in energy
use and investments in more efficient equipment; administrative expenses decreased in line with the
increase in revenue from this business line.
         Expenses related to our hotel operation business include payment of real estate taxes, insurance
premiums and legal and auditors’ fees. When applicable, gains or losses derived from the sale of assets
are also included in this item. Such expenses increased by 42.1% in the year ended December 31, 2015
compared to the year ended December 31, 2014, but remained proportionally in line with revenues,
representing 0.5% and 0.4% of revenues in the years ended December 31, 2015 and December 31,
2014, respectively.
        Hotel management, brand and other
        Hotel management, brand and other includes management and brand services along with our
loyalty management (Ampersand) and call center (Konexo) businesses. The operating data under hotel
management, brand and other is for all the hotels we manage in Mexico.



                                                     73
        Revenues for the year ended December 31, 2015 increased by 1.4% to Ps.1,123.2 million for the
year ended December 31, 2015 compared to Ps.1,107.9 million for the year ended December 31, 2014,
growth was not in line with system-wide hotels mainly due to a resizing of the Konexo business unit and
Ampersand as significant contracts were not renewed for the full year 2015, offset by a 8.0% increase in
the average number of available rooms to 19,946 for the year ended December 31, 2015 compared to
18,461 for the year ended December 31, 2014 and a 8.8% increase in RevPAR, Ps.765 for the year
ended December 31, 2015 compared to Ps.703 for the year ended December 31, 2014.
         Direct costs and corporate expenses related to hotel management, brand and other business
lines include, primarily, costs and expenses of its corporate sales, hotel operations, as well as costs
related to human resources departments as well as its Ampersand and Konexo businesses. According to
the summary of operating results, these costs and expenses decreased by 0.6% to Ps.1,110.0 million for
the year ended December 31, 2015 from Ps.1,116.4 million for the comparable period of 2014. The
decrease in these costs and expenses is primarily attributable to the continued resizing of the Ampersand
and Konexo businesses and the shift in the focus of these businesses to the provision of services to our
own operations.
        For urban hotels the average number of available rooms presented an increase of 7.9% to 17,157
for the year ended December 31, 2015 from 15,898 for the year ended December 31, 2014, with an
improvement of 2.8% in the average rate to Ps.1,043 for the year ended December 31, 2015 compared to
Ps.1,014 for the year ended December 31, 2014, accompanied by an increase in occupancy of 2.1% to
65.0% for the year ended December 31, 2015 from 62.9% for the year ended December 31, 2014, which
ultimately resulted in a RevPAR increase of 6.3% to Ps.678 for the year ended December 31, 2015 from
Ps.638 for the year ended December 31, 2014.
        Coastal hotels presented an increase of 8.8% in the available rooms average to 2,788 for the
year ended December 31, 2015 from 2,563 for the year ended December 31, 2014. The average rate
increased 14.5% to Ps.1,886 for the year ended December 31, 2015 from Ps.1,647 for the year ended
December 31, 2014 with a higher occupancy of 1.8 percentage points to 68.6% for the year ended
December 31, 2015 compared to 66.8% for the year ended December 31, 2014 which resulted in a
RevPAR increase of 17.5% to Ps.1,294 for the year ended December 31, 2015 from Ps.1,101 for the year
ended December 31, 2014.
        Vacation Club
         Our Vacation Club business line primarily includes our vacation properties comprised of the
Fiesta Americana Vacation Club, The Front Door (which is being rebranded as Live Aqua Residence
Club) and Kivac programs. Revenue from the Vacation Club increased by 31.2% to Ps.2,619.8 million in
the year ended December 31, 2015, from Ps.1,996.7 million in the year ended December 31, 2014.
Growth defined the vacation properties business, with an increase in the number of members to more
than 56,000 in the year ended December 31, 2015 including Kivac that reported approximately 26,000
clients.
        Expenses for the Vacation Club business line mainly include expenses related to sales, financing,
administration and operating expenses for our destinations. These costs increased by 31.1% to
Ps.1,993.3 million in the year ended December 31, 2015 from Ps.1,520.7 million for the year ended
December 31, 2014.
        As of December 31, 2015 the portfolio profile of Vacation Club, which is valued at approximately
U.S.$210 million, was improved substantially and reveals its health since 89% of such portfolio falls within
the regular collection period of less than 90 days.
        Sale of non-strategic properties
         The Ps.54.4 million revenue includes the sale of non-strategic properties during the year ended
December 31, 2015 was a result of the sale of a plot of land in Ixtapa of Ps.19 million. Revenue for the
sale of non-strategic properties during the year ended December 31, 2014 was Ps.26.2 million, as a
result of the sale of a land parcel located in the State of Quintana Roo in which the Costa Maya hotel was
previously located.




                                                    74
        Other revenues
        Revenues from our other revenues line item consist primarily of revenues from ancillary activities.
Revenues for the year ended December 31, 2015 were Ps. 54.4 million, compared to Ps.25.8 million for
the year ended December 31, 2014, as a result of the payment of a dividend corresponding to the sale of
2 hotels to FibraHotel by a company in which we had a non-controlling interest of 25%.
        Corporate expenses
         Corporate expenses include our corporate overhead such as salaries, administrative expenses,
legal fees and severance payments of our corporate finance, corporate human resources and technology
departments, as well as the office of the Chief Executive Officer. Corporate expenses in the year ended
December 31, 2015 represented Ps.321.1 million, a 25.3% increase from Ps.256.2 million for the year
ended December 31, 2014. As a percentage of our revenues, corporate expenses represented 4.7% and
4.4%, respectively, of our total income for the years ended December 31, 2015 and December 31, 2014.
The increase in corporate expenses is the result of expenses that have been incurred in connection with
the reorganization of our management team.
        Depreciation, amortization and real estate leasing
        We had depreciation, amortization and real estate leasing expenses of Ps.801.6 million in the
year ended December 31, 2015, a 8.5% increase from the Ps.739.0 million for the year ended December
31, 2014 mainly due to a higher exchange rate as payments under some hotel leases are denominated in
U.S. dollars and to the addition of the LAT20 by Live Aqua leased hotel in Playa del Carmen in November
2015.
        Operating (loss) income
         Our operating (loss) income consolidates the operating income of our hotel operation; hotel
management, brand and other; Vacation Club and other revenues business lines and deducts our
corporate expenses and depreciation, amortization and real estate leasing expenses. Accordingly, as a
result of the foregoing, consolidated operating income was Ps.947.3 million in the year ended December
31, 2015 compared to Ps.544.7 million in the year ended December 31, 2014. The income in the year
ended December 31, 2015 was mainly related to the better performance of our hotels system-wide.
        Other expenses, net
       Other expenses, net include primarily all amortized commissions, premiums and fees related to
new loans or debt issuances and pre-operating expenses.
        Our other expenses, net decreased by 99.0% during the year ended December 31, 2015 to
Ps.0.5 million compared to Ps.45.7 million during the year ended December 31, 2014. The decrease is
mainly attributable to the capitalization of expenses incurred in connection with the issuance of the
Existing Notes in June 2015.
        Net financing result
        Our net financing result was Ps.1,283.0 million in the year ended December 31, 2015, a 45.2%
increase from Ps. 883.8 million in the year ended December 31, 2014. Interest expense increased by
21.8% to Ps.508.8 million in the year ended December 31, 2015, from Ps.417.7 million for the
comparable period of 2014. Currency exchange effects related to transactions denominated in foreign
currency resulted in a loss of Ps.708.6 million in the year ended December 31, 2015, compared to a loss
of Ps. 427.9 million in the year ended December 31, 2014. The aforementioned increases were mainly
due to the depreciation of the peso against the U.S. dollar by 16.9% during the year ended December 31,
2015.
        Taxes
        After the enactment of new tax laws in Mexico and the repealing of the prior tax rules regarding
consolidation recorded in 2013, we recorded Ps.131.3 million of taxes payable for 2015, while in 2014 we
recorded a Ps.1,061.2 million benefit.




                                                    75
        In 2015, we reached a partial settlement with the federal tax authorities of Mexico with respect to
the audit of our subsidiary Turística Hotelera Cabos Siglo XXI, S.A. C.V. The Mexican tax authorities
determined a potential tax credit of Ps.243.5 million. The adoption of a conclusive agreement was
requested before the office of the Attorney General for Taxpayer Protection (Tax Ombudsman) and we
reached a preliminary agreement with SAT to pay Ps.41.8 million in order to settle the total claim. As of
March 31, 2016, we have paid the total amount settled
        Income from discontinued operations, net of income tax
         We recorded a loss of Ps.2.6 million in 2015 while in 2014, we recorded a net gain of Ps.8.7
million included in discontinued operations. The change is due to expenses in connection with the
restructuring of our subsidiaries.
        Consolidated net (loss) income
       As a result of the factors described above, our net consolidated loss for the year ended
December 31, 2015 was Ps.470.4 million, compared to net income of the Ps.718.2 million for the year
ended December 31, 2014.




                                                    76
      Results of operations for the year ended December 31, 2014 compared to the year ended
December 31, 2013
       The following table sets forth our results of operations derived from our three principal operating
business lines and certain other data for the periods specified:

                                                                                                       Year Ended December 31,
                                                                                                       2013                2014
                                                                                                (in thousands of Mexican pesos)

              Continuing operations
                Revenue ...................................................................           8,550,358            5,848,278
                Cost of sales ............................................................            5,953,657            3,667,834
                  Gross Profit ..........................................................             2,596,701            2,180,444

                 Administration expenses ..........................................                     703,104              745,305
                 Sale and development expense................................                           110,563              105,726
                 Depreciation, amortization, real estate
                    leasing..................................................................         1,641,401              739,026
                 Other expenses, net .................................................                  183,213                45,669
                 Interest expense .......................................................               393,659              417,669
                 Interest income.........................................................             (113,084)              (22,509)
                 Commissions and financial expenses .......................                              57,711                60,763
                 Exchange loss, net ...................................................                  29,996              427,934
                 Equity in losses of associates ...................................                       4,863                12,595
                                                                                                      3,011,426            2,532,178

                 Loss before income tax ............................................                   (414,725)           (351,734)

                 Income tax expense (benefit) ...................................                     1,161,883          (1,061,257)
                    (Loss) profit from continuing operations
                      operations ........................................................            (1,576,608)             709,523

              Discontinued operations
                (Loss) profit from discontinued operations ................                            (181,206)                  8,718

                 Consolidated (loss) income for the year....................                         (1,757,814)             718,241




                                                                                 77
Information by operating segment for the year ended December 31, 2014 is as follows:


                                   Hotel                                  Sale of
                      Hotel     management,                  Vacation      non-                                             Total
      2014                                     Corporate                                 Total        Eliminations
                    operation    brand and                     Club      strategic                                       consolidated
                                   other                                  assets


 Total revenues     2,746,820      1,822,798       25,827    1,970,489     26,197     6,592,131           (743,853)         5,848,278
 Cost and
 general            2,350,664      1,394,370                 1,565,046     26,197     5,336,277           (743,853)         4,592,424
 expenses
 Corporate
                                                  256,202                               256,202                              256,202
 expenses
 Depreciation
                                                  409,265                               409,265                              409,265
 and amortization
 Other expenses                                    45,669                                 45,669                               45,669
 Operating
                      396,156        428,428    (685,309)     405,443            0      544,718                     0         544,718
 income (loss)


                                                                             Financial expenses and other expenses net        (896,452)

                                                                                             Loss before income taxes         (351,734)




Information by operating segment for the year ended December 31, 2013 is as follows:

                                   Hotel                                  Sale of
                      Hotel     management,                  Vacation      non-                                             Total
      2013                                     Corporate                                 Total        Eliminations
                    operation    brand and                     Club      strategic                                       consolidated
                                   other                                  assets


 Total revenues     2,708,706      2,043,439                 1,776,043   2,781,588    9,309,776           (759,418)         8,550,358
 Cost and
 general            2,351,678      1,597,414                 1,440,589   2,216,417    7,606,098           (759,418)         6,846,680
 expenses
 Corporate
                                                  247,157                                247,157                              247,157
 expenses
 Depreciation
 and                                            1,314,888                             1,314,888                             1,314,888
 amortization
 Other expenses                                   183,213                                183,213                              183,213
 Operating
                     357,028        446,025    (1,745,258)    335,454     565,171       (41,580)                    0        (41,580)
 income (loss)


                                                                             Financial expenses and other expenses net        (373,145)

                                                                                              Loss before income taxes        (414,725)




         The tables above reflect our financial information by operating segment. The information for each
individual segment does not include the effects of elimination of intercompany transactions; such
eliminations are provided in a separate column to arrive at the consolidated totals. For this reason,
amounts in the individual segment information above do not tie directly to the information for those
segments in the consolidated statements of comprehensive (loss) income. The discussions below
generally refer to the results of our segments as presented net of eliminations, as within the consolidated
statement of comprehensive (loss) income. When we provide information or discussion of amount prior to
the effect of intercompany eliminations, as reported within the tables herein, we refer to such tables.




                                                              78
        Total revenue
       Our total revenue decreased by 31.6% from Ps.8,550.3 million in 2013 to Ps.5,848.2 million in
2014, mainly due to the sale of 14 of our hotels to FibraHotel and other sales of non-strategic assets in
2013 that resulted in income of Ps.2,781.6 million in such year.
        Hotel operation
        Hotel operation includes revenues and expenses derived from the operation of owned or leased
hotels. The operating data under hotel operation is only for owned and leased hotels in Mexico.
Revenues for the year ended December 31, 2014 increased by 0.7% to Ps.2,691.6 million from
Ps.2,673.7 million in the year ended December 31, 2013.
        From an operating standpoint, the revenue increase is primarily attributable to (i) a 0.6
percentage point increase in occupancy, (ii) a 12.6% increase in the RevPAR to Ps.831 for the year
ended December 31, 2014 from Ps.738 for the year ended December 31, 2013, partially offset by (iii) a
4.2% decrease in the average of managed rooms from 5,668 for the year ended December 31, 2013 to
5,429 for the year ended December 31, 2014.
       The results of urban hotels showed an improvement in comparison to those recorded during the
year ended December 31, 2013. The RevPAR of urban hotels was greater by 11.3% for the year ended
December 31, 2014, Ps.742 for the year ended December 31, 2014 compared to Ps.667 for the year
ended December 31, 2013. This was due to an increase of 9.1% in the ADR to Ps.1,099 for the year
ended December 31, 2014 compared to Ps.1,007 for the year ended December 31, 2013, (ii) a 1.3
percentage point increase in the occupancy factor to 67.5% for the year ended December 31, 2014
compared to 66.2% for the year ended December 31, 2013, partially offset by a 10.5% decrease in the
average of available rooms to 4,154 for the year ended December 31, 2014 compared to 4,643 for the
year ended December 31, 2013.
        Coastal hotels operated on average 24.4% more rooms – 1,275 for the year ended December 31,
2014 compared to 1,025 for the year ended December 31, 2013 – due to the transfer of the hotel Grand
Fiesta Americana Los Cabos Golf & Spa from the Vacation Club business which, from July 1, 2012 until
December 2013, had been marketed by the Vacation Club. These hotels recorded a 9.6% ADR increase
to Ps.1,514 for the year ended December 31, 2014 compared to Ps.1,381 for the year ended December
31, 2013, partially offset by a 2.8 percentage point decrease in occupancy to 74.0% for the year ended
December 31, 2014 compared to 76.8% for the year ended December 31, 2013. This resulted in a 5.6%
increase in RevPAR in comparison with the year ended December 31, 2013 to Ps.1,119 for the year
ended December 31, 2014 compared to Ps.1,060 for the year ended December 31, 2013, which was
driven by the consolidation of the shift of three hotels from the European plan to the all inclusive format
(which provides for food and beverage and other related costs to be included in the base room rate paid
by the guest), as well as an increase in tourist flow to beach destinations, mainly from the United States
and Brazil.
        Departmental costs and expenses in our hotel operation business consist of food and beverage
costs, wages related to room staff and food and beverage personnel and other expenses such as
commissions to agencies, reservation fees, room amenities and laundry services. Departmental costs
and expenses were Ps.1,004.5 million during the year ended December 31, 2014, representing a 0.3%
decrease when compared to Ps.1,007.5 million during the year ended December 31, 2013. Departmental
costs and expenses remained flat in line with the revenues from hotel operation after the reduction in the
number of our owned hotels in comparison to the year ended December 31, 2013. Departmental profits
(revenues minus departmental costs and expenses) were Ps.1,687.1 million in the year ended December
31, 2014, representing a 1.3% increase when compared to Ps.1,666.1 million in the year ended
December 31, 2013.
         General expenses related to our hotel operation business consist of administrative expenses,
sales, advertising and promotion expenses and maintenance and energy costs. In aggregate, such
expenses increased 5.6% to Ps.571.7 million during the year ended December 31, 2014 from Ps.541.2
million during the year ended December 31, 2013. By category, such expenses increased as follows: (i)
administrative expenses, which were Ps.177.3 million in the year ended December 31, 2014 and
Ps.138.0 million in the year ended December 31, 2013, an increase of 28.5%, (ii) sales, advertising and


                                                    79
promotion expenses, which were Ps.105.7 million in the year ended December 31, 2014 and Ps.110.6
million in the year ended December 31, 2013, a decrease of 4.4% and (iii) maintenance and energy
expenses, which were Ps.288.7 million in the year ended December 31, 2014 and Ps.292.6 million in the
year ended December 31, 2013, a decrease of 1.4%. Sales, advertising and promotion and maintenance
and energy expenses decreased primarily as a result of a lower number of our owned hotels, better
operational practices such as the implementation of programs to increase the efficiency in energy use
and investments in more efficient equipment; administrative expenses increased in line with the
expansion of our hotel operation activities and the increase in revenue from this business line.
        Expenses related to our hotel operation business include payment of real estate taxes, insurance
premiums and legal and auditors’ fees. When applicable, gains or losses derived from the sale of assets
are also included in this item. Such expenses decreased by 8.7% from 2014 to 2013 due to a lower
number of leased hotels.
        Hotel management, brand and other
        Hotel management, brand and other includes management and brand services along with our
loyalty management (Ampersand) and call center (Konexo) businesses. The operating data under hotel
management, brand and other is for all the hotels we manage in Mexico.
        Revenues for the year ended December 31, 2014 decreased by 7.7% to Ps.1,107.9 million for the
year ended December 31, 2014 compared to Ps.1,200.4 million for the year ended December 31, 2013
mainly due to a resizing of the Konexo business unit as a significant contract was not renewed for 2014,
offset by a 9.1% increase in the average number of available rooms to 18,259 for the year ended
December 31, 2014 compared to 16,732 for the year ended December 31, 2013 and a 4.9% increase in
RevPAR, Ps.703 for the year ended December 31, 2014 compared to Ps.670 for the year ended
December 31, 2013.
         Direct costs and corporate expenses related to Hotel management, brand and other business line
include, primarily, costs and expenses of its corporate sales, hotel operations, as well as costs related to
human resources departments as well as its Ampersand and Konexo businesses. According to the
summary of operating results, these costs and expenses decreased by 14.2% to Ps.1,116.4 million for
the year ended December 31,2014 from Ps.1,300.4 million for the comparable period of 2013. The
decrease in these costs and expenses is primarily attributable to the resizing of the Ampersand and
Konexo businesses and the shift in the focus of these businesses to the provision of services to our own
operations.
         For urban hotels the average number of available rooms presented an increase of 8.3% to 15,678
for the year ended December 31, 2014 compared to 14,475 for the year ended December 31, 2013, with
an improvement of 5.4% in the average rate to Ps.1,014 for the year ended December 31, 2014
compared to Ps.962 for the year ended December 31, 2013, partially offset by a decrease in occupancy
of 0.9 percentage points to 62.7% for the year ended December 31, 2014 compared to 63.6% for the year
ended December 31, 2013, which ultimately resulted in a RevPAR increase of 3.9% to Ps.635 for the
year ended December 31, 2014 compared to Ps.612 for the year ended December 31, 2013.
         Coastal hotels presented an increase of 14.3% in the available rooms average to 2,581 for the
year ended December 31, 2014 compared to 2,258 for the year ended December 31, 2013. The average
rate increased 9.3% to Ps.1,633 for the year ended December 31, 2014 compared to Ps.1,495 for the
year ended December 31, 2013 with a lower occupancy of 1.8 percentage points to 68.1% for the year
ended December 31, 2014 compared to 69.9% for the year ended December 31, 2013 which resulted in
a RevPAR increase of 6.4% to Ps.1,112 for the year ended December 31, 2014 compared to Ps.1,045 for
the year ended December 31, 2013.
        Vacation Club
        Our Vacation Club    business line primarily includes our vacation properties comprised of the
Fiesta Americana Vacation    Club, The Front Door (which is being rebranded as Live Aqua Residence
Club) and Kivac programs.    Revenue from the Vacation Club increased by 5.4% to Ps.1,996.7 million in
the year ended December      31, 2014, from Ps.1,894.6 million in the year ended December 31, 2013.




                                                    80
Growth defined the vacation properties business, with an increase in the number of members to more
than 50,000 in the year ended December 31, 2014. Kivac reported approximately 19,000 clients.
         Expenses for the Vacation Club business line mainly include expenses related to sales, financing,
administration and operating expenses for our destinations. These costs increased by 6.4% to Ps.1,520.7
million in the year ended December 31, 2014 from Ps.1,429.3 million for the year ended December 31,
2013.
        As of December 31, 2014 the portfolio profile of Vacation Club, which is valued at approximately
U.S.$188 million, was improved substantially and reveals its health since 89% of such portfolio falls within
the regular collection period of less than 90 days.
        Sale of non-strategic properties
        Revenue for the sale of non-strategic properties during the year ended December 31, 2014 was
Ps.26.2 million, a 99.0% decrease compared to Ps.2,781.6 million for the year ended December 31,
2013, as a result of the sale of a land parcel located in the State of Quintana Roo in which the Costa
Maya hotel was previously located. The Ps.2,781.6 million revenue for the sale of non-strategic
properties during the year ended December 31, 2013 was a result of the sale of 14 of our hotels to
FibraHotel.
        Other revenues
        Revenues from our other revenues line item consist primarily of revenues from ancillary activities.
Revenues for the year ended December 31, 2014 were Ps.25.8 million, compared to Ps.0 for the year
ended December 31, 2013, as a result of the payment of a dividend corresponding to the sale of 2 hotels
to FibraHotel by a company in which we have a non-controlling interest of 25%.
        Corporate expenses
         Corporate expenses include our corporate overhead such as salaries, administrative expenses,
legal fees and severance payments of our corporate finance, corporate human resources and technology
departments, as well as the office of the Chief Executive Officer. Corporate expenses in the year ended
December 31, 2014 represented Ps.256.2 million, a 3.7% increase compared to Ps.247.2 million for the
year ended December 31, 2013. As a percentage of our revenues, corporate expenses represented
4.4% of our total income for the year ended December 31, 2014. The increase in corporate expenses is
the result of expenses that have been incurred in connection with the reorganization of our management
team, which included severance payments.
        Depreciation, amortization and real estate leasing
        We had depreciation, amortization and real estate leasing expenses of Ps.739.0 million in the
year ended December 31, 2014, a 1.0% decrease in comparison to the Ps.746.6 million during 2013
mainly due to a lower depreciation as a result of a lower number of leased hotels.
        Operating (loss) income
         Our operating (loss) income consolidates the operating income of our hotel operation; hotel
management, brand and other; Vacation Club and other revenues business lines and deducts our
corporate expenses and depreciation, amortization and real estate leasing expenses. Accordingly, as a
result of the foregoing, consolidated operating income was Ps.544.7 million in the year ended December
31, 2014 compared to an operating loss of Ps.41.6 million in the year ended December 31, 2013. The
loss in the year ended December 31, 2013 was mainly related to our recognition of an impairment in the
value of our assets in the amount of Ps.894.8 million, as a result of the sale of the shares of our non-
strategic assets of a subsidiary (Antigua Inmobiliaria Hotelera, S.A. de C.V.) and the refurbishment of the
Fiesta Americana Villas Cozumel hotel.
        Other expenses, net
       Other expenses, net include primarily all amortized commissions, premiums and fees related to
new loans or debt issuances and pre-operating expenses.




                                                    81
         Our other expenses, net decreased by 75.1% during the year ended December 31, 2014 to
Ps.45.7 million compared to Ps.183.2 million during the year ended December 31, 2013. The decrease is
mainly attributable to the foreclosure in 2013 on certain of our shares which secured certain of our
obligations in connection with the development of a land plot located in the Riviera Maya commonly
known as Chemuyil.
        Net financing result
        Our net financing result was Ps.883.8 million in the year ended December 31, 2014, a 140.0%
increase as compared to Ps.368.3 million in the year ended December 31, 2013. Interest expense
increased by 6.1% to Ps.417.7 million in the year ended December 31, 2014, in comparison to Ps.393.6
million for the comparable period of 2013. Currency exchange effects related to transactions
denominated in foreign currency resulted in a loss of Ps.427.9 million in the year ended December 31,
2014, compared to a loss of Ps.30.0 million in the year ended December 31, 2013. The aforementioned
increases were mainly due to the depreciation of the peso against the U.S. dollar by 12.6% during the
year ended December 31, 2014.
        Taxes
          The enactment of new tax laws in Mexico and the repealing of the tax rules regarding
consolidation in 2013, effective in 2014, had various consequences on our tax expense during the years
ended December 31, 2013 and 2014. Under the Income Tax Law (LISR) in effect in 2014, the tax
consolidation scheme was eliminated and, therefore, we are obligated to pay the deferred tax up to
December 31, 2013, during the following five years starting in 2014. This deconsolidation tax of Ps.882.2
million was recognized under income taxes in the consolidated statement of comprehensive income (loss)
for the year ended December 31, 2013. Similarly, the 2014 LISR eliminated the incentives that allowed
the gain on the sale or contribution of real property to a qualified Real Estate Company (SIBRAs) in
exchange for shares in the SIBRA to be deferred for tax purposes until the sale of the shares held in the
SIBRA occurs. Consequently, if the conditions for deferral of the gain for tax purposes has not been
fulfilled as of December 31, 2016, the tax must be accrued on that date. The tax liability for the gain on
certain SIBRA transactions we entered into was not fully recorded previously because we had no plans to
sell the shares or the assets related to these transactions. Consequently, due to the change in
circumstances, we recorded a deferred tax of Ps.1,297.4 million in 2013. However, based on a series of
additional analyses and the tax attributes we complied with during 2014, Ps.1,043.6 million was canceled
in the consolidated statement of comprehensive income, resulting in an income tax benefit for the year
ended December 31, 2014. Additionally, as a result of the negotiation of the settlement of certain income
tax proceedings with the Mexican tax authorities originating from their audits in connection with the years
2004 to 2008, we recognized Ps.125.6 million of income tax expense for the year ended December 31,
2013.
        Income from discontinued operations, net of income tax
        In September 2014, we executed an agreement to fully terminate the escrow guaranty related to
the sale of our hotel operation business in South America, pursuant to which termination we received
U.S.$16.6 million. This amount was partially offset by a related payable, resulting in a net gain on the
transaction of Ps.8.7 million included in discontinued operations.
        Consolidated net (loss) income
       As a result of the factors described above, our net consolidated income for the year ended
December 31, 2014 was Ps.718.2 million, a change from the Ps.1,757.8 million net loss for the year
ended December 31, 2013.




                                                    82
Liquidity and Capital Resources
            Overview
         We have successfully transitioned from an enterprise that primarily owns hotels to a company
whose growth and revenue derive mainly from hotel management and other related services. While
capital expenditures under our management model are substantially lower than under our hotel operation
model, in order to keep our owned hotels attractive and competitive, we continue spending to maintain,
modernize and refurbish our owned hotels. In addition, to continue growing our vacation club business,
we make expenditures in the development of new units for sale. All of these expenses create a
continuing need for cash. To the extent we cannot fund expenditures from cash generated by operations,
funds must be borrowed or otherwise obtained through other financing.
         As a holding company, our ability to meet our debt and other obligations is dependent on the
earnings and cash flows of our subsidiaries. We maintain centralized control of our enterprise’s finances,
regulating cash flows of each of our subsidiaries in relation to income forecasts and expense budgets
periodically submitted by each subsidiary. We also centralize control of obtaining and administering our
various credit lines.
            Liquidity
        Cash flow from operating activities is generated primarily from operating income from our owned
and leased hotels, management revenues and the sale and financing of vacation club memberships. In
certain years, we have also generated resources from the sale of non-strategic assets. These are the
principal sources of cash used to fund our operating expenses, interest payments on debt, capital
expenditures, dividend payments and income taxes.
      The following table sets forth the generation and application of cash for the years ended
December 31, 2013, 2014 and 2015 and for the three months ended March 31, 2015 and 2016.

                                                                                    For the years ended                          Three months
                                                                                       December 31,                             ended March 31,
                                                                     2013                   2014             2015             2015           2016
                                                                                                   (in thousands of pesos)

Net cash provided by (used in) operating
 activities ......................................................... (201,546)            347,962      1,476,682            416,712       497,950
Net cash provided by (used in) investing
 activities ......................................................... 771,492              (382,389)     (504,597)            (33,424)     (105,875)
Net cash provided by (used in) financing
 activities ......................................................... (1,297,237)          314,535      (1,245,955)          (788,803)      (15,098)
Adjustment to cash flows due to exchange
 rate fluctuations .............................................          1,789             11,319         39,888                  0              0
Cash and cash equivalents at period end ......... 706,365                                  997,792        763,810            592,277      1,140,787


            Operating Activities
        In the three months ended March 31, 2016, our net cash provided by operating activities was
Ps.498.0 million, increasing from the Ps.416.7 million over the same period of 2015. This increase is
mainly attributable to our results of operations for that period, adjusted by Ps.253.7 million in non-cash
items, Ps.0.8 million in exchange rate fluctuations, Ps.8.3 million in taxes and a Ps.41.3 million increase
in working capital. See “—Three months Ended March, 2016 Compared with the Three months Ended
March, 2015.”
        Net cash provided by operating activities was Ps.1,476.7 million in 2015, compared to cash used
in operating activities of Ps.348.0 million in 2014 and Ps.201.5 million in 2013. Our higher net cash
provided by operating activities in 2015 was primarily due to lower net income adjusted for Ps.2,072.0
million non-cash items, Ps.984.5 million in exchange rate fluctuations and Ps.124.9 million used for
working capital.




                                                                                      83
          In 2014, lower cash used in operating activities was primarily due to an adjustment of our net
income for PS.342.5 million in non-cash items, primarily Ps.409.3 million in depreciation, Ps. 1,061.2
million in tax benefit, and a Ps.712.8 million reduction in working capital. In 2013, net cash from operating
activities was Ps.2,404.2 million non-cash items, Ps.1,161.9 million in taxes, Ps.1,314.9 million in
depreciation and asset impairment and Ps.847.9 million in uses for working capital.
            Investing Activities
         In the three months ended March 31, 2016, net cash used in investing activities was Ps.105.9
million compared to Ps. 33.4 million for the three months ended March 31, 2015. This increase was
primarily due to a faster pace in the use of cash in connection with the refurbishment of our hotels. During
the three months ended March 31, 2016, we incurred expenses mainly in the renovation of four owned
hotels under the Fiesta Americana brands.
         In 2015, net cash used in investing activities was Ps.504.6 million and comprised maintenance
capital expenditures for our owned hotels and capital expenditures for the renovation of hotels. In 2014,
net cash used in investing activities was Ps.382.4 million and comprised maintenance capital
expenditures for our owned hotels and capital expenditures for the renovation of hotels. In 2013, net
cash provided by investing activities was Ps.771.5 million, primarily from the cash received from the sale
of 14 hotels to FibraHotel, offset by capital expenditures for our owned hotels.
            Financing Activities
         In the three months ended March 31, 2016, net cash used in financing activities was Ps.15.1
million compared to Ps.788.8 million during the three months ended March 31, 2015. We did not declare
or pay any dividends during the three months ended March 2016.
        During 2015, net cash used in financing activities was Ps.1,246.0 million and included proceeds
from borrowings to pay the outstanding principal amount (plus accrued interest) of our Euro commercial
paper program in November 2015.
       During 2014, net cash generated by financing activities was Ps.314.5 million and included
proceeds from borrowings to pay the outstanding principal amount of our 9.250% Senior Notes due
January 2015 (the “2015 Notes”).
        In 2013, net cash used in financing activities was Ps.1,297.2 million and was used primarily to
prepay convertible debentures and bank loans and to pay closing costs of a cross-currency swap.
            Indebtedness
       The following table sets forth information regarding our consolidated long-term debt as of March
31, 2016:
                                                                        Amounts
                                                                 (In thousands of Ps.)   Currency   Average cost (2)    Maturity
 Existing Notes(1) ..........................................            6,021,750         USD          7.875%         June 2022
 2017 Notes...................................................             659,502         USD          7.875%         Nov. 2017
 Inmobiliaria del Sudeste, S.A. de C.V.
 Convertible Loan ..........................................                1,134          USD        LIBOR + 3%         2018

                                                  Total                 6,682,386
____________________________
(1) The amount is not net of the related Ps.424 million offering fees and expenses which were capitalized during the three-month
period ended March 31, 2016.
(2) The average cost does not include costs related to tax indemnities such as tax gross-ups or other indemnities.

            During 2014, we performed the following actions regarding our indebtedness:
                   •      We issued on February 20, 2014 U.S.$35.0 million principal amount of our Existing 2017
                          Notes as part of a private exchange for U.S.$31.6 million principal amount of the 2015
                          Notes. This issuance was a reopening of our U.S.$225.0 million Existing 2017 Notes
                          which we issued in December 2012 and U.S.$50.0 million principal amount of our
                          Existing Notes which we issued in January 2013.



                                                                              84
           •   We issued on November 28, 2014 U.S.$47.2 million principal amount of 6% commercial
               paper due November 18, 2015 under our Euro commercial paper program. We used the
               funds obtained from the issuance under our Euro commercial paper program to fund the
               payment of the U.S.$51.7 million outstanding principal amount of our 2015 Notes which
               were due on January 15, 2015.
           •   In September 2014, we entered into a Ps.200.0 million twelve-month revolving credit
               agreement with Banco Santander, S.A. (renewed on September 29, 2015) which was
               secured by a mortgage on the Fiesta Inn Aeropuerto hotel, which is owned by our
               subsidiaries Gran Operadora Posadas, S.A. de C.V., Operadora del Golfo de México,
               S.A de C.V., and YIPA, S.A. de C.V. As of December 31, 2015, March 31, 2016 and the
               date of this offering memorandum, the outstanding balance was Ps.0.0.
       During 2015, we performed the following actions regarding our indebtedness:
           •   In January 2015, we paid the U.S.$51.7 million principal outstanding amount of our 2015
               Notes which were due on January 15, 2015.
           •   Issuance of Existing Notes:

               On June 30, 2015, we issued U.S.$350.0 million of Existing Notes and conducted a
               concurrent tender offer for the U.S.$310.0 million principal amount outstanding of our
               7.875% Senior Notes due 2017. The purchase price in the tender offer was U.S.$1,060
               for each U.S.$1,000 of the 2017 Notes.
               We used a portion of the proceeds from the offering to purchase U.S.$271.7 million of
               2017 Notes, or 87.63% of the principal amount outstanding, in the tender offer, with the
               remaining principal amount outstanding of the 2017 Notes decreasing to U.S.$38.3
               million. The Existing Notes pay interest at a rate of 7.875% per year semiannually on
               June 30 and December 30 each year, and mature on June 30, 2022.
               The remaining proceeds from the offering of the Existing Notes were used to repay in full
               the U.S.$47.2 million principal amount outstanding under our Euro commercial paper
               program at maturity in November 2015.
               Our tender offer expenses of Ps.339.5 million, which include U.S.$16.1 million of
               premium for the purchase of 2017 Notes in the tender offer, are being amortized based
               on the life of the issuance of the Existing Notes using the effective interest rate method.


Contractual obligations
         The following is a summary of our contractual obligations as of March 31, 2016 without giving
effect to this offering:




                                                  85
                                                                             Payments due by Period
                                                                             (in thousands of pesos)
                                                                 Less than                 1-3                  3-5             More than
 Contractual obligations                       Total                1 year                years               Years               5 years

 Short-term debt (includes
  short-term portion of long-
  term debt)(1)                                 659,502                                     659,502
      Long-term debt (2)                      6,021,750                                                                         6,021,750
      Convertibles (3)                             1,134                                       1,134
      Operating lease (4)                     1,396,846                369,583              367,996             659,267
      Capital lease                               83,054                44,279                25,446             13,329
 Total obligations (2)                        8,162,285                413,862            1,054,078             672,595         6,021,750

(1)   Ps. 86.6 million of interest until maturity is not included.
(2)   Total obligations are net of Ps.424.1 million net of commissions in issuances of our loans in compliance with IFRS accounting. Ps.2,964 million of
      interest until maturity is not included.
(3)   Includes the convertible loan of Inmobiliaria del Sudeste, S.A. de C.V.
(4)   Obligations have been determined based on fixed leases, thus not considering variable portions.

         Our operating lease obligations include fixed lease payments deriving from long-term agreements
of our leased hotels. Some of these leasing agreements provide for payments in U.S. dollars and, for
purposes of this table, they are converted to pesos at the exchange rate as of March 31, 2016.
        Capital lease obligations include capital lease agreements of up to three years related primarily to
the leasing of computing equipment for our hotels and corporate offices.
        In the ordinary course of business, we also enter into long-term supply arrangements for different
services and with several suppliers which are not reflected in the table above.
       In addition, our obligations under derivative financial instruments are described below under “—
Market Risk Disclosure—Derivative Financial Instruments.”
Market Risk Disclosure
       In addition, our obligations under derivative financial instruments are described below under “—
Market Risk Disclosure—Derivative Financial Instruments.”
           Derivative financial instruments
        Financial derivatives - As of December 31, 2015, a portion of our revenues, generally around
25%, has been directly or indirectly denominated in U.S. dollars. This is because the prices of the
guestrooms in the beach hotels (principally Cancún and Los Cabos) maintain rates in U.S. dollars and
also because, historically, a portion of the sales and financing of the Vacation Club memberships have
been expressed in U.S. dollars.
        Given that some of the revenues are denominated directly or indirectly in U.S. dollars, to minimize
the exposure to exchange rates in Mexican pesos, our policy has been to maintain a significant portion of
the debt in U.S. dollars by obtaining loans in U.S. dollars when market conditions permit.
           Interest Rate Risk
         As of March 31, 2016, substantially all of our outstanding indebtedness was fixed rate and,
therefore, we do not believe we are exposed to significant interest rate risk. We do not currently hedge
our interest rate risk.
           Exchange Rate Risk
         As of March 31, 2016, all of our outstanding indebtedness was denominated in U.S. dollars. We
do not currently hedge our exchange rate risk. A depreciation (or appreciation) of 10% in the peso
against the U.S. dollar would result in an additional foreign exchange loss (or gain) in the results and
equity for the year ended December 31, 2015 of approximately Ps.471.0 million.



                                                                          86
Off-Balance Sheet Arrangements
        Except for the operating lease agreements disclosed in the table above in “–Contractual
Obligations”, we currently have no off-balance sheet arrangements.




                                              87
                                                BUSINESS
Overview
          We are the largest and one of the fastest growing hospitality companies in Mexico, with 145
hotels, resorts and vacation properties in our portfolio comprising 23,826 rooms. In the more than 45
years since opening our first hotel, we have defined the hospitality industry in Mexico and established a
portfolio of 9 highly recognizable brands. Our flagship brands, Fiesta Americana and Grand Fiesta
Americana, are two of the most recognized hotel brands in Mexico. Our middle-scale brand, Fiesta Inn, is
among the largest brands in its category across Mexico based on total number of rooms. In the luxury,
lifestyle resort category, our Live Aqua brand is among the highest regarded of our brands and we expect
to further bolster its profile in the coming years through development initiatives that are currently in
process. Of our 145 hotels, 16 are owned, 14 are leased, 109 are managed-only hotels and six are
franchised. Our hotels are located in a mix of urban and coastal destinations serving both leisure and
business travelers across Mexico, with approximately 80% of our rooms located in urban destinations and
20% in coastal destinations. Currently we have more than 14,000 employees serving our guests on a
daily basis at our properties and in our corporate headquarters and over 1.7 million members in our
loyalty programs, which positions us among the leading hospitality providers in Mexico. Our shares are
listed on the Mexican Stock Exchange under the ticker “POSADAS” with a market capitalization as of
March 31, 2016 of Ps.21,322.9 million or U.S.$1,239.3 million.
         We are the leading operator of hotels in Mexico based on number of rooms, geographic coverage
and market share. We distinguish ourselves from other operators by offering hotel owners superior
management and franchise services including centralized reservation and distribution networks,
marketing programs, revenue-optimization tools, data gathering and customer relationship management
capabilities, web-based guest satisfaction systems, robust customer loyalty programs and strong, well-
defined brands. According to our internal market studies, as of December 31, 2015, we were the leading
hotel operator in Mexico with 27% of the total managed hotel rooms in the country. Our Fiesta Americana,
Fiesta Inn and One Hotels brands each rank first, with 23%, 33% and 58% of the total managed rooms in
the upscale, middle-scale and economy classes, respectively. In the luxury class, our Grand Fiesta
Americana and Live Aqua brands rank first and sixth, respectively, with 21% and 6% of the total luxury
managed rooms in Mexico, respectively.
        We have achieved a leadership position by implementing strategies and following opportunities
that have allowed us to grow consistently, with a diversified and balanced portfolio of owned, leased,
managed and franchised hotels, in both urban and coastal destinations.
        As part of our corporate strategy, we have continued to focus on our core strategic markets and
strengthening of our overall company risk profile. We believe that our ongoing shift to a more asset-light
business model, in combination with our leading position in the Mexican market, enhances our ability to
become more resilient to industry cycles while also providing us with flexibility to take advantage of future
growth opportunities.
         We also operate a vacation club business through Fiesta Americana Vacation Club (FAVC).
FAVC markets and sells memberships that grant a 40-year, point-based right to use vacation club resorts
that we own and operate in resort destinations in Mexico, including Los Cabos, Puerto Vallarta, Cancún,
Acapulco, Kohunlich and Cozumel, as well as other affiliated properties around the world. We also offer a
vacation club product called Kivac, which consists of the sale of points which may be redeemed within
five years of sale for accommodation in any of our hotels. Kivac was created to generate a new
distribution channel for our hotels’ unused inventory and targets a market for which FAVC membership
may be too expensive or long in duration. Kivac has proven to be very popular in the mid-scale market,
particularly in urban locations. In 2013, we launched a new product called The Front Door within our
Vacation Club business line which is similar to the FAVC product but targets a more exclusive and luxury
market. Collectively, our Vacation Club business represented 38.0% and 33.2% of our revenues for the
year ended December 31, 2015 and for the three months ended March 31, 2016, respectively.
        In addition, we have successfully developed management services and technology platforms to
support our hotel operating business, by establishing a number of related services businesses and units
to support our core business lines: Konexo, which provides call center and contact services for related



                                                     88
and unrelated businesses; Conectum, which offers business process outsourcing services, or shared
services, for diverse industries; and Ampersand, which previously managed our loyalty programs and
those of third parties, but is currently transitioning into managing only our loyalty programs. Collectively,
the Konexo, Conectum and Ampersand services businesses represented 3.3% and 1.7% of our revenues
for the year ended December 31, 2015 and for the three months ended March 31, 2016, respectively.
         Together with the strategic expansion of our hotel operations and vacation club business, we
have sought to build strong, well-positioned brand names and to foster customer recognition through
consistency of service. We believe we have a unique mix of strong hotel brands within the 3, 4 and 5-star
tiers, providing a range of options for our customers. We consider our brands to be one of our greatest
assets. We operate substantially all of our hotels in Mexico under the Fiesta Americana, Grand Fiesta
Americana, Fiesta Inn, One Hotels, Live Aqua, Gamma and The Explorean brand names.
        Our Hotel Brands
            •   Fiesta Americana and Grand Fiesta Americana are our flagship brands. We currently
                operate 24 hotels under these brands, including four hotels under the Fiesta Americana
                brand devoted to FAVC. Hotels operating under these brands offer deluxe, large scale,
                full-service accommodations to the high-end leisure traveler segment in coastal
                destinations and to the high-end business traveler segment in major urban centers. We
                currently operate six hotels under the Grand Fiesta Americana brand. The Fiesta
                Americana hotels are upper-scale class hotels, and the Grand Fiesta Americana hotels
                are luxury class hotels. According to the Mexican classification system, Fiesta
                Americana properties are five-star hotels and Grand Fiesta Americana properties are
                Gran Turismo hotels, which exceed the five-star category. The hotels range from
                approximately 130 to 650 rooms. The Fiesta Americana and Grand Fiesta Americana
                brands represented, as of March 31, 2016, 29.4% of our total hotel rooms.
                Approximately 32.2% of the hotels in our development pipeline will be operated under the
                Fiesta Americana and Grand Fiesta Americana brands, including hotels under the Fiesta
                Americana brand devoted to FAVC. We have redesigned our Fiesta Americana and
                Grand Fiesta Americana concept logo and décor and have begun remodeling our hotels
                to reflect the updated look.
            •   Fiesta Inn hotels are middle-scale class hotels offering modern, comfortable
                accommodations and efficient service primarily to the domestic and regional business
                traveler segment. We position our Fiesta Inn properties as business class hotels.
                According to the Mexican classification system, Fiesta Inn properties are four-star hotels.
                We currently operate 64 hotels in Mexico under the Fiesta Inn brand including two
                extended-stay Fiesta Inn LOFT hotels, and these hotels are normally located in small,
                mid-size or main urban destinations or suburbs of major urban areas. Fiesta Inn hotels
                compete primarily with other moderately priced Mexican and international chains, as well
                as with moderately priced Mexican independent hotels. The hotels range from
                approximately 40 to 250 rooms. The Fiesta Inn brand represented, as of March 31, 2016,
                39.0% of our total hotel rooms. Approximately 31.2% of the hotels in our development
                pipeline will be operated under the Fiesta Inn brand.
            •   One Hotels is an innovative chain of economy class hotels in Mexico that offers guests a
                modernly designed and comfortable accommodation at an affordable rate. The warm
                atmosphere, efficient service and functional design is ideal for business travelers who
                desire a convenient location and restful accommodations at an accessible price.
                According to the Mexican classification system, One Hotels properties are three-star
                hotels. One Hotels compete primarily with other economy class independent hotels. We
                currently operate 39 hotels under the One Hotels brand. The hotels range from
                approximately 60 to 140 rooms. The One Hotels brand represented, as of March 31,
                2016, 20.8% of our total hotel rooms. Approximately 28.7% of the hotels in our
                development pipeline will be operated under the One Hotels brand.




                                                     89
            •   Live Aqua is an upscale, luxury, lifestyle resort hotel brand. The Live Aqua concept
                seeks to create a memorable experience through pampering details–including fine dining,
                aromatic scents, spirit-renewing sanctuaries and comfortable settings–and superior
                service. According to the Mexican classification system, Live Aqua properties are lifestyle
                hotels. We have three Live Aqua hotels, the 371-room Live Aqua hotel in Cancún, the
                135-room Live Aqua in the exclusive business district of Bosques de las Lomas in Mexico
                City and the 60-room LAT20 by Live Aqua hotel in Playa del Carmen, which opened in
                November 2015. In 2015, we entered into an exclusive-license contract for use of the
                Live Aqua brand in the United States. As a result of this alliance, we expect to receive
                income from royalties and other related services from the hotels to be developed in the
                United States. The Live Aqua brand represented, as of March 31, 2016, 2.4% of our total
                hotel room inventory. Approximately 6.0% of the hotels in our development pipeline will
                be operated under the Live Aqua brand.
            •   Gamma is a new brand which targets independent hotel owners and is based on a
                franchise model. According to the Mexican classification system, Gamma properties are
                four-star hotels. The hotel owners have two options under this brand: (i) an operating
                plan and license under which we assume hotel operations on their behalf, or (ii) a pure
                franchise model under which they maintain their own operation but we offer them access
                to the distribution and marketing systems of our Fiesta Americana and Fiesta Inn brands.
                As of March 31, 2016, ten hotels operated under our Gamma brand, representing 6.2%
                of our total hotel rooms. Currently, none of the hotels in our development pipeline will be
                operated under the Gamma brand.
            •   The Explorean is a brand directed at international and domestic tourists with a focus on
                adventures accessible to a wide range of people. According to the Mexican classification
                system, The Explorean properties are five-star hotels. We have two Explorean hotels,
                one in Cozumel and one in Kohunlich, ranging from 40 to 56 rooms. The Explorean brand
                represented, as of March 31, 2016, 0.4% of our total hotel room inventory.
•   Our ongoing growth will be driven by increasing the number of properties managed and franchised
    under our brand portfolio. This strategy means allocating capital expenditure to certain selected
    expansion projects and focusing on investing in the maintenance of already existing properties. In
    particular, as of the date of this offering memorandum, we plan to expand in Mexico by operating and
    franchising 33 additional hotels with 4,851 rooms. This will represent an approximately 20.4%
    increase in the number of rooms we offer, with 63.1% of the new rooms corresponding to our
    economy and business (middle-scale) brands. Of these hotels, two will operate as Live Aqua, one as
    Grand Fiesta Americana, four under the Fiesta Americana brand, one as FAVC, one as The Front
    Door (which is being rebranded as Live Aqua Residence Club), 12 under the Fiesta Inn brand
    (including one Fiesta Inn LOFT), and 12 under the One Hotels brand. In keeping with our strategy of
    operating a greater number of hotels with minimum investment, we plan to be the operator or
    franchiser of these new rooms through franchise, management and lease agreements with third party
    investors. We estimate that total investment for this development plan in Mexico will be approximately
    U.S.$442.4 million, of which we estimate that we will contribute approximately 25.8% or U.S.$114.2
    million, mainly from our cash flow generation and by contributing in kind certain of our existing owned
    real estate assets to the development of such plan, with the remainder contributed by the owners of
    the hotels we will manage and franchise. We anticipate opening these hotels within 2.5 years
    following the date of this offering memorandum.
         Since 2013, we have made significant investments in development projects for the enhancement
of our Fiesta Americana and Grand Fiesta Americana brands. We have also designed and launched
Fiesta Inn LOFT for extended-stay travelers, and designed Fiesta Inn Express, which offers a more
limited range of services and infrastructure than Fiesta Inn but maintains the same quality standards with
respect to rooms and common areas. We have also developed the design and implemented the
necessary infrastructure to provide hotel franchise services under our brands, including the Gamma
brand.




                                                    90
       Our Other Brands
           •   Fiesta Rewards is our hotels’ customer loyalty program. Launched in 1989, Fiesta
               Rewards was the first customer loyalty program developed in Mexico, and today we
               believe it is Mexico’s largest hotel loyalty program based on redemption numbers. The
               program is point-based and offers points for every hotel stay. Points can, in turn, be
               redeemed for a variety of rewards including free hotel stays, airline tickets, car rentals,
               electronics, clothing and fashion products. Fiesta Rewards has established partnerships
               with American Airlines AAdvantage, Avis, Accor Le Club, American Express, Thanks
               Again, Aeroméxico Club Premier, Iberia Plus and other programs and companies for use
               in our Fiesta Rewards program. As of March 31, 2016, our Fiesta Rewards program had
               approximately 1.7 million members. Fiesta Rewards represents approximately 38.0% of
               the occupancy of all of our hotels and is one of the most important competitive
               advantages of our urban hotels. Fiesta Rewards also has a co-branded credit card with
               Banco Santander, the Santander-Fiesta Rewards Card, which has approximately
               134,000 cardholders in Mexico and also generates points to be redeemed in our
               program.
           •   Fiesta Americana Vacation Club is the vacation club business within our hospitality
               portfolio. FAVC members receive an annual allocation of points that they can redeem
               over a period of 40 years to stay at our FAVC properties, any of our managed hotels, and
               through FAVC’s affiliation with Resorts Condominium International (RCI), Hilton Hotels
               Corp. and any RCI-affiliated or Hilton Grand Vacation Club Resort throughout the world.
               As of March 31, 2016, FAVC had over 31,000 members.
           •   Kivac is a vacation club product that we launched in 2010 and consists of the sale of
               points that may be redeemed within five years of sale for accommodations in any of our
               hotels or in certain other hotels. As of March 31, 2016, Kivac had over 26,000 members.
           •   The Front Door, to be rebranded as Live Aqua Residence Club beginning on June 1,
               2016, is our new luxury vacation club business. The Front Door provides similar services
               to FAVC with a particular focus on a more exclusive and luxury market. The Front Door
               members can redeem their annual allocation of points to stay at our apartments in Marina
               Vallarta and Cozumel dedicated to this business line, as well as other upscale properties
               managed by us and other properties affiliated with The Registry Collection throughout the
               world. As of March 31, 2016, The Front Door had over 400 members.
       We have also developed synergistic services businesses which, as of March 31, 2016,
represented 1.7% of our revenues and include:
           •   Konexo, which provides call center and customer care solutions for related and
               unrelated businesses;
           •   Conectum, which offers business process outsourcing services, or back office shared
               services, for diverse industries; and
           •   Ampersand, which previously managed our loyalty programs and those of third parties,
               but is currently transitioning into managing only our loyalty programs.
Our Competitive Strengths
         Although we operate in a highly competitive environment, we believe that we have a number of
competitive strengths that differentiate us from our competitors and position us well in the market
segments in which we operate. We believe that the following are the key highlights of our competitive
position:
           •   Leading hotel operator in Mexico. We believe we are the leading operator of hotels in
               Mexico based on number of rooms, geographic coverage and market share. Our
               strength is a result of our diversified brand portfolio and investments. We operate hotels
               in Mexico City and in 60 other cities in Mexico. Our diverse portfolio allows us to obtain a
               better penetration in urban areas and offer our managed services to top regional hotels.


                                                   91
•   Unique mix of strong hotel brands and diversified portfolio of properties. We
    believe that we benefit from strong brand recognition in Mexico. Our brands are
    recognized as providing high-value accommodations in desirable locations. For example,
    50 of our properties received the Certificate of Excellence by TripAdvisor in 2015, and
    eight of these hotels are in TripAdvisor’s Hall of Fame, having received the Certificate of
    Excellence in each of the five years since the award program’s inauguration. According to
    Millward Brown Dynamic Tracking 2015, our Fiesta Americana and Fiesta Inn brands are
    within the top three hotel brands in Mexico in terms of brand consideration, which is an
    indicator based on the percentage of people who have expressed that a particular brand
    would be either their first choice or one that they would seriously consider for their next
    trip. Also, 61 of our hotels have received TripAdvisor GreenLeaders awards and in 2016,
    the Live Aqua Cancún received the Readers’ Choice Award from Condé Nast Traveler
    and the Grand Fiesta Americana Cancún was a silver winner in the Travvy Awards for
    best overall resort in Mexico. Our diversified brand portfolio targets a range of market
    segments throughout Mexico—including business and leisure travelers in urban
    destinations in upscale, moderately priced categories, and groups, conventions and
    leisure travelers in urban and coastal destinations. In addition to benefiting from Mexico’s
                       th
    position as the 9 leading destination in the world for tourism, our portfolio is positively
    impacted by the growth in foreign direct investment in urban areas of Mexico related to
    diverse economic sectors such as automotive, energy and manufacturing.
•   Highly scalable and efficient operating model. In recent years we have been able to
    expand our hotel business mainly by increasing our operation of hotels developed with
    investment capital provided by third parties. Our movement from a capital-intensive
    business model towards a service-focused business model has allowed us to significantly
    reduce our capital expenditures and reposition ourselves as an asset-light company with
    a highly scalable and efficient operating structure.
•   Proprietary state-of-the-art technological infrastructure. We have invested and
    continue to invest in technology platforms to achieve greater operating efficiencies,
    enhanced distribution capabilities and revenue management tools. We believe that these
    investments have made our distribution network competitive with most international hotel
    companies, which has given us a strong advantage over our Mexican competitors. We
    have reduced our distribution costs by centralizing and consolidating the room inventory
    data from our entire hotel portfolio into a repository solution called the Inventario Central
    Posadas (Posadas Central Inventory), or ICP, which allows us easy access to revenue
    management and inventory data. We have enhanced our profitability through real-time
    dynamic pricing of our room inventory. Of the total reservations at our managed hotels,
    77% are received through our voice, web-based solutions and group-oriented channels at
    a very competitive average cost, while 23% are received through indirect third-party
    channels, including wholesalers, global distribution systems and online travel agencies,
    allowing us to maximize revenue. We have also achieved cost reductions by centralizing
    and consolidating accounting, payroll, strategic sourcing and receivables processing. We
    believe we are one of the few hotel operators in the industry that has developed such
    systems. We have created our systems in partnership with technology industry leaders
    such as Oracle, Savvis, TravelClick and VFM Leonardo, among others.
•   Preeminent vacation club offering significant synergies. Our Vacation Club business
    enhances the profitability of our existing core hotel portfolio by leveraging synergies
    stemming from both businesses. Since its inception, FAVC has provided us with a new
    market niche, replicating the business model followed by major global chains. FAVC has
    allowed us to reduce cyclicality in our coastal properties due to its flexibility and create a
    loyal client base that values high-end service. We also extended the vacation club
    concept with the implementation of Kivac, which has generated a new distribution
    channel for our hotels’ unused inventory and targets a market for which FAVC
    membership may be too expensive or long in duration. In addition, since 2013 with the
    launch of our new product called The Front Door (which is being rebranded as Live Aqua



                                         92
                Residence Club) within our Vacation Club business line, we provide a similar service to
                the FAVC product but with a particular focus on a more exclusive and luxury market.
            •   Mexico’s largest loyalty program based on redemption numbers and a portfolio of
                value-creating ancillary service-based businesses. We have created a loyal
                customer base through our Fiesta Rewards guest loyalty program. As of March 31,
                2016, our Fiesta Rewards program had approximately 1.7 million members. Fiesta
                Rewards has established partnerships with American Airlines AAdvantage, Avis, Accor
                Le Club, American Express, Thanks Again, Aeroméxico Club Premier, Iberia Plus and
                other programs and companies for use in our Fiesta Rewards program. Our Fiesta
                Rewards program allows us to retain valued customers while generating stable cash
                flows during cyclical periods. Fiesta Rewards also has a co-branded credit card with
                Banco Santander, the Santander-Fiesta Rewards Card, which has over 134,000
                cardholders in Mexico and also generates points to be redeemed in our program. We
                have capitalized on our position as the leading hotel operator in Mexico by marketing our
                management skills and technology platform, originally developed to support our hotel
                operating business, and establishing a number of value-creating services businesses that
                set us apart from the industry.
            •   Consistent market outperformer. The effectiveness of our overall strategy and our
                business model, as well as the success of our distribution and loyalty programs, is
                supported by our consistent outperformance of our competitors in the Mexican market, as
                reflected in our occupancy and RevPAR data. The average occupancy at our managed
                hotels has consistently been higher than occupancy at hotels managed by our
                competitors in Mexico. For the twelve month period ended March 31, 2016, the
                occupancy average at our managed hotels, excluding new hotel openings during such
                twelve month period, was 67%, compared to 60% for the Mexican market’s average.
                Historically, the RevPAR penetration average at our managed properties has been over
                100% and, for the three month period ended March 31, 2016, our RevPAR penetration
                average was 120%.
            •   Highly respected and influential management team. Our management team has
                extensive industry expertise and is well respected among peers and investors. With some
                of the lowest turnover rates in the industry, our management team has been able to
                reduce organizational volatility, thereby facilitating our pursuit of longer-term goals and
                objectives. Our Chairman, Pablo Azcárraga Andrade, and our Chief Executive Officer,
                José Carlos Azcárraga Andrade, have been with us 31 years and 25 years, respectively,
                and members of our top management team collectively have an average of more than 19
                years of industry experience.
Our Business Strategy
         Our long-term strategic plan is to continue to be the leading hotel operator and a major tourism-
related services provider in Mexico.
         We focus on maximizing shareholder value and return on capital by optimizing the use of our
talent, third party management contracts, real estate and advanced proprietary operating systems. As
part of our portfolio management strategy, we continuously examine our business units to address issues
of market dynamics, demand, supply and competition. Several of our key strategies are highlighted
below:
            •   Continue to consolidate and expand our hotel network through the addition of
                long-term hotel management and franchise contracts. An important part of our
                growth strategy is to utilize our strong brand recognition, solid reputation, centralized
                resources and extensive management experience to enter into additional hotel
                management and franchise contracts and, by extension, reduce our investment in owned
                hotels. We believe that we are an attractive option for hotel owners who seek profitable
                investments with a stable revenue stream. Management and franchise contracts with
                hotels owned by third parties, including hotels that we lease from third parties, help


                                                   93
    improve our profitability by generating revenue streams with minimal additional capital
    investment by us. As of the date of this offering memorandum, our development pipeline
    is comprised of plans to operate 33 new hotels with 4,851 rooms, which will represent an
    increase of approximately 20.4% in our total number of rooms. Approximately 63.1% of
    these hotels are Fiesta Inn, Fiesta Inn LOFT and One Hotels, which are our economy
    and budget-brand tiers. We estimate our pipeline hotels to represent a total investment
    of U.S.$442.4 million, of which we estimate that we will contribute approximately 25.8%
    or U.S.$114.2 million, mainly from our cash flow generation and by contributing in kind
    certain of our existing owned real estate assets to the development of such plan, with the
    remainder contributed by the owners of the hotels we will manage and franchise. We
    anticipate opening these hotels within approximately 30 months following the date of this
    offering memorandum.
•   Continue to increase capital efficiency. The continued shift to an asset-light model and
    a focus on our Mexican operations has resulted in reduced operational risk, as well as
    diminished capital expenditure requirements. Furthermore, the sale in 2012 of our South
    American hotel operations for approximately U.S.$278 million, in combination with the
    sale to FibraHotel of 14 of our hotels in 2013 and the sale of two additional hotels in 2014
    by a subsidiary in which we held a non-controlling interest and the sale of our corporate
    headquarters, have provided us with significant proceeds that have helped to reduce our
    overall indebtedness. In addition, in April 2016, we entered into an agreement with
    FibraHotel pursuant to which we will lease the Fiesta Americana Hermosillo to FibraHotel
    for a three-year period and invest the total amount of the rent for this period into
    remodeling and improvements of the property. After the end of the lease, subject to
    certain terms and conditions, FibraHotel will acquire the property in 2020. We are also
    negotiating an agreement to sell the Fiesta Inn Monterrey Valle to FibraHotel which we
    expect to enter into in June 2016. In addition, we are also currently in the process of
    reprofiling our debt to reschedule existing maturities, which we believe will contribute to
    improving our capital structure. We expect that these initiatives will provide additional
    financial flexibility to achieve our strategy. See “Summary — Recent Developments.”
•   Continue to enhance our operational efficiency. We are in the process of
    implementing an internal corporate restructuring in order to reorganize the number of our
    subsidiaries and the functions that some of them perform in our structure in order to
    reduce intercompany operations and streamline our organizational structure. We expect
    that this corporate restructuring will allow us to reduce the number of our subsidiaries to
    37 from 55, consolidate our hotel operations and payroll activities in a single entity,
    eliminate 70% of our intercompany transactions and close 273 bank accounts. This
    corporate restructuring is expected to be completed in 2017. As of the date of this
    offering memorandum, we have merged several of our subsidiaries into other
    subsidiaries or into the Company, and are in the process of completing three more such
    mergers. In addition, we are implementing strategies and making investments aimed at
    improving our operational procedures and reducing our operating costs, including
    redirecting bookings at our properties from third-party intermediaries which charge us
    booking fees to our own reservation systems and reducing headcount to avoid
    redundancy.
•   Continue to penetrate the moderately priced business traveler segment. We have
    successfully addressed the needs of the domestic and regional business traveler, and
    our success has allowed us to diversify our operations. We believe the domestic
    business travel segment continues to be underserved and represents attractive growth
    opportunities to us going forward. In 1993 we began to serve this segment in Mexico
    through our Fiesta Inn brand. Building on the success of Fiesta Inn, in 2007 we launched
    One Hotels, an economy class line in Mexico, catering to business travelers with lower
    budgets. We currently operate 64 Fiesta Inns and 39 One Hotels serving this market
    segment. We plan to continue expanding our Fiesta Inn brand in the moderately priced
    business traveler segment and to expand our One Hotels economy class budget brand,



                                        94
                primarily through third-party owned hotels, by opening 12 Fiesta Inn hotels (including one
                Fiesta Inn LOFT hotel) and 12 One Hotels within approximately 30 months following the
                date of this offering memorandum.
            •   Continue to develop our vacation club portfolio. We have been able to build a solid
                and profitable vacation club business by leveraging our brand positioning. Our strong
                brand names have helped us significantly increase our customer base while providing our
                customers a unique experience with unparalleled flexibility. We believe that the vacation
                club business enhances the profitability of our existing asset base by leveraging
                synergies stemming from both businesses. We will selectively continue converting,
                developing and constructing resorts or new vacation club units in appealing destinations.
                We currently have seven vacation club resorts in Acapulco, Los Cabos, Cancún,
                Kohunlich, Puerto Vallarta and Cozumel, and we will soon have another in Los Cabos. A
                recent example of our innovative approach to the vacation club business is our new
                product called The Front Door (which is being rebranded as Live Aqua Residence Club)
                within our Vacation Club which was launched in 2013 and complements our previously
                existing FAVC and Kivac vacation club programs.
            •   Enhance the guest experience. We believe our knowledge of our guests’ preferences
                and patterns grants us a significant competitive advantage. For more than 20 years, we
                have consistently invested in customer loyalty programs, such as our Fiesta Rewards
                program, thereby creating repeat users of our hotels. Using the knowledge of our
                customers as a foundation, we have built a detailed database that feeds into our
                proprietary guest experience customer relationship management system, which allows us
                to anticipate each customer's pre-stay, in-stay and post-stay needs, preferences and
                desires. This platform allows us to tailor our services to each guest based on experience,
                thus creating a unique bond with our customers. In addition, we closely monitor and
                study global trends in the hotel industry in terms of customer experience and seek to
                improve our customers’ stay at our properties by providing unique attention to their needs
                through our selection of furniture, beds, pillows, services and food and beverages. We
                have also implemented a service culture which is focused on creating out of the ordinary
                and spontaneous experiences with bespoke elements and details based on each client.
            •   Use our leading sector and geographical expertise to selectively develop and
                acquire strategic assets. Our management team possesses significant market
                knowledge, an average of 19 years of industry experience and strong relationships within
                the Mexican real estate and hospitality sector. We intend to identify opportunistically
                unique asset acquisitions that are consistent with our overall risk profile, as well as our
                asset-light strategy. We have successfully partnered with FibraHotel, Fibra Danhos and
                FibraUno, three Mexican REITs whose stock trades on the Mexican Stock Exchange,
                with whom we have entered into real estate sale and purchase, leasing and hotel
                management transactions in connection with our business, and we have successfully
                renewed our management contracts with many of the owners of the hotels we have
                operated throughout the years.
            •   Focus on strengthening the core capabilities of our services platforms. We have
                successfully designed and developed specific services platforms, such as Ampersand,
                Konexo and Conectum, to support our day-to-day operations and, to a lesser extent, offer
                our management experience to third parties. We intend to continue strengthening and
                developing these services platforms through marginal investments.
History
       Grupo Posadas, S.A.B. de C.V. was incorporated under the laws of Mexico on April 18, 1967
when Gastón Azcárraga Tamayo formed Promotora Mexicana de Hoteles, S.A., or Promotora, to build
and operate a flagship hotel in Mexico City. This hotel, which first opened as the Fiesta Palace in 1970, is
known today as the Fiesta Americana Reforma.




                                                    95
         In 1979, Promotora opened the first hotel under the Fiesta Americana brand name in Puerto
Vallarta through a joint venture company called Operadora Mexicana de Hoteles, S.A. de C.V., or
Operadora. Americana Hotels Inc., a subsidiary of American Airlines, was Promotora’s joint venture
partner in Operadora.
         In 1982, Promotora acquired a 50% equity interest in Posadas de México, S.A. de C.V., or
Posadas de México, then a franchisee of a Holiday Inn hotel in Mexico. At the time of the acquisition,
Promotora was the largest hotel operator in Mexico, with a portfolio consisting of 12 Fiesta Americana
hotels and one Holiday Inn hotel. Throughout the 1980s, Promotora focused on the development of the
Fiesta Americana brand, although it continued as a Holiday Inn franchisee in a few select locations. In
1983, Promotora acquired Americana Hotels’ interest in Operadora and in 1990 it acquired the other 50%
interest in Posadas de México.
         In 1989, we launched our Fiesta Rewards customer loyalty program to help foster a loyal
customer base. The point-based program offers a certain number of points for every U.S. dollar spent on
stays and consumption in our hotels and in certain subscriber restaurants, bars and spas, among other
places. The points can, in turn, be redeemed for a variety of attractive rewards including, among other
things, free hotel stays, airline reservations, car rentals and fashion products.
        In 1992, Promotora changed its corporate name to Grupo Posadas, S.A.B. de C.V and we listed
our common stock on the Mexican Stock Exchange. In 1993, we began to target the business traveler
market through our Fiesta Inn brand when we opened our first Fiesta Inn hotel in an urban location.
        In 1998, we started our expansion into South America with the acquisition of the Caesar Park
chain. As part of the acquisition we added hotels in Brazil and Argentina to our portfolio and also
obtained the rights to the Caesar Park brand name throughout Latin America (except that the Caesar
Park hotel then operating in Panama City, Panama was not a part of this acquisition).
       We entered the vacation club business in 1999 when we opened our first Fiesta Americana
Vacation Club resort in Los Cabos. We have since added other vacation club resorts in Cancún,
Acapulco, Puerto Vallarta, Kohunlich and recently in Cozumel.
         In 2001, we opened our first Caesar Business hotel in Brazil and, in 2007, we opened our first
hotel in Chile, the Caesar Business hotel in Santiago. Also, in 2001, we started to deploy our Inventario
Central Posadas (Posadas Central Inventory), or ICP, to consolidate room inventory data from our hotel
portfolio into a single database. In 2003, we began the implementation of Conectum, our business
process outsourcing service company.
        In 2005, we launched Live Aqua, a deluxe, lifestyle brand with a resort in Cancún. In 2007 we
opened our first One Hotels, a 3-star tier budget brand catering to the business traveler who looks for
affordable, well-located accommodations. We also launched our Konexo and Ampersand businesses in
2007.
       In 2006, and in order to comply with the new provisions of the Mexican Securities Market Law we
adopted the form of “sociedad anónima bursátil” or S.A.B., therefore changing our corporate name to
Grupo Posadas, S.A.B. de C.V.
        In 2010, we acquired ownership of real property located on the Riviera Maya, with plans to
develop a tourism complex including resorts providing hotel services, vacation club and other types of
vacation properties. Likewise, we launched our product Kivac, which allows buyers to purchase points
redeemable within five years of purchase for lodging at any of our hotels. In 2010, we also initiated
conversion of three of our coastal hotels to the all-inclusive category, which we completed in 2011. We
also purchased ownership of the shares of one of our subsidiaries (Sudamérica en Fiesta S.A.) that was
owned by IFC.
        On August 13, 2010, we sold our participation in Nuevo Grupo Aeronáutico, S.A. de C.V.
(formerly Grupo Mexicana de Aviación, S.A. de C.V., or Mexicana) to third parties, for a nominal amount.
Before the sale and as of December 31, 2009, we held a 30.41% interest in Mexicana, accounting for
such investment under the equity method. As of December 31, 2008, our equity investment in Mexicana
was fully reserved and has had no material impact on the consolidated net income of the Company since
that date.


                                                   96
       In 2011, we entered into an alliance with Santander Bank to issue a co-branded credit card under
the shared brand Santander-Fiesta Rewards, the brand name under which our client loyalty program
operates. In this same year, the Fiesta Inn concept was refreshed and re-launched.
       In 2011, José Carlos Azcárraga Andrade was appointed Chief Executive Officer, and our
shareholders voted to unify Series L shares (shares with limited vote) into Series “A”. As a result, all
shareholders hold the same rights.
        In 2011 and 2012, we purchased 100% of the shares of the owner of one of our hotels in Cancún,
Fiesta America Condesa Cancún.
        On July 16, 2012, we announced that we had reached an agreement with Accor, S.A. (Accor),
one of the world’s leading hotel management companies, to sell our operations in South America, and the
sale to Accor was consummated on October 10, 2012. In order to guarantee funding of post-closing
purchase price adjustments and indemnification obligations typical in this type of transaction, an escrow
account was established with a portion of the purchase price, with Accor as the primary beneficiary, with
an original balance of U.S.$32.0 million. These funds were to be released to us on various dates from
October 2014 through 2019, upon satisfaction of certain conditions established in the sale contract. In
September 2014, we entered into an agreement with Accor to fully terminate the escrow guarantee
account related to the sale of the hotel operation business in South America and as a result we recovered
U.S.$16.6 million.
        In 2012, we decided to operate the Fiesta Americana hotel located in Cozumel, Quintana Roo,
within our Vacation Club business and, during 2013, we started converting this hotel into a Vacation Club
property.
        Given the increasing popularity of the “all-inclusive” format, in 2013 we converted our Grand
Fiesta Americana hotel in Los Cabos and our Fiesta Americana hotel in Cozumel to this format.
        In 2013 we launched a new product called The Front Door (which is being rebranded as Live
Aqua Residence Club) within our Vacation Club business line which is similar to the Fiesta Americana
Vacation Club (FAVC) product but focuses on a more exclusive and luxury market. In connection with
this product, in April 2013 we acquired 16 apartments in Puerto Vallarta with a total investment of
U.S.$5.6 million, which have been devoted to the Private Residence Club under The Front Door brand
and which have been available since August 2013. We estimate the average sale per customer to be of
approximately U.S.$135,000 versus the current average sale per customer of U.S.$20,000 of the current
program.
        In the fourth quarter of 2013, we purchased the plots of land for the construction of two Grand
Fiesta Americana Villas projects in Nuevo Vallarta, Nayarit, and Acapulco Diamante, for U.S.$12.7 million
and U.S.$9.9 million, respectively. We expect to complete the development of the Acapulco Diamante
project by December 2017. We currently do not have a definitive project in place for Nuevo Vallarta,
Nayarit and we continue to explore different options in connection with such project.
         In December 2013, we sold to third parties certain non-strategic real estate assets for a total
consideration of Ps.680 million; including a parcel of land called “Chemuyil” in the State of Quintana Roo,
Mexico. Such parcel of land was sold free from any lien, including any lien for the benefit of the Institute
for the Administration of the State Patrimony of the State of Quintana Roo or IPAE (Instituto para la
Administración del Patrimonio Estatal del Estado de Quintana Roo), since the IPAE exercised its rights to
collect liquidated damages in the amount of U.S.$10 million against our subsidiary Promotora Ecotur,
S.A. de C.V., attributable to an alleged breach of construction agreements in such parcel of land, by
foreclosing on certain shares of Grupo Posadas, S.A.B. de .C.V. which were placed in a guarantee trust.
After the foreclosure no obligations were outstanding with the IPAE.
       In 2013, we sold 14 of our hotels which were operated under the Fiesta Inn and One brands to
FibraHotel, a Mexican hotel real estate investment trust, or REIT.
       In 2013, we also sold to FibraUno our corporate offices located in the Lomas de Chapultepec
neighborhood of Mexico City for a price of U.S.$15 million and leased them from FibraUno for a period of
10 years. In 2014, we terminated the lease agreement for the corporate offices located in Lomas de



                                                    97
Chapultepec and entered into an agreement with FibraUno whereby we leased our current corporate
offices located in the Santa Fe neighborhood of Mexico City for a term of 10 years.
         During 2013, we launched our new hotel brand, Gamma, through which we intend to develop a
marketing system for our services based on franchise arrangements. Gamma was created to target
business opportunities we recognize exist with respect to good quality hotels located in Mexico which are
already in the market but may lack access to state-of-the-art systems and distribution channels to
compete with major hotel operators. Most of these arrangements will allow the hotel owner or titleholder
to continue operating the hotel, improve its quality standards and at the same time leverage the
infrastructure and market strengths of Grupo Posadas, while preserving the hotel’s distinctive local
touches.
        During 2014, we opened 18 new hotels, including four conversions to the Gamma brand,
representing a total of 2,296 additional rooms. The new hotels are the Fiesta Inn Mérida, One Mexico
City Alameda, One Silao, One Guadalajara Periferico Vallarta, One La Paz, One Villahermosa Center,
One Vallarta Airport, Gamma Fiesta Inn Morelia Belo, One Queretaro South Downtown, One Cancún
Centro, Gamma Fiesta Inn Ciudad Obregon, Gamma Fiesta Inn Leon, Gamma Fiesta Inn Tijuana, Fiesta
Inn Queretaro, Centro Sur, The Explorean Cozumel, One Monclova, One Leon Poliforum and Fiesta Inn
Plaza Central.
        During 2014, we allocated our hotel in Cozumel to the Vacation Club business.
        In 2014, we announced our intention to carry out an internal corporate restructuring in order to
reorganize the number of our subsidiaries and the functions that some of them perform in our structure
and to transform the Company into a pure stock holding company and therefore transfer, to the extent
possible, our hotel management, brand licensing and franchising businesses to one or more of our
subsidiaries which will, as a result of such transfer, receive the revenues from such operations. This
would mean that we, as a holding company, would not directly own operational assets. This corporate
restructuring was expected to be completed in 2017. As the result of new analyses, we are continuing our
process of internal corporate restructuring to make our business more efficient, but we no longer intend to
transform the Company into a pure stock holding company, since it is going to continue operations and
may directly own operational assets.
       In 2014, a company in which we have a non-controlling interest of 25% sold two hotels to
FibraHotel.
        In September 2014, our hotels on the Baja California peninsula suffered significant damage.
Those hotels have insurance coverage for property damage and consequential losses, and we filed
claims under those policies in the amount of U.S.$14.6 million. The claims are still being negotiated, and
we have received U.S.$4.1 million as an advance payment.
         In 2013 and 2014, we invested in or refurbished the following owned or leased hotels: Fiesta Inn
Monterrey Valle, Fiesta Americana Mérida, Fiesta Americana Guadalajara, Fiesta Inn Aeropuerto Ciudad
de México in Mexico City, Fiesta Inn Centro Histórico in Mexico City and Fiesta Inn Cuautitlán, which is
currently being remodeled.
        On June 30, 2015, we issued U.S.$350.0 million of Existing Notes and conducted a concurrent
tender offer for the U.S.$310.0 million principal amount outstanding of our 7.875% Senior Notes due
2017. The purchase price in the tender offer was U.S.$1,060 for each U.S.$1,000 of the 2017 Notes.
         We used a portion of the proceeds from the offering to purchase U.S.$271.7 million of 2017
Notes, or 87.63% of the principal amount outstanding, in the tender offer, with the remaining principal
amount outstanding of the 2017 Notes decreasing to U.S.$38.3 million. The Existing Notes pay interest
at a rate of 7.875% per year semiannually on June 30 and December 30 each year, and mature on June
30, 2022.
       The remaining proceeds from the offering of the Existing Notes were used to repay in full the
U.S.$47.2 million principal amount outstanding under our Euro commercial paper program at maturity in
November 2015.




                                                    98
        Our tender offer expenses of Ps.339.5 million, which include U.S.$16.1 million of premium for the
purchase of 2017 Notes in the tender offer, are being amortized based on the life of the issuance of the
Existing Notes using the effective interest rate method.
        In 2015, we launched two new hotel brands: LAT20 by Live Aqua, a brand designed under an
innovative and intimate concept, and Fiesta Inn LOFT, a hotel industry product designed for long stays.
       During 2015, we opened 14 new hotels, including 5 conversions to the Gamma brand,
representing a net total of 2,165 additional rooms: One Cuernavaca, Gamma El Castellano Merida,
Gamma Monterrey Gran Hotel Ancira, One Villahermosa Tabasco 2000, Gamma Ixtapa, One Celaya,
One Gran Sur, Gamma Xalapa Nubara, Fiesta Inn LOFT Irapuato, Grand Fiesta Americana All Inclusive
Parks Vallarta, Fiesta Inn LOFT Cd. Del Carmen, Gamma Campeche Malecon, LAT 20 by Live Aqua in
Playa del Carmen and Fiesta Inn Villahermosa.
        In 2015, we entered into an exclusive license contract for use of the Live Aqua brand in the
United States. As a result of this alliance we expect to receive income from royalties and other related
services from the hotels to be developed in the United States.
        During 2016, we have opened five hotels representing a total of 754 rooms, of which two are One
Hotels, one is a Fiesta Inn and one is a Grand Fiesta Americana, all under operating contracts. In addition
to these, an existing Fiesta Inn hotel in Pachuca was shifted to the Gamma brand.
Principal Business Activities
        We believe that we are the leading operator of hotels in Mexico based on number of rooms,
geographic coverage and market share. We distinguish ourselves from other operators by offering hotel
owners superior management and franchise services including among other things, centralized
reservation and distribution networks, marketing programs, revenue-optimization tools, data gathering
and customer relationship management capabilities, web-based guest satisfaction systems, robust
customer loyalty programs and strong, well-defined brands.
          In Mexico we operate 144 hotels (including seven vacation club resorts), which includes two
Fiesta Inn LOFT hotels which are extended stay hotels physically attached to two Fiesta Inn hotels, with a
total of 23,626 rooms (including our vacation club units). In addition, we own one hotel with 200 rooms in
Texas, for a total of 23,826 rooms. Of our 145 hotels, 16 are owned, 14 are leased, 109 are managed-
only hotels and six are franchised. Our hotels are located in a mix of urban and coastal destinations
serving both leisure and business travelers across Mexico, with approximately 80% of our rooms located
in urban destinations and 20% in coastal destinations.




                                                    99
      The following table sets forth the number of our hotels as of the date of this offering
memorandum:


                                           Mexico               USA              Total
         Brand             Class
                                       Hotels Rooms       Hotels   Rooms    Hotels   Rooms

Fiesta Americana         Upper-Scale    14      3,825                        14       3,825
Grand Fiesta Americana     Luxury        6      1,873                         6       1,873
FA Vacation Club           Luxury        7      1,613                         7       1,613
                          Medium-
Fiesta Inn                              62      9,083                        62       9,083
                           Scale
                          Medium-
Fiesta Inn LOFT                         2           164                       2       164
                           Scale
Live Aqua                  Luxury        3       566                          3        566
One Hotels                Economy       39      4,840                        39       4,840
                          Medium-
Gamma Hotels                            10      1,449                        10       1,449
                           Scale
               (1)
Other brands                 —          1           213     1      200        2       413
Total                                   144     23,626      1      200       145     23,826
% of Total                                       99%               1%                100%




                                              100
The following map shows the number and brand of the hotels we operate as of May 16, 2016:




                                        101
        Hotel Business
         Owned hotels. We have 16 owned hotels in our portfolio representing 4,593 rooms and 19.3% of
our total rooms. As of March 31, 2016, we had 17 owned hotels in our portfolio representing 4,814 rooms
and 20.6% of our total rooms. We continuously refurbish our owned hotels in order to maintain consistent
quality standards. Our owned hotels contributed approximately 30.77% and 31.27% of our revenues
during the three months ended March 31, 2015 and during the three months ended March 31, 2016,
respectively.
        Leased hotels. We have 14 leased hotels in our portfolio representing approximately 2,395
rooms and 10.1% of our total rooms. As of March 31, 2016, we had 14 leased hotels in our portfolio
representing 2,395 rooms and 10.3% of our total rooms. Our lease contracts typically have a 10-year
term and are generally renewable for an additional five-year period. The lease payments we are required
to make under these agreements are generally equal to the greater of the specified fixed lease amount
and a specified percentage of the hotel’s total revenues. Certain of the lease agreements also require us
to invest a percentage of the hotel’s gross revenues to apply toward the costs of maintenance and
refurbishing. As of March 31, 2016, the average remaining term of our existing lease agreements was
approximately 5.3 years, not taking into account any extension rights we may choose to exercise. Our
leased hotels contributed approximately 19.81% and 22.61% of our revenues during the three months
ended March 31, 2015 and during the three months ended March 31, 2016, respectively.
         Managed hotels. We have 109 managed hotels in our portfolio (not including our owned and
leased hotels, all of which we also manage) representing approximately 15,937 rooms and 66.9% of our
total rooms. As of March 31, 2016, we had 105 managed hotels in our portfolio representing 15,214
rooms and 65.2% of our total rooms. We enter into management contracts with all of the hotels we
operate. Our management contracts are typically fifteen years in duration and are generally renewable
for an additional five-year period. The agreements provide us with authority over all necessary activities
for the operation of the hotels, including procuring food, beverages and other inventories, marketing the
hotels, establishing room rates, processing reservations and staffing the hotels (although we do not
directly employ the vast majority of the staff at any given hotel). Our management services include
branding, distribution, marketing, customer loyalty programs, standards, consulting, on-site selection and
research and development support. We receive fees pursuant to long-term management contracts for all
of the hotels we operate. Our management contracts provide for the payment of fees for our operation
based on certain specified criteria and the payment of expenses for the provision of services, and are
structured according to three different models (i) traditional, (ii) fixed fee and (iii) percentage of gross
operating profits. Our traditional management contracts typically involve (i) a base fee calculated as a
percentage of a hotel’s gross operating profit, (ii) a management fee calculated as a percentage of a
hotel’s total revenue, (iii) a brand fee calculated as a percentage of a hotel’s room revenue, (iv) several
variable charges for the provision of different services such as reservations, technology, procurement and
collections and (v) the payment of other expenses such as a common advertising fund, loyalty programs
and sales fees. Our fixed fee management contracts typically involve (i) a base fee calculated as a
percentage of a hotel’s gross operating profit, (ii) a management fee calculated as a percentage of a
hotel’s total revenue, (iii) a brand fee calculated as a percentage of a hotel’s room revenue, (iv) a single
fixed charge for the provision of different services such as reservations, technology, procurement,
collections and (v) the payment of other expenses such as a common advertising fund, loyalty programs
and sales fees. Our percentage of gross operating profits management contracts typically involve (i) a fee
calculated as a percentage of a hotel’s gross operating profit and (ii) the payment of other expenses such
as a common advertising fund, loyalty programs and sales fees. Revenues from hotel management may
also include payments we receive in connection with early termination of management contracts. As of
March 31, 2016, the fees we received pursuant to long-term management contracts for the hotels we
operate were divided as follows: (i) 47% traditional model, (ii) 11% fixed fee model and (iii) 42%
percentage of gross operating profits model. Moreover, these agreements generally require that the hotel
owners, or the owners of the leasehold interest in a hotel, as the case may be, invest a specified
percentage of annual revenues to refurbish and maintain the hotels in accordance with operating
standards we establish. As of March 31, 2016, the average remaining life of our existing management
agreements with third parties was 10.1 years. Our managed hotels contributed approximately 7.9% and
8.5% of our revenues during the three months ended March 31, 2015 and during the three months ended


                                                    102
March 31, 2016, respectively. See note 4.c to our audited financial statements in this offering
memorandum for information relating to the methods applied to consolidate our operating results.
          Franchised hotels. We have 6 franchised hotels in our portfolio representing 901 rooms and
3.8% of our total rooms. As of March 31, 2016, we had 6 franchised hotels in our portfolio representing
901 rooms and 3.9% of our total rooms. We receive fees pursuant to our long-term franchise contracts
for all of the hotels we franchise. In general, our franchise contracts provide for the payment of fees and
expenses based on (i) a percentage of a hotel’s room revenues, (ii) a fixed reservation fee, (iii) a fee for
personnel training and (iv) the payment of other expenses such as a common advertising fund, loyalty
programs and sales fees. Our franchised hotels contributed approximately 0.12% and 0.21% of our
revenues during the three months ended March 31, 2015, and during the three months ended March 31,
2016, respectively.
       We also operate one hotel in Mexico under the Holiday Inn franchise brand and own one hotel in
Texas that we operate under the Ramada franchise brand. We pay franchise fees for the use of these
brands. These hotels constitute 1.7% of our total rooms as of the date of this offering memorandum and
1.8% of our total rooms as of as of March 31, 2016. These hotels are not a part of our core hotel
management business and we continue to explore available options with respect to these properties.
       The following table sets forth our hotels organized by brand, characterizes each hotel’s location
as urban area or coastal region, identifies whether each hotel is owned, leased or managed, indicates the
number of rooms per hotel and, for owned hotels, indicates our percentage ownership as of March 31,
2016:

                                                                 Live Aqua
                   Hotel                              State            Urban/Coastal             Type            Rooms              Owned


 Bosques                                       Ciudad de México               Urban            Managed             135                0%
 Cancún                                           Quintana Roo               Coastal            Leased             371                0%
 LAT 20 by Live Aqua                              Quintana Roo               Coastal            Leased             60                 0%




                                          Grand Fiesta Americana / Fiesta Americana
                   Hotel                           State          Urban/Coastal                  Type            Rooms           Owned


 Aguascalientes                                  Aguascalientes               Urban            Managed             192              0%
 Centro Monterrey                                  Nuevo León                 Urban            Managed             207              0%
 Condesa Cancún                                   Quintana Roo               Coastal            Owned              502            100%
 Cuernavaca, Hacienda San Antonio El                                                                                               0%
                                                     Morelos                  Urban            Managed             112
 Puente
 Grand Chapultepec                             Ciudad de México              Urban              Leased             203             0%
 Grand Coral Beach Cancún                        Quintana Roo                Coastal           Managed             602             0%
 Grand Guadalajara Country Club                     Jalisco                  Urban             Managed             207             0%
 Grand Puebla Angelópolis                           Puebla                   Urban             Managed             168             0%
 Grand Puerto Vallarta                              Jalisco                  Coastal           Managed             444             0%
 Guadalajara                                        Jalisco                  Urban              Owned              391            100%
 Hacienda Galindo                                 Querétaro                  Urban              Owned              168            100%
 Hermosillo 1                                       Sonora                   Urban              Owned              221            100%
 Mérida                                            Yucatán                   Urban              Owned              350             51%




1 This hotel is expected be transferred to FibraHotel in 2020 pursuant to a purchase agreement entered into in April 2016. See “Summary — Related
     Developments.”




                                                                       103
                              Grand Fiesta Americana / Fiesta Americana
                  Hotel                State          Urban/Coastal        Type     Rooms   Owned
Puerto Vallarta                       Jalisco                Coastal      Managed    291      0%
Querétaro                           Querétaro                Urban        Managed    173      0%
Reforma                          Ciudad de México            Urban         Owned     616     100%
Santa Fe                         Ciudad de México            Urban         Leased    172      0%
Veracruz                             Veracruz                Urban        Managed    233      0%


                                     Fiesta Americana Vacation Club
                  Hotel                State         Urban/Coastal         Type     Rooms   Owned


Cancún                             Quintana Roo              Coastal      Owned      310    100%
Condesa Acapulco                     Guerrero                Coastal      Owned      560    100%
Cozumel Dive Resort                Quintana Roo              Coastal      Owned      174    100%
Explorean Cozumel                  Quintana Roo              Coastal      Owned      56     100%
Explorean Kohunlich                Quintana Roo              Coastal      Owned      40     100%
Grand Los Cabos                  Baja California Sur         Coastal      Owned      249    100%
Los Cabos                        Baja California Sur         Coastal      Owned      457    100%
Nima Bay                              Jalisco                Coastal      Owned      16     100%




                                                Fiesta Inn
                  Hotel                State             Urban/Coastal     Type     Rooms   Owned


Aeropuerto Ciudad de México      Ciudad de México            Urban        Owned      327    100%
Aguascalientes                     Aguascalientes            Urban        Managed    125     0%
Cancún Las Américas                Quintana Roo              Coastal      Leased     152     0%
Celaya                              Guanajuato               Urban        Managed    124     0%
Cencali Villahermosa                 Tabasco                 Urban        Managed    159     0%
Centro Histórico                 Ciudad de México            Urban         Leased    140     0%
Chetumal                           Quintana Roo              Urban        Managed    131     0%
Chihuahua                           Chihuahua                Urban        Managed    152     0%
Ciudad del Carmen                   Campeche                 Urban        Managed    131     0%
Ciudad Juárez                        Chihuahua               Urban        Managed    166     0%
Ciudad Obregón                         Sonora                Urban        Managed    123     0%
Coatzacoalcos                         Veracruz               Urban        Managed    122     0%
Colima                                 Colima                Urban        Managed    104     0%
Cuautitlán                       Estado de México            Urban        Leased     128     0%
Cuernavaca                            Morelos                Urban        Managed    155     0%
Culiacán                              Sinaloa                Urban        Leased     146     0%
Durango                              Durango                 Urban        Managed    138     0%
Ecatepec                         Estado de México            Urban         Leased    143     0%
Guadalajara Expo                      Jalisco                Urban        Managed    158     0%
Hermosillo                            Sonora                 Urban        Managed    155     0%
Insurgentes Sur                  Ciudad de México            Urban        Leased     162     0%
Insurgentes Viaducto             Ciudad de México            Urban        Leased     210     0%
Mérida                                Yucatán                Urban        Managed    166     0%
Mexicali                           Baja California           Urban        Managed    150     0%
Monclova                             Coahuila                Urban        Managed    158     0%
Monterrey Fundidora                 Nuevo León               Urban        Managed    155     0%
Monterrey La Fe                     Nuevo León               Urban        Managed    161     0%
Monterrey Tecnológico               Nuevo León               Urban        Managed    201     0%




                                                       104
                                                Fiesta Inn
                   Hotel               State             Urban/Coastal    Type     Rooms   Owned


Monterrey Valle                     Nuevo León              Urban         Owned     177    100%
Naucalpan                         Estado de México          Urban        Managed    119     0%
Nogales                                Sonora               Urban        Managed    107     0%
Nuevo Laredo                         Tamaulipas             Urban        Managed    120     0%
Oaxaca                                Oaxaca                Urban        Managed    145     0%
Periférico Sur                    Ciudad de México          Urban         Leased    212     0%
Perinorte                         Estado de México          Urban        Managed    123     0%
Plaza Central                     Ciudad de México          Urban        Managed    169     0%
Poza Rica                             Veracruz              Urban        Managed    107     0%
Puebla FINSA                          Puebla                Urban        Managed    123     0%
Puebla las Ánimas                     Puebla                Urban        Leased     140     0%
Querétaro                            Querétaro              Urban        Managed    225     0%
Querétaro Centro Sur                 Querétaro              Urban        Managed    134     0%
Reynosa                             Tamaulipas              Urban        Managed    127     0%
Saltillo                             Coahuila               Urban        Managed    149     0%
San Luis Potosí Glorieta Juárez   San Luis Potosí           Urban        Managed    135     0%
San Luis Potosí Oriente           San Luis Potosí           Urban        Leased     140     0%
Santa Fe                          Ciudad de México          Urban         Leased    189     0%
Tampico                              Tamaulipas             Urban        Managed    124     0%
Tepic                                  Nayarit              Urban        Managed    139     0%
Tijuana Otay Aeropuerto            Baja California          Urban         Leased    142     0%
Tlalnepantla                      Estado de México          Urban        Managed    131     0%
Toluca                            Estado de México          Urban        Managed    144     0%
Toluca Aeropuerto                 Estado de México          Urban        Managed    150     0%
Toluca Centro                     Estado de México          Urban        Managed    85      0%
Torreón Galerías                      Coahuila              Urban        Managed    146     0%
Tuxtla Gutiérrez                      Chiapas               Urban        Managed    120     0%
San Cristobal de las Casas            Chiapas               Urban        Managed    80      0%
Veracruz Boca del Río                Veracruz               Urban        Managed    144     0%
Veracruz Malecón                     Veracruz               Urban        Managed    92      0%
Xalapa                               Veracruz               Urban        Managed    119     0%
Zacatecas                            Zacatecas              Urban        Managed    146     0%




                                        Fiesta Inn LOFT


                   Hotel               State            Urban/Coastal     Type     Rooms   Owned


Irapuato LOFT                       Guanajuato              Urban        Managed    44      0%
Ciudad del Carmen LOFT               Campeche               Urban        Managed    120     0%




                                                      105
                                                          One Hotels
                 Hotel                   State            Urban/Coastal     Type       Rooms   Owned


Acapulco Costera                       Guerrero                Coastal    Managed       126     0%
Aguascalientes Ciudad Industrial    Aguascalientes             Urban      Managed       126     0%
Aguascalientes San Marcos           Aguascalientes             Urban      Managed       126     0%
Cancún Centro                        Quintana Roo              Coastal    Managed       126     0%
Celaya                                Guanajuato               Urban      Managed       126     0%
Ciudad de México Alameda           Ciudad de México            Urban      Managed       117     0%
Ciudad de México Patriotismo       Ciudad de México            Urban      Managed       132     0%
Ciudad del Carmen Concordia           Campeche                 Coastal    Managed       126     0%
Coatzacoalcos Forum                    Veracruz                Urban      Managed       126     0%
Cuernavaca                              Morelos                Urban      Managed       126     0%
Culiacán Forum                          Sinaloa                Urban      Managed       119     0%
Durango                                 Durango                Urban      Managed       126     0%
Gran Sur                           Ciudad de México            Urban      Managed       144     0%
Guadalajara Centro Histórico             Jalisco               Urban      Managed       146     0%
Guadalajara Periférico Norte             Jalisco               Urban      Managed       126     0%
Guadalajara Periférico Vallarta          Jalisco               Urban      Managed       121     0%
Guadalajara Tapatío                      Jalisco               Urban      Managed       126     0%
Irapuato                              Guanajuato               Urban      Managed       126     0%
La Paz                             Baja California Sur         Coastal    Managed       126     0%
León Poliforum                        Guanajuato               Urban      Managed       126     0%
Monclova                               Coahuila                Urban      Managed       66      0%
Monterrey Aeropuerto                  Nuevo León               Urban      Managed       126     0%
Oaxaca Centro                           Oaxaca                 Urban      Managed       109     0%
Playa del Carmen Centro              Quintana Roo              Urban      Managed       108     0%
Puebla FINSA                            Puebla                 Urban      Managed       126     0%
Querétaro Aeropuerto                   Querétaro               Urban      Managed       126     0%
Querétaro Centro Sur                   Querétaro               Urban      Managed       126     0%
Querétaro Plaza Galerías               Querétaro               Urban      Managed       126     0%
Reynosa Valle Alto                    Tamaulipas               Urban      Managed       135     0%
Salamanca                             Guanajuato               Urban      Managed       126     0%
Salina Cruz                             Oaxaca                 Urban      Managed       126     0%
Saltillo Derramadero                   Coahuila                Urban      Managed       126     0%
San Luis Potosí Glorieta Juárez     San Luis Potosí            Urban      Managed       126     0%
Silao                                 Guanajuato               Urban      Managed       126     0%
Toluca Aeropuerto                  Estado de México            Urban      Managed       126     0%
Villahermosa 2000                       Tabasco                Urban      Managed       126     0%
Villahermosa Centro                     Tabasco                Urban      Managed       110     0%
Xalapa Las Ánimas                      Veracruz                Urban      Managed       126     0%



                                                    Gamma
                 Hotel                   State         Urban/Coastal        Type       Rooms   Owned


Campeche                              Campeche                 Urban      Franchised    146     0%
Valle Grande Ciudad Obregón             Sonora                 Urban      Managed       135     0%
Mérida el Castellano                    Yucatán                Urban      Franchised    153     0%
Plaza Ixtapa                           Guerrero                Coastal    Franchised    153     0%
Fussion León                          Guanajuato               Urban      Managed       159     0%
Monterrey Gran Hotel Ancira           Nuevo León               Urban      Franchised    244     0%




                                                         106
                                                    Gamma
                Hotel                   State          Urban/Coastal      Type       Rooms   Owned
Morelia Belo                          Michoacán                Urban    Franchised    84      0%
Lausana Tijuana                  Baja California Norte         Urban     Managed      140     0%
Pachuca                                Hidalgo                 Urban     Leased       114     0%
Xalapa Nubara                         Veracruz                 Urban    Franchise     121     0%


                                                    Other
                Hotel                   State           Urban/Coastal     Type       Rooms   Owned


Ramada Plaza                         Texas (U.S.)              Urban     Owned        200    100%
Mérida                                 Yucatán                 Urban    Managed       213     9%



        Because of our market position and strong reputation, during the last few years we have been
able to expand our hotel business mainly through increasing our operation of hotels developed with
investment capital provided by third parties, thus reducing our need to use financial resources generated
by our own cash flow or financing activities.
         As of the date of this offering memorandum, our development pipeline is comprised of plans to
operate 33 new hotels with 4,851 rooms, which will represent an increase of approximately 20.4% in our
total number of rooms. Approximately 63.1% of these hotels are Fiesta Inn, Fiesta Inn LOFT and One
Hotels, which are our economy and budget-brand tiers. We estimate our pipeline hotels to represent a
total investment of U.S.$442.4 million, of which we estimate that we will contribute approximately 25.8%
or U.S.$114.2 million, mainly from our cash flow generation and by contributing in kind certain of our
existing owned real estate assets to the development of such plan, with the remainder contributed by the
owners of the hotels we will manage and franchise. We anticipate opening these hotels within
approximately 30 months following the date of this offering memorandum.




                                                         107
         The following table sets forth, for the indicated periods, certain operating data by brand for the
hotels in our portfolio:

                                              Occupancy         ADR(1)(2)    ADR(1)(2)        RevPAR(1)(3)       RevPAR(1)(3)
                                                                  Ps.         (U.S.$)            Ps.               (U.S.$)
 Fiesta Americana and Grand Fiesta
 Americana(4)
   Year ended December 31, 2015…....             68%               1,632        95                1,112               65
   Three months ended March 31, 2016             71%               1,927        112               1,361               79
 Fiesta Inn and Fiesta Inn LOFT
   Year ended December 31, 2015 ……               67%               1,031        60                 694                40
   Three months ended March 31, 2016             67%               1,070        62                 717                42
 Live Aqua
   Year ended December 31, 2015…….               74%               2,685        156               1,980              115
   Three months ended March 31, 2016             71%               3,297        192               2,355              137
 One Hotels
   Year ended December 31, 2015…….               59%               708          41                 421                24
   Three months ended March 31, 2016             58%               743          43                 429                25
 Gamma Hotels
   Year ended December 31, 2015…….               51%               748          43                 381                22
   Three months ended March 31, 2016             56%               758          44                 424                25
 Other Brands(5)
   Year ended December 31, 2015…….               66%               1,049        61                 693                40
   Three months ended March 31, 2016             70%               1,131        66                 796                46

(1)   ADR is determined by dividing total room revenues for the period indicated by total room nights sold during such period.
(2)   ADR and REVPAR figures are presented for all of the hotels in our portfolio. Therefore, these figures include information
      relating to hotels we do not own (those we manage but that are owned by third parties).
(3)   REVPAR is calculated as ADR multiplied by the occupancy rate (equivalent to dividing total room revenues by total room
      nights available for sale).
(4)   Includes hotels operating under the Fiesta Americana, Fiesta Americana Grand.
(5)   Includes hotels operating under the Holiday Inn name.


          Vacation Club Business—Fiesta Americana Vacation Club
          We also operate a vacation club business through which we market and sell memberships that
grant a right to use the vacation club resorts we own and operate in upscale destinations in Mexico
including Los Cabos, Cancún, Acapulco, Puerto Vallarta, Cozumel and Kohunlich, as well as other
affiliated properties around the world. Our vacation club business operates under the brand name Fiesta
Americana Vacation Club, or FAVC. The Cancún property has 310 units, the Los Cabos property has
457 units, the Acapulco property has 560 units, the Kohunlich property has 40 units, Nima Bay has 16
units and operates two hotels in Cozumel with 174 and 56 rooms, respectively. As of March 31, 2016,
FAVC had over 31,000 members, primarily residents of Mexico and the United States.
         Vacation club members buy a “40-year-right-to-use point-based program” evidenced by an
annual allocation of vacation club points. FAVC typically charges an initial payment of between 10% and
30%, and offers installment payment plans that accrue interest for the balance of the purchase price.
Although historically a substantial portion of our vacation club sales were denominated in U.S. dollars, as
of March 31, 2016, approximately 75% of our vacation club receivables portfolio is denominated in pesos,
albeit at a higher interest rate, as a result of the requests by certain members who wanted to convert their
installment payment obligations from U.S. dollars to pesos. We expect to continue to offer peso-
denominated payment plans to Mexican residents who wish to manage their exposure to fluctuations in
the peso exchange rate.
        Vacation club points can be redeemed to stay at our FAVC properties, as well as any of our
hotels or, through FAVC’s affiliations with Resorts Condominium International, or RCI, and Hilton Hotels
Corp., any RCI-affiliated resort or Hilton Grand Vacation Club, or HGVC, resort throughout the world. In
connection with FAVC’s agreement with HGVC, HGVC provides certain services related to product




                                                             108
development and vacation club design, sales and marketing consultation transaction processing, and
member contact and communication. Members can also exchange points for miles on partner airlines.
         In 2010, we began marketing a new vacation club product called Kivac, which consists of the sale
of points that may be redeemed within five years of sale for accommodations in any of our hotels. Kivac
was created to generate a new distribution channel for our hotels’ unused inventory and is targeted at a
market for which FAVC membership may be too expensive or long. Kivac has proven to be popular in the
mid-scale market, particularly in urban locations, and has reached over 26,000 members. Since its
inception in 1999, FAVC has become a significant source of our revenue.
        In addition to FAVC and Kivac, since 2013 we operate a luxury vacation club business called The
Front Door which provides services similar to FAVC with a particular focus on a more exclusive and
luxury market. The Front Door members can redeem their annual allocation of points to stay at our
apartments in Marina Vallarta and Cozumel dedicated to this business line, as well as other upscale
properties managed by us and other properties affiliated to The Registry Collection throughout the world.
        Collectively, our vacation club business contributed approximately 38.0% and 33.2% of our
revenues for the year ended December 31, 2015 and during the three months ended March 31, 2016,
respectively.
Other Related Services Businesses
      We have established a number of related business that attempt to market to third-parties our
management skills and technology platform initially developed to support our hotel operating business.
        Ampersand
       Our Ampersand business, which previously managed loyalty programs for third parties and our
businesses, but currently only provides services to our businesses.
       Ampersand contributed approximately 5.2% and 0.6% of our revenues in the three months
ended March 31, 2015 and during the three months ended March 31, 2016, respectively.
        Conectum
        Our Conectum unit offers business process outsourcing services such as accounting, payroll and
technology services to a variety of industries. Like Ampersand, the Conectum business has its roots in
our efforts to consolidate and integrate the financial operations of the different hotels in our portfolio.
Conectum contributed approximately 0.7% and 0.6% of our revenues during the three months ended
March 31, 2015 and during the three months ended March 31, 2016, respectively.
        Konexo
         Our Konexo business provides call center and customer care services to a variety of customers.
The Konexo service center in Morelia, Michoacán, Mexico has grown out of our efforts to create an
efficient and less expensive direct and real-time distribution channel for our hotel operations. Konexo
contributed approximately 0.6% and 0.5% of our revenues during three months ended March 31, 2015
and March 31, 2016, respectively.
Organizational Structure
         Grupo Posadas, S.A.B. de C.V. is a sociedad anónima bursátil de capital variable (listed
corporation with variable capital) under the laws of Mexico and is a holding company, and its corporate
purpose is, among other things, to acquire, hold, subscribe, dispose of or, in any other manner, perform
commercial transactions related to stock and other equity interests in commercial entities or civil
associations, incorporated according to Mexican or foreign law. However, unlike other holding groups, a
significant portion of our business and financing operations are conducted directly by Grupo Posadas,
S.A.B. de C.V. (including our management agreements and our loan agreements and credit facilities). In
2014, we announced our intention to carry out an internal corporate restructuring in order to reorganize
the number of our subsidiaries and the functions that some of them perform in our structure in order to
reduce intercompany operations and streamline our organizational structure. We expect that this
corporate restructuring will allow us to reduce the number of our subsidiaries to 37 from 55, consolidate
our hotel operations and payroll activities in a single entity, eliminate 70% of our intercompany


                                                   109
transactions and close 273 bank accounts. This corporate restructuring is expected to be completed in
2016. As of the date of this offering memorandum, we have merged several of our subsidiaries into other
subsidiaries or into the Company, and are in the process of completing three more such mergers. As part
of this process, the following subsidiaries entered into an agreement to be merged into Grupo Posadas,
S.A.B. de C.V: Promotora Inmobiliaria Hotelera, S.A. de C.V., Controladora de Acciones Posadas, S.A.
de C.V., Promotora Posadas, S.A. de C.V. (formerly Promotora del Caribe, S.A.), Promociones Hoteleras
del Caribe, S.A. de C.V., Corporativo Prohoca, S.A. de C.V., Fiesta Vacation, S.A. de C.V., Hoteles y
Villas Posadas, S.A. de C.V., Asesores Administrativos Los Cabos, S.A. de C.V., Servicios
Administrativos Posadas, S.A. de C.V., API LA, S.A. de C.V., API PM, S.A. de C.V., API FA, S.A. de C.V.,
Axioma Demostrado, S.L. and Servicios Gerenciales Posadas, S.A. de C.V. The mergers will take effect
three months after the filing of the merger agreement with the Public Registry of Commerce. As of the
date of this offering memorandum, the agreements are in the process of being filed. In addition, Gran
Operadora Posadas, S.A.B. de C.V. entered into an agreement to be merged into Posadas de
Latinoamérica, S.A. de C.V. The mergers will take effect three months after the filing of the merger
agreement with the Public Registry of Commerce. As of the date of this offering memorandum, the
agreements are in the process of being filed. The subsidiaries being merged are guarantors of the
Existing Notes and will guarantee the New Notes. However, because the guarantors are merging into
Grupo Posadas, S.A.B. de C.V. or into another guarantor, the percentage of our consolidated revenues
and total assets respectively represented by Grupo Posadas, S.A.B. de C.V together with the guarantors
of the Notes on a consolidated basis will remain substantially the same following the mergers.
         The chart on the following page presents the organizational structure of our main operating
subsidiaries and our direct or indirect percentage of equity ownership in such subsidiaries as of the date
of this offering memorandum. The shaded boxes indicate subsidiaries that will be guarantors of the
Notes. The chart on the following page reflects certain of our subsidiaries that still exist as of the date of
this offering memorandum since certain mergers that are being carried out as part of our corporate
restructuring have not yet become fully effective.




                                                     110
                                                                                       Grupo Posadas S.A.B. de C.V.




                                        Controladora de                                    Servicios
         Administración Digital                               Fundación Posadas,                                      Porto Ixtapa,                                                            Promotora Posadas,
                                     Acciones Posadas, S.A.                              Administrativos                                                   Posadas ISA Inc
        Conectum, S.A. de C.V.                                       A.C.                                             S.A. de C.V.                                                                S.A. de C.V.
                                            de C.V.                                   Posadas, S.A. de C.V.                                                    (100%)
               (100%)                                              (100%)                                               (100%)                                                                      (100%)
                                            (100%)                                          (100%)


         Operadora Dinatur de         Dirección Corporativa                            Sistema Director de        Konexo Centro de                                                            Promociones Hoteleras
         Sonora, S.A. de C.V.         Posadas S.A. de C.V.                           Proyectos, S.A. de C.V.    Soluciones, S.A. de C.V     ML Investment Co.               Ridgedale Corp.   del Caribe, S.A. de C.V.
                60%                          (100%)                                          (100%)                     (100%)                   (100%)                         (100%)                (100%)


         Servicios Gerenciales          Fiesta Vacation,                                  Solosol Tours,        Desarrollos Inmobiliarios                                                      Corporativo Prohoca,
                                                                                                                                                          Bia Acquisition Ltd.
         Posadas, S.A. de C.V.            S.A. de C.V.                                     S.A. de C.V.          Posadas, S.A. de C.V.                                                             S.A. de C.V.
                                                                                                                                                                (100%)
                (100%)                      (100%)                                           (100%)                     (100%)                                                                       (100%)


                                                                                     Hoteles y Villas Posadas   Corporación Hotelera de
         Promotora Inmobiliaria      Promoción y Publicidad
                                                                                           S.A. de C.V.             Ciudad Juárez,
         Hotelera, S.A. de C.V.        Fiesta, S.A. de C.V.
                                                                                             (100%)                  S.A. de C.V.
                (100%)                       (100%)
                                                                                                                       (100%)

              Asesores                    Posadas de                                     Administradora
                                         Latinoamérica,        Yipa, S.A. de C.V.                                 Gran Inmobiliaria
          Administrativos Los                                                        Profesional de Hoteles,
                                          S.A. de C.V.              (100%)                                      Posadas,, S.A. de C.V.
          Cabos, S.A. de C.V.                                                             S.A. de C.V.
                                             (100%)                                                                   (100%)
               (100%)                                                                        (100%)

        Inmobiliaria del Sudeste,                                                     Inversora Inmobiliaria    Operadora del Golfo de
             S.A. de C.V.                                                               Club, S.A. de C.V.       México, S.A. de C.V.
                 (51%)                                                                       (100%)                    (100%)


       Inmobiliaria Administradora                                                                                    Inmobiliaria
          Minerva, S.A. de C.V       API LA S.A. de C.V.      API FA, S.A. de C.V.    API PM, S.A. de C.V.        Administradora del
         (FA Guadalajara-Land)             (100%)                   (100%)                  (100%)                Bajío, S.A. de C.V.
                  (100%)                                                                                                (100%)

         Kohunlich Adventures,                                                                                     Desarrollo Arcano,
             S.A. de C.V.                                     Axioma Demostrado,                                     S.A. de C.V.
                (100%)                                                S.L.                                              (70%)
                                                                    (100%)

           Gran Operadora                                                                                       Soluciones de Lealtad,
         Posadas, S.A. de C.V.                                                                                       S.A. de C.V.
               (100%)                                                                                                  (100%)

          Comercializadora de
            Reservaciones                                                                                       Comisiones e Incentivos
         Posadas, S.A. de C.V.                                                                                    Fiesta, S.A. de C.V
               (100%)                                                                                                   (100%)

Holding entity: Grupo Posadas, S.A.B. de C.V. is party to all of the hotel management, license and franchise contracts for our hotels and resorts in Mexico, holds all our
trademarks in Mexico and the European Union, and some in the United States.

Vacation Club entities: Inversora Inmobiliaria Club, S.A. de C.V. is the subsidiary through which we hold our Acapulco, Cancún, Marina Vallarta, and Kohunlich vacation club
resorts. Gran Inmobiliaria Posadas S.A. de C.V. and Operadora del Golfo de México S.A. de C.V. own our Cozumel vacation club resort. Posadas de Latinoamérica, S.A. de
C.V. owns Los Cabos vacation club resort and sells timeshare rights to all of our resorts properties and Kivac. Desarrollos Inmobiliarios Posadas, S.A. de C.V. buys property in
Los Cabos for The Front Door inventory.

Real estate entities: Gran Inmobiliaria Posadas, S.A. de C.V. is the beneficial owner of almost all of our owned hotels. Operadora del Golfo de México, S.A. de C.V. owns all of
our hotels in Mexico, except for the Fiesta Americana Condesa Cancún hotel and the Fiesta Americana Mérida hotel. Inmobiliaria Administradora Minerva S.A. de C.V. owns
the land under the Fiesta Americana Guadalajara hotel and Yipa S.A. de C.V. owns certain real property lots under the Fiesta Inn Aeropuerto hotel. Inmobiliaria del Sudeste
S.A. de C.V. is the owner of, and receives all of the cash flows of, the Fiesta Americana Mérida hotel. Bia Acquisition Ltd. is the subsidiary through which we own one hotel
located in Laredo, Texas. Desarrollo Arcano, S.A. de C.V. and Porto Ixtapa, S.A. de C.V. are the developers of two residential ventures in Ixtapa, Mexico.

Other business/activities entities: Promoción y Publicidad Fiesta, S.A. de C.V. holds the marketing fund for all of our hotels. Administración Digital Conectum, S.A. de C.V.
holds our Conectum business. Konexo Centro de Soluciones S.A. de C.V. holds our Konexo’s call center business. Solosol Tours S.A. de C.V. holds our GloboGo business.
Soluciones de Lealtad, S.A. de C.V. holds our Ampersand business. Posadas USA Inc. holds our sales promotion and collection operations in the United States. Kohunlich
Adventures, S.A. de C.V. holds our federal ground transportation permits for transportation of our hotel guests. Fundación Posadas A.C. holds and administers our public charity
programs.

Payroll entities: Dirección Corporativa Posadas, S.A. de C.V. is the payroll entity for the executive committee for the Company. Servicios Administrativos Posadas, S.A. de
C.V. is the corporate payroll entity. Servicios Gerenciales Posadas, S.A. de C.V. is the payroll entity for the hotels’ executive committees. Inmobiliaria Administradora del Bajío
S.A. de C.V. is the payroll entity for Fiesta Americana Mérida. Hoteles y Villas Posadas, S.A. de C.V. is the general payroll for the owned and leased hotels, and is slated to be
merged into Grupo Posadas, S.A.B. de C.V.

Dormant entities: Comercializadora de Reservaciones Posadas, S.A. de C.V., Sistema Director de Proyectos, S.A. de C.V., Administardora Profesional de Hoteles, S.A. de
C.V.; Corporación Hotelera de Ciudad Juárez, S.A. de C.V., Comisiones e Incentivos Fiesta, S.A. de C.V. Inversiones Las Posadas 4500, C.A., Inversiones Las Posadas 4501,
C.A. and Posadas América del Sur, C.A. are dormant entities which are not shown on the chart.

Entities that are undergoing corporate reorganization: Gran Operadora Posadas, S.A. de C.V. was formerly one of our timeshare rights-sellers for our resort properties and
Kivac. Hoteles y Villas Posadas S.A. de C.V. receives all the cash flows of our wholly owned and leased hotels in Mexico. Promociones Hoteleras del Caribe, S.A. de C.V. is the
owner of the Fiesta Americana Condesa Cancún hotel. Fiesta Vacation S.A. de C.V. manages our vacation club exchange program. Promotora Inmobiliaria Hotelera, S.A. de
C.V. acts as the corporate treasurer of Grupo Posadas and all of its subsidiaries. Controladora de Acciones Posadas S.A. de C.V. holds some of our subsidiaries’ shares and all
our trademarks in Latin America. API FA, S.A. de C.V., API LA, S.A. de C.V., API PM, S.A. de C.V., Asesores Administrativos Los Cabos, S.A. de C.V., Axioma Demostrado,
S.L., Corporativo Prohoca, S.A. de C.V., Hotelera Los Cabos, S.A. de C.V., Promotora del Caribe, S.A. (now Promotora Posadas, S.A. de C.V.), Operadora Dinatur de Sonora,
S.A. de C.V., Servicios Administrativos Posadas, S.A. de C.V. and Servicios Gerenciales Posadas, S.A. de C.V. are entities that we plan to dispose of, including through
mergers into the Company and our other subsidiares or liquidation pursuant to our ongoing corporate reorganization.




                                                                                          111
Projects Under Development
         We continually assess opportunities to operate hotels in new locations. Our real-estate and
development division is responsible for identifying locations for new projects. We do not apply fixed
statistical or numerical parameters when making a decision on whether to expand into a particular area,
but our analysis takes into account the population of the city, the area’s level of local economic activity
and the willingness of investors to invest capital in the location. Once a location has been identified by
our development department, our research department evaluates the feasibility of the proposal by
analyzing existing supply and demand for rooms in the area, the level of local competition, ranges of rates
to charge, and which of our brands would be appropriate for the project. The following briefly discusses
our current hotel projects under development.
         As of the date of this offering memorandum, our development pipeline is comprised of plans to
operate 33 new hotels with 4,851 rooms, which will represent an increase of approximately 20.4% in our
total number of rooms. Approximately 63.1% of these hotels are Fiesta Inn, Fiesta Inn LOFT and One
Hotels, which are our economy and budget-brand tiers. We estimate our pipeline hotels to represent a
total investment of U.S.$442.4 million, of which we estimate that we will contribute approximately 25.8%
or U.S.$114.2 million, mainly from our cash flow generation and by contributing in kind certain of our
existing owned real estate assets to the development of such plan, with the remainder contributed by the
owners of the hotels we will manage and franchise. We anticipate opening these hotels within
approximately 30 months following the date of this offering memorandum.

                                  Openings                                            Mexico
                                                                            Hotels    Rooms     % of Rooms
              Live Aqua .............................................             2       320           6.6
              The Front Door (to be rebranded Live
                                                                                  1       100           2.1
              Aqua Residence Club) .........................
              Grand Fiesta Americana.......................                       1       180           3.7
              Grand Fiesta Americana Vacation
                                                                                  1       490          10.1
              Villas ....................................................
              Fiesta Americana .................................                  4       702          14.5
              Fiesta Inn .............................................         11       1,475          30.4
              Fiesta Inn LOFT ...................................                 1        48           1.0
              One ......................................................       12       1,536          31.7
                     Total .............................................       33       4,851         100.0



Management Divisions
        We operate our business through five divisions: hotel management, real-estate and development,
vacation club, franchises and finance. The heads of each of these five divisions, together with our
Chairman of the Board of Directors, constitute our Executive Committee. See “Management–Executive
Committee.”
         The hotel management division is responsible for the day-to-day operations of our hotels and is
focused on achieving optimum service and customer satisfaction levels at each of our properties. This
division is responsible for the application of guidelines, policies and procedures that seek to ensure brand
consistency throughout all of the hotels in our portfolio, other than franchised hotels. In addition, our sales
force reports to the management division.
         The real-estate and development division is responsible for maximizing the value of our hotel
properties and increasing the profitability of those assets. The division is also responsible for furnishing
the hotels we operate and for planning, managing and overseeing our development pipeline, including
identifying locations for new projects and evaluating the feasibility of a proposed location. See “—
Projects Under Development.”




                                                                            112
       The vacation club division is responsible for the sales, operation and development of the Fiesta
Americana Vacation Club, Kivac and The Front Door business (which is being rebranded as Live Aqua
Residence Club).
         The franchise division is responsible for the development of brands and trademarks, the
implementation of standards applicable to the franchised hotels and our distribution channels. This
division is also responsible for the development of guidelines, policies and procedures that seek to ensure
brand consistency throughout all of the hotels in our portfolio. This division also provides support to our
franchisees.
         The finance division is responsible for overseeing and managing our finances. In particular, this
division manages our financial, treasury, tax, insurance, banking relationships, loan administration and
derivatives policies.
Systems and Technology
         We believe that investing in new systems and technology is critical to our growth and
distinguishes our enterprise from other companies in the Mexican and Latin American hotel and tourism
industry. Throughout our history we have developed new systems, technology and platforms that we
believe have allowed us to achieve success by optimizing our product distribution, managing our
operations more efficiently and cultivating the talents of our employees.
          One such capability is ICP, our centralized and consolidated room inventory solution for our entire
hotel portfolio. ICP updates in real-time as room availability changes and this information is furnished to
all distribution channels through which we sell rooms. We believe the ICP platform allows us to optimize
our earnings by allowing us to price our actual room inventory rapidly to meet fluctuations in customer
demand.
        We operate our IT platforms under strict international safety standards and certifications.
        Another such capability is CRM platform, our guest experience system that places our guests at
the very core of our operations by recognizing them and personalizing the service they receive before,
during and after their stay, systematizing their benefits and exerting rigorous control over their requests
and our responses to them over the course of their stay.
       See “Risk Factors—We are subject to risks related to stoppages or failures in informational
systems” and “Risk Factors—A network failure could cause delays or interruptions of service, which could
cause us to lose customers and revenues” for risks associated with our systems and technology.
Seasonality
         As of the date of this offering memorandum, of the 23,826 hotel rooms we operate, approximately
80% are in urban or suburban locations and cater primarily to business travelers. These hotel operations
have not experienced significant seasonal fluctuations aside from minor reductions in occupancy during
the holiday season from mid-December through mid-January. The remaining hotel rooms we operate are
in coastal resort locations. Our coastal hotel operations generally experience two peak seasons. The
first peak, the traditional winter season, occurs during the months of December through April and results
primarily from foreign tourism. The second peak occurs during the summer months of July through
August and results from Mexican and foreign tourism. This seasonality can be expected to cause
quarterly fluctuations in our revenues. See “Risk Factors—The hotel industry is seasonal.”
Competition
         The hotel industry in Mexico is highly competitive. Our hotels generally compete with a variety of
Mexican and international hotel operators, some of which, on an international basis, are substantially
larger than us and operate under well-known international brand names. In mid-size urban areas and
suburbs of large cities, our hotels primarily compete with Mexican and international chains as well as
independently owned and managed hotels. Depending upon the class of the hotel, competition is based
primarily upon price, quality of facilities and services offered, physical location within a particular market
and the ability to earn and redeem customer loyalty program points. Hotel owners must make continuing
expenditures for modernization, refurbishment and maintenance to prevent competitive obsolescence.



                                                     113
The competitiveness of the Company’s hotels has been enhanced by our frequent guest program (Fiesta
Rewards) the Fiesta Americana Vacation Club and Kivac.
        The main competitors of our Fiesta Americana hotels are other high-end international and
Mexican chains such as Camino Real, Crowne Plaza, Marriott, Hyatt, Westin, Hilton Sheraton and
Intercontinental. The competitors of our Fiesta Inn hotels are both independent local hotel operators and
moderately priced international and Mexican chains such as Holiday Inn, Holiday Inn Express, Best
Western, Mision, Hampton Inn, NH Hotels and City Express. Our One Hotels compete primarily with
other economy class and independent hotel operators. In our efforts to increase the number of hotel
properties we manage, we also compete with entities who seek the same opportunities to enter into
management contracts with hotel owners. Some of these entities have substantially greater marketing
and financial resources than we do, although few are as well situated as we are in the markets that we
serve. Our principal competitors for management opportunities include CityExpress, Riu and AMResorts,
Starwood and Marriott. We do not allow any competitors to operate hotels under our distinctive brands.
         The vacation club industry is also highly competitive. FAVC competes primarily with Palace
Resorts, Mayan Palace, Club Regina and Royal Holiday Club in Mexico, and generally with other
vacation club destinations in the Caribbean and other coastal resort areas. The Front Door competes
primarily with Mayan Grand Luxe and premium vacation real estate developments such as Inspirato.
Kivac does not have a direct competitor in the market it serves.
         We are also subject to competition in our services businesses. Konexo competes with many
large, multinational providers of call center and contact services. Conectum competes with many entities
offering similar business process outsourcing services and with accounting professionals who provide
some similar service.
Environmental Matters
         We are subject to certain legal requirements and potential liabilities under various federal, state
and municipal environmental laws and regulations, including the regulations for environmental impact,
hazardous waste and prevention and control for the contamination of water, air and soil, which we refer to
as “Environmental Laws.” Governmental authorities may impose certain administrative and criminal
penalties or fines for violation of Environmental Laws. Such authorities may also, among other things,
close, either indefinitely or temporarily, operations of any businesses located at any real properties found
in violation of any Environmental Laws. Such laws often impose liability without regard to whether the
owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances.
The punishment for infringement of the Environmental Laws might consist of remediation of the damaged
environment, administrative and criminal penalties and fines. The presence of hazardous or toxic
substances may adversely affect the owner’s ability to sell or rent such real property or to borrow using
such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic
wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or
disposal facility, regardless of whether such facility is owned or operated by such person. We do not
believe that we use substances or generate waste that may be deemed hazardous or toxic under
applicable Environmental Laws. We have not been subject to or suffered any civil liabilities or costs
related to cleaning up contamination resulting from historic uses of our current or former properties
owned, leased or managed by us.
         In addition to the above, owners and operators of real property may face civil liability for personal
injury or property damage because of various environmental conditions such as alleged exposure to
hazardous or toxic substances, poor indoor air quality, radon or poor drinking water quality.
        We are also subject to other laws and regulations relating to operation and closure of storage
tanks, and preservation of wetlands, coastal zones or endangered species, which could limit our ability to
develop, use, sell or rent our real property or use it as collateral. Future changes in environmental laws
or the discovery of currently unknown environmental conditions may have a material adverse effect on
our financial condition and results of operations. In addition, Mexican environmental regulations have
become increasingly stringent over the last decade. Accordingly, there can be no assurance that more
stringent enforcement of existing laws and regulations or the adoption of additional laws and regulations
would not have a material effect on our business and financial condition or prospects.



                                                     114
Intellectual Property
         We own various trademarks either directly or through our subsidiaries that are registered in
Mexico and/or in certain foreign countries in which we operate, including Live Aqua®, Fiesta Americana®,
Grand Fiesta Americana®, Fiesta Americana Vacation Club®, Fiesta Rewards®, Fiesta Inn®, The
Explorean®, One Hotels®, KIVAC®, The Front Door®, Gamma Hoteles®, Posadas® Ampersand®,
Konexo®, Conectum®, GloboGO® and Summas® We also own various unregistered trademarks either
directly or through our subsidiaries, including Inventario Central Posadas™, and Conectum™. In addition,
we hold licenses either directly or through our subsidiaries to certain intellectual property used in
connection with the management of our business, including the third-party software we use in our
Conectum and ICP. We consider all of foregoing intellectual property and the associated name
recognition to be valuable to our business. We know of no material legal challenge or imminent threat of
a material challenge to our use of such intellectual property.
        We are also party to a co-existence agreement with Live Aqua Hotels & Resorts with respect to
the “Aqua” name.
        In 2015, we entered into an exclusive license contract for use of the Live Aqua brand in the
United States.
Employees
        As of March 31, 2016, we employed 5,388 employees at our owned hotels and corporate
positions. As of March 31, 2016, 9,384 employees were employed by the owner or lessor at the hotels
that we operate but with whom we do not have a direct contractual relationship.
        In Mexico, approximately 45% of our workforce is unionized. Collective bargaining agreements
with our unionized employees are entered between the individual hotels at which such unionized
employees work and the relevant union. In general, there is a different union representing our unionized
employees at each of our hotels. These collective bargaining agreements are generally reviewed and
revised annually for salary adjustments and every two years for other contractual terms. Each of the
individual hotel unions is affiliated with a national labor organization: either the CTM (Confederación de
Trabajadores de México) or the CROC (Confederación Revolucionaria de Obreros y Campesinos).
        During the past 10 years, we have not had any material disputes with any of the unions that
represent our employees. We currently believe that we have good relations with employees at all of our
properties, as well as with the unions to which certain of our employees belong.
Regulation
        Our operations are subject to federal, state and municipal regulations in each of the jurisdictions
in which we operate. See “Risk Factors—We are subject to governmental regulations.”
         In Mexico, each of our hotels is granted a business license by both the state and the municipality
to operate locally. Licensing requirements may vary significantly from state to state and even within each
state. State and municipal laws in Mexico also regulate fire safety, civil protection and similar matters.
Additionally, each of our hotels is required to have sanitation licenses and hotel construction projects are
required to have a construction license and environmental authorization, and must comply with several
zoning and land-use regulations. We believe that we are in material compliance with all applicable
sanitation and construction licenses in Mexico, and with the environmental authorizations and zoning and
land-use regulations applicable to our operations.
        Our operations in Mexico are also subject to the Mexican Ley General de Equilibrio Ecológico y
de la Protección al Ambiente (General Law of Ecological Stabilization and Environmental Protection), the
rules and regulations published thereunder and the state and local environmental equivalents. Under this
law, companies are under the regulatory jurisdiction of the Mexican Secretaría del Medio Ambiente y
Recursos Naturales (Ministry of the Environment and Natural Resources). Environmental regulations in
Mexico became stricter in the past decade in a trend that is likely to continue in the future in view of the
environmental agreements entered by Mexico, the United States and Canada in connection with NAFTA.
We have an internal environmental and safety compliance program that seeks to ensure that all of our
properties and businesses are in compliance with applicable environmental laws and regulations. We



                                                    115
believe that we are taking appropriate measures to ensure compliance and/or are in compliance with all
environmental laws and regulations.
        We develop and operate vacation club resorts and we market and sell memberships in the
vacation club. We generally sell the memberships pursuant to interest-accruing installment payment
arrangements that require a 10% down payment. These activities are all subject to regulation, including
the standards established by the Official Mexican Standards. For example, Mexican regulations grant the
purchaser of a vacation club membership the right to rescind the purchase contract at any time within a
minimum statutory rescission period of five business days that begins upon the signing of the contract.
These activities are also regulated at the state level; therefore, regulations may vary in each state in
which we operate. In addition, the Procuraduría Federal del Consumidor (Mexican Consumer Protection
Agency) must authorize our model contract for the sale of vacation club memberships.
        In addition to the regulations discussed above, each of our hotels is subject to extensive federal,
state and local regulations in Mexico and in the United States, as applicable, and, on a periodic basis,
must obtain various licenses and permits, including, but not limited to, those relating to the operation of
restaurants, swimming pools, fitness club facilities, parking garages, the sale of alcoholic beverages and
occupational health and safety.
       Grupo Posadas, S.A.B. de C.V. is a Mexican public company and as such is subject to the
Mexican Securities Market Law and its regulations.
        Companies listed on the Mexican Stock Exchange are required to meet certain listing
requirements, including maintaining at least 100 shareholders. Based on Mexican Stock Exchange
information, as of June 2015 we had more than 100 shareholders and were in compliance with the listing
requirements.
       We believe that, other than as disclosed above, we are in material compliance with applicable
laws and regulations and have obtained all applicable licenses and permits and that our business is
conducted in substantial compliance with applicable laws.
Legal Proceedings
        Tax Proceedings
        On May 23, 2014, the Servicio de Administración Tributaria (the Mexican Tax Administration
Service), or SAT, alleged that we failed to pay certain income taxes in fiscal year 2006 mainly in
connection with a trademark repatriation strategy and assessed a tax liability of Ps.767.2 million
(U.S.$49.5 million). On July 7, 2014 we initiated and filed an administrative appeal for revocation in order
to defend ourselves against the claim presented by SAT.
         Up to December 31, 2012, we and some of our subsidiaries were parties to tax proceedings
originating from the years 2004 to 2008 in which the Mexican tax authorities alleged non-payment of
federal taxes for a total amount of approximately Ps.1,121.0 million. During the first half of 2013, we
requested the Mexican tax authorities to apply the forgiveness benefits established in various rules and
criteria published in the Federal Income Tax Law, better known as “tax amnesty”. Consequently, there
were several rulings in our favor forgiving all of the alleged contested debt in exchange for a single
payment of Ps.142.9 million, of which Ps.125.6 million was recognized in the results of 2013, within
income tax expense and refers to income tax, and Ps.17.3 million was recognized in the results of 2013,
within “other expenses”, and is associated with local and value-added tax. Such actions concluded these
lawsuits.
        In 2015, we reached a partial settlement with the federal tax authorities of Mexico with respect to
the audit of our subsidiary Turística Hotelera Cabos Siglo XXI, S.A. C.V. The Mexican tax authorities
determined a potential tax credit of Ps.243.5 million. The adoption of a conclusive agreement was
requested before the office of the Attorney General for Taxpayer Protection (Tax Ombudsman) and we
reached a preliminary agreement with SAT to pay Ps.41.8 million in order to settle the total claim. As of
March 31, 2016, we have paid the total amount settled. On April 11, 2016, we were notified by the SAT of
a tax assessment of Ps.2.8 million, which amount was not included in the previously mentioned
agreement with SAT. We are currently considering our responses to this SAT assessment.



                                                    116
        On January 29, February 4 and April 22 of 2015, the SAT issued the Audit Report (Oficio de
Observaciones) for fiscal years 2009, 2008 and 2007 respectively. The main concepts included in such
reports are the effects derived from our trademark repatriation strategy, the deduction of interest and
reimbursement of expenses. In order to avoid the execution of a tax claim by the SAT, in July, August and
September of 2015 we requested the adoption of a conclusive agreement for each of such fiscal years
before the office of the Attorney General for Taxpayer Protection (Tax Ombudsman). We are currently
holding discussion panels with the SAT and the Tax Ombudsman.

        We are also currently subject to tax audit proceedings, with respect to fiscal years 2010 and 2013
as a result of the effects of the enactment of new tax laws that made us pay the income tax determined
that was monetarily deferred until December 31, 2013, and the tax attributable to the termination of the
consolidation regime. The SAT is reviewing certain transactions that were included in the tax returns of
such years. As of the date of this offering memorandum, these proceedings are still in progress.

         We are also currently subject to audit proceedings with respect to fiscal years 2012 and 2013 for
our subsidiaries Promotora Inmobiliaria Hotelera, S.A. de C.V., Soluciones de Lealtad, S.A. de C.V. and
Gran Operadora Posadas, S.A. de C.V. The SAT is reviewing certain transactions that were included in
the tax returns of such years. As of the date of this offering memorandum, these proceedings are still in
progress.
        Other Legal Proceedings
          In November 2000 and June 2004, Invertur Pacífico, S.A. de C.V., Empresas del Angel, S.A. de
C.V., filed lawsuits against Turística Hotelera los Cabos Siglo XXI, S.A. C.V., which operated our Fiesta
Inn hotel at the Mexico City airport, for wrongful foreclosure on a bank loan secured in part by 80% of the
shares of Yipa, S.A. de C.V, which held title to the property. The plaintiffs previously owned the shares
and the hotel, which was also mortgaged to secure the loan. The plaintiffs filed a lawsuit in 2000,
challenging the validity of the loan, and we subsequently purchased the loan from the bank, and
foreclosed on the shares, thereby becoming the owner of the building. Plaintiffs filed the second lawsuit
in 2004, alleging wrongful foreclosure on the shares, and both lawsuits were combined by the court. The
parties have filed their claims and counterclaims, the proceeding is not yet in the discovery stage, and we
do not expect to receive a lower court ruling by the end of 2016. In the event the lawsuit were to be
resolved against us, based on the nature of the claims, we believe that we would be required to pay the
cash value of the shares, which is approximately Ps.40 million (U.S.$3.1) million.
         We are a creditor in the pending bankruptcy proceedings (quiebra) of Compañía Mexicana de
Aviación, S. A.    de     C.V. and    its   subsidiaries   and    affiliates, or Mexicana,   which were
commenced in August 2010. We have filed claims in those proceedings for sums owed to us by
the Mexicana group debtors in an aggregate amount of approximately Ps.171.2 million. From such
claims Ps.115 million correspond to operating transactions. As of December 31, 2010 we fully reserved
against amounts owed to us resulting from the inability to collect these receivables. Accordingly, these
proceedings have not had any effects on our consolidated financial information from 2011 and
thereafter. We formerly had a 30.41% interest in Mexicana. On August 13, 2010, we sold our
participation in Mexicana to third parties for a nominal amount. The sale had no material impact on our
consolidated net income. We may be subject to collateral legal proceedings or other proceedings with
respect to this matter although as of March 31, 2016, we have not received any notice of any existing or
potential claims against us in connection with the Mexicana quiebra proceedings.
        In 2016, we abandoned our legal action seeking a writ of amparo regarding the application of the
Federal Law on the Prevention and Identification of Operations Using Illicit Resources (Ley Federal para
la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita).
         We and our subsidiaries have also commenced amparo proceedings in Mexico related to the
constitutionality of Federal and State laws and other ordinances. The subject of such claims are the
constitutionality of amendments to the Federal Income Tax Law (Ley de Impuesto Sobre la Renta) with
respect to permitted deductions and the repeal of the tax consolidation rules, the annual amendments to
federal tax laws (Miscelánea Fiscal) for the fiscal year 2014 and the Federal Tax Code (Código Fiscal de



                                                   117
la Federación) in connection with electronic accounting rules, and the constitutionality of the amendments
to the Federal Tax Code and administrative rules governing the obligation to provide information on
“relevant operations” and a decree issued by the State of Coahuila with respect to taxes on payroll. We
believe that our claims in such proceedings have a valid basis but cannot assure the outcome of any such
proceeding. If any such proceeding were decided adversely to us we may implement certain procedures
and controls which may entail changes to our operational structure and costs.
          In addition to the matters described above, we are from time to time subject to certain claims and
party to certain legal proceedings incidental to the normal course of business. In view of the inherent
difficulty of predicting the outcome of legal matters, we cannot state with confidence what the eventual
outcome of these pending matters will be, what the timing of the ultimate resolution will be or what the
eventual loss, fines or penalties related to each pending matter may be.




                                                    118
                                             MANAGEMENT
Board of Directors
         Pursuant to our estatutos sociales (by-laws), our management is the responsibility of our Board of
Directors. Members of our Board of Directors are elected annually at the ordinary general shareholders’
meeting by our shareholders and serve one year terms. Our by-laws provide that our Board of Directors
meet at least every three months. Our Board of Directors takes all major decisions concerning the
management of Grupo Posadas, S.A.B. de C.V. Our by-laws provide that the Board of Directors must be
comprised of at least five but no more than 21 members (plus their respective alternates) and that at least
25% of the members must be independent. The permanent and alternate Secretaries are not part of our
Board of Directors. Our by-laws also require that a majority of the members of our Board of Directors be
Mexican citizens. Our current Board of Directors, as appointed pursuant to the resolutions adopted in our
shareholders’ annual meetings dated March 15, 2016, is comprised of 10 permanent members and two
alternates.
        The following table lists the current members of our Board of Directors:
                                                                                              Date of
               Name                Age                          Position                     Original
                                                                                            Designation
  Pablo Azcárraga Andrade          57    Chairman of the Board of Directors                April 29, 1997
  José Carlos Azcárraga Andrade    50    Chief Executive Officer of Grupo Posadas          April 30, 2008
  Enrique Azcárraga Andrade        51    Director                                          May 31, 1991
  Fernando Chico Pardo             63    Director                                          July 26, 1995
  Juan Servitje Curzio             58    Director                                          April 30, 2012
  Luis Alfonso Nicolau Gutiérrez   54    Independent Director                              April 30, 2012
  Jorge Soto y Gálvez              72    Independent Director                              April 28, 2006
  Silvia Sisset Harp Calderoni     44    Director                                          April 5, 2010
  Carlos Levy Covarrubias          54    Director                                          April 27, 2006
  Benjamín Clariond Reyes-Retana 67      Independent Director                              March 15, 2013

       Mr. Pablo Azcárraga Andrade, Mr. Enrique Azcárraga Andrade and Mr. Jose Carlos Azcárraga
Andrade are brothers. Mr. Juan Servitje Curzio is married to Cecilia Azcárraga Andrade. The alternate
members of the Board of Directors are Alfredo Loera Fernández and Charbel Christian Francisco Harp
Calderoni, to represent indistinctly Silvia Sisset Harp Calderoni and Carlos Levy Covarrubias at the board
meetings.
        Set forth below is a brief summary of the business experience of our directors:
Pablo Azcárraga Andrade
         Mr. Azcárraga is currently the Chairman of the Board of Directors. Since Mr. Azcárraga’s arrival
at Grupo Posadas, S.A.B. de C.V., in 1986, he has held various positions within Grupo Posadas, such as
General Director of Fiesta Americana Condesa Cancún, General Director of the Fiesta Americana Hotel
Division, and he has been in charge of numerous hotel openings, development and management projects
such as Holiday Inn Crowne Plaza (today Fiesta Americana Reforma) and Fiesta Americana Condesa
Cancún, among others. From 1992 through late 2008, Mr. Azcárraga led the supervision, management,
development and aggressive expansion of the Posadas’ hotels and brands, including Fiesta Americana,
Grand Fiesta Americana, Fiesta Inn in Mexico and Posadas’ prior Caesar Park and Caesar Business
hotels in South America.
        Mr. Azcárraga holds an accounting degree from Universidad Anáhuac, Mexico City and a
master’s degree in hotel management from Cornell University. He also holds an executive degree in




                                                    119
advanced management from Harvard University.         Mr. Azcárraga is also involved in the charitable
activities of Fundación Posadas, A.C.
José Carlos Azcárraga Andrade
        José Carlos Azcárraga is Chief Executive Officer for Grupo Posadas since November 11, 2011.
He holds a degree in Industrial Engineering from Anáhuac University, Mexico City Campus, and an MBA
from the J.L. Kellogg Graduate School, Northwestern University, in Evanston, Illinois.
        Prior to Grupo Posadas, Mr. Azcárraga worked for Booz Allen & Hamilton, and Chase Manhattan
Bank in New York City.
         He started his career at Posadas in 1994, leading various areas as Director of the Real Estate
division, CEO of Fiesta Americana Vacation Club and VP of Sales & Marketing for Posadas Hotel
Management Division.
        Mr. Azcárraga is member of our Executive Committee since 2001 and part of our Board of
Directors since 2008.
        Also, Mr. Azcárraga was elected in 2008 for a 2-year term as Chairman of AMDETUR (the
Mexican Resort Development Association) and since 2010 he has been a member of the Board of
Directors of the American Resort Development Association.
Enrique Azcárraga Andrade
        Mr. Azcárraga is an industrial engineer with MBA studies from Harvard University. He has
worked in several prestigious Mexican companies such as Operadora de Bolsa, S.A. de C.V., Grupo
Posadas, S.A.B. de C.V., DESC–Sociedad de Fomento Industrial, GBM–Grupo Bursátil Mexicano, S.A.B.
de C.V., and is currently the General Director of Exio, S.C., an investment consulting and family office
company.
Fernando Chico Pardo
        Mr. Chico holds a college degree in business and a master’s degree in business administration
from Northwestern University. Mr. Chico has held several positions in the following companies: Bimbo,
S.A. de C.V., Anderson Clayton, Bank of America, Salomon Brothers, Standard Chartered Bank, Mocatta
Metals Corporation, Casa de Bolsa Acciones y Asesoría Bursátil, Inversora Bursátil, Grupo Financiero
Inbursa and is currently the President of Promecap, S.C. and ASUR, S.A.B. de C.V. Mr. Chico is also an
active member of the Board of Directors of: Grupo Financiero Inbursa, Condumex, S.A. de C.V., Grupo
Carso, S.A.B. de C.V., Sanborns, S.A. de C.V., Sears Roebuck de Mexico, United Pension Fund,
Quantum Group of Funds and Papalote Museo del Niño, among others.
Juan Servitje Curzio
        Mr. Servitje is an industrial engineer who graduated from Universidad Anahuac and holds a
master’s degree in business administration with honors from Northwestern University’s J.L. Kellogg
School of Management. He is the Chairman of the Board of Directors of Productos Rich, S.A. de C.V.,
and since 2000, he has been the Chairman of Rich Products Corporation for Latin America. He is also a
member of the Board of Grupo FRIALSA, a leading company in Mexico in controlled temperature storage
and distribution. He also participates in various nonprofit organizations such as ENACTUS where he is
also Chairman of the Board, SIFE (Students in Free Enterprise), among others.
Luis Alfonso Nicolau Gutiérrez
        Mr. Nicolau is a lawyer who graduated from the Escuela Libre de Derecho and he holds a
Master’s Degree in Law from Columbia University. He is a partner of the Law Firm Ritch, Mueller, Heather
y Nicolau, S.C. Mr. Nicolau is a director for Morgan Stanley México and Shakey’s Pizza México, chairman
of the Fulbright Trust, a member of the Museo del Niño Trust and a member of the Oversight Committee
of the Mexican Stock Exchange. Mr. Nicolau is the author of various legal publications.
Jorge Soto y Gálvez
        Mr. Soto holds an accounting degree from Universidad Nacional Autónoma de México. Prior to
joining Grupo Posadas, S.A.B. de C.V., Mr. Soto worked at Arthur Andersen and managed some of the


                                                  120
elite clients of the firm, until becoming part of the Executive Committee for the Mexico division. Mr. Soto
has been a member of the board of directors of several elite clients of Arthur Andersen and currently has
his own consulting company.
Silvia Sisset Harp Calderoni
        Ms. Harp holds a bachelor’s degree in accounting from ITAM. She has held different positions at
Robert’s and Filantropía, Educación y Cultura A.C. She was the CEO of the Fundación Alfredo Harp
Helú, and has been the Chairman of its board of directors since 2006. She is a member of the Board of
Directors of Grupo Martí and the Patronato of Fundación Teletón, among others.
Carlos Levy Covarrubias
        Mr. Levy holds a bachelor’s degree in business from Universidad Iberoamericana. In 1987, he
joined Casa de Bolsa Accival and held several operative positions until he became Operations Director.
From 1991 through 2005, Mr. Levy held several positions in Grupo Financiero Banamex-Accival, such as
Director of Assets Management Coordination, Deputy General Director of the Treasury, General Director
of Casa de Bolsa Accival, and Corporate Director of Specialized Banking and Asset Management of
Grupo Financiero Banamex. After leaving Banamex, Mr. Levy founded his own investment management
company. From 2003 through 2005, Mr. Levy was also President of the Asociación Mexicana de
Intermediarios Bursátiles (Mexican Association of Financial Intermediaries).
Benjamín Clariond Reyes-Retana
          Mr. Clariond has a degree in business administration from the Instituto Tecnológico y de Estudios
Superiores de Monterrey, a certificate in upper level corporate management from the Industrial Studies
Center in Geneva, and a certificate in family-owned enterprises management from the Wharton School, of
the University of Pennsylvania. He has held various upper executive level positions in Grupo IMSA in
Monterrey and was chairman and member of the board of diverse industrial, banking and service
institutions. He has been a house representative elected to the LIV legislature for the I Federal Electoral
District of Nuevo Leon, a member of the Committees for Human Settlements and Public Works, Industrial
Capital and Promotion and Communication and Transportation, and also served on the technical
committee of the chamber of representatives. He was the Municipal President of Monterrey and interim
Governor of the state of Nuevo Leon appointed by congress in 1996. He is currently a Federal
Representative elected by proportional representation for Nuevo Leon to the LXI Legislature.
Executive Committee
        Pursuant to our by-laws, we have an Executive Committee elected by the Board of Directors
consisting of at least three, but no more than five, members. The Executive Committee is currently
comprised of Pablo Azcárraga Andrade, Enrique Azcárraga Andrade, and Carlos Levy Covarrubias.
      The main role of the Executive Committee is to analyze the matters referred to it by the
Company.
Corporate Practices Committee
        Both the Mexican Securities Market Law and our by-laws require us to have a Corporate
Practices Committee that is currently comprised of Messrs. Luis Alfonso Nicolau Gutiérrez, as President,
Jorge Soto y Gálvez and Benjamín Clariond Reyes-Retana. The Corporate Practices Committee is
responsible for, among other things:
            •   providing its opinion to the Board of Directors with respect to matters that are under its
                responsibility, pursuant to the Mexican Securities Market Law;
            •   requesting the opinion of independent experts when considered convenient, for the
                adequate performance of its functions or when requested by the Mexican Securities
                Market Law; and
            •   calling shareholders’ meetings and including relevant items for the agenda of such
                meetings, as they believe necessary.




                                                   121
Audit Committee
       Both the Mexican Securities Market Law and our by-laws require us to have an Audit Committee.
The Audit Committee is responsible for, among other things:
           •   reviewing our financial statements and assuring compliance with the applicable financial
               reporting standards;
           •   preparing an annual report of activities for submission to the Board of Directors;
           •   reviewing financial proposals before submission to our Board of Directors;
           •   issuing opinions regarding related party transactions prior to submission to the Board of
               Directors, and seeking the opinion of experts in connection therewith as appropriate; and
           •   periodically meeting with our internal auditor to review audit reports.
        The current members of our Audit Committee are Jorge Soto y Gálvez, as President, Luis Alfonso
Nicolau Gutiérrez and Benjamín Clariond Reyes-Retana, each of whom is an independent member of our
Board of Directors.




                                                   122
Officers
        Set forth below are the names, ages and current positions of our officers, together with their years
of service with us (rounded to the nearest year). These officers are responsible for our day-to-day
management and operations and are the heads of our main operational and financial departments:


                                                                                             Years with
               Name                Age                        Position
                                                                                              Posadas


  Pablo Azcárraga Andrade          57    Chairman of the Board of Directors                   31
  José Carlos Azcárraga Andrade    50    Chief Executive Officer of Grupo Posadas             25
  Javier Barrera Segura            53    Chief Executive Officer of Franchises                27
  Jorge Carvallo Couttolenc        59    Chief Executive Officer of Inmobiliaria Posadas      22
  Arturo Martínez del Campo
                                   49    Chief Financial Officer                               1
   Saucedo
  Enrique Calderón Fernández       49    Chief Executive Officer of Hotelera Posadas           9
  Gerardo Rioseco Orihuela         52    Chief Executive Officer of Vacation Properties       16


         Set forth below is a brief summary of the business experience of our officers who are not also
directors:
Javier Barrera Segura
       Mr. Barrera holds a degree in Economics at the ITAM and a Master’s degree in Business
Administration from Tulane University. In 1986, he was granted the National Award in Economics.
        For more than 26 years, he has held important positions in Grupo Posadas, S.A.B. de C.V.,
including marketing, branding, distribution human resources and technology. Before becoming CEO of
Posadas Franchise, Mr. Barrera was responsible for designing and launching Fiesta Americana Vacation
Club.
Jorge Carvallo Couttolenc
       Mr. Carvallo is currently the Executive Vice President and Chief Executive of Inmobiliaria
Posadas. Mr. Carvallo has been in Grupo Posadas, S.A.B. de C.V. for more than 22 years. He is
responsible for our owned and leased hotels and the development division of Grupo Posadas, S.A.B. de
C.V. Mr. Carvallo has participated in several financial, operational and development ventures within
Grupo Posadas, S.A.B. de C.V., including the company’s incursion in South America. Mr. Carvallo
served as the head of Grupo Posadas, S.A.B. de C.V., in South America for three years and has been
dynamically involved in the expansion of the hotel management and operation activities of Grupo
Posadas, S.A.B. de C.V. throughout Mexico.
        Mr. Carvallo holds a degree in chemical engineering from Universidad Iberoamericana, Mexico
City, and a master’s degree in business administration from Instituto Tecnológico Autónomo de México,
or ITAM, in Mexico City.
Gerardo Rioseco Orihuela
        Mr. Rioseco is an Industrial Engineering graduate from the Universidad Anáhuac del Sur. He
joined Grupo Posadas in 1999 after gaining experience in the finance and tourism industries. At Grupo
Posadas Mr. Rioseco initially participated in the creation of Fiesta Americana Vacation Club as Project
Director in Los Cabos. After 9 years as Commercial Director of Fiesta Americana Vacation Club and then
as Commercial Director of Posadas Vacation Properties, he was appointed as the General Director of
Posadas Vacation Properties.



                                                    123
Arturo Martínez del Campo Saucedo
        Mr. Martínez is an Industrial Engineer graduate from the Universidad Iberoamericana and holds a
Master’s degree in Administration from the University of California. He joined Grupo Posadas on February
2, 2015. He has broad experience in finance and management gained at Grupo Financiero Banamex–
Citigroup, where he worked for 26 years and held the positions of Mexico Cost Management Head,
Financial Planning Corporate Bank and Treasury Corporate Financial Planning and Treasury (Mexico /
Latam), Chief Financial and Administrative Officer at Crédito Familiar and Chief Financial Officer at
Avantel /and Banamex Citigroup, among others.
Enrique Calderón Fernández
        Mr. Calderón has a degree in Hotel Industry from the Centro de Estudios Superiores de San
Angel. He has worked for more than 20 years in the hotel business sales and tourism service areas in
Posadas and other companies in the tourism sector, creating marketing, advertising and sales strategies.
In 1999, Mr. Calderón joined Grupo Posadas as Sales Director for Fiesta Americana hotels. Since then
he has held several positions such as Sales Director South Region, City Hotels Key Accounts Director
and Mexico Sales Director. In 2010 Mr. Calderón was appointed Chief Commercial Officer and was
responsible for the total revenue generation for our hotel portfolio. In February 2015 Mr. Calderón
became Chief Executive Officer of Hotelera Posadas.




                                                  124
                                     PRINCIPAL SHAREHOLDERS

        Our common stock has been listed on the Mexican Stock Exchange since 1992. There are
approximately 496 million Series “A” common shares outstanding and fully paid. The Series “A” shares
have showed a non-trading status according to the rates of the Mexican Stock Exchange. The listings of
the Series “A” shares has never been suspended by any regulatory authority.
        On November 11, 2011, at a General Extraordinary Shareholders' Meeting, our shareholders
voted to amend our by-laws to provide for the exchange of our Series L shares for Series “A” shares on a
one-for-one basis. As of the date of the offering memorandum, the conditions and authorizations
necessary to update the registration of its shares in the Registro Nacional de Valores (National Securities
Registry) have been fulfilled and the corresponding exchange was made.
        As of March 15, 2016, to the best of our knowledge, (i) members of the Azcárraga Andrade family
own in the aggregate more than 10% of our capital stock, (ii) an investment company managed by Accival
own more than 10% of the corporate capital of the Company, and (iii) a trust managed by Banco Nacional
de México, S.A., integrante del Grupo Financiero Banamex, División Fiduciaria holds more than 10% of
the Company’s corporate capital. Some members of the Azcárraga Andrade family, who are also
relevant officers and directors of Grupo Posadas, S.A.B. de C.V. each individually hold more than 1% but
less than 10% of our capital stock, and jointly have approximately 12% of our capital stock. To the best of
our knowledge, other than Ms. Maria Luisa Andrade de Azcárraga, no person, including any other
member of the Azcárraga Andrade family, directly or indirectly, owns more than 5% of our Series “A”
shares.
         On March 7, 2012, our General Extraordinary Shareholders Meeting approved a Ps.900 million
private offering of subordinated debentures mandatorily convertible into 183,257,227 Series “A” shares of
the Company. The shareholders also approved the issuance of 183,257,000 Series “A” shares to be held
in Treasury and to be subscribed upon conversion of the debentures. On January 2, 2013, such
debentures were fully liquidated and on March 15, 2013, our Shareholders Meeting resolved that it was
impossible to meet the conditions to which the conditional corporate capital increases was subject,
thereby cancelling the aforementioned capital increase.




                                                   125
                                 RELATED PARTY TRANSACTIONS
        In August 2005, March and May 2008 and September 2012, we entered into certain hotel
operation and brand license agreements with companies in which Benjamín Clariond, a member of the
Board of Directors, holds an interest. Those agreements were entered into at arms’ length.
         We have granted loans from time to time to members of our Executive Committee in amounts not
exceeding the present value of 75% of the executive’s expected variable annual compensation (bonus)
for the next five years combined. These loans bear interest at what we believe to be market rates. The
loans may have up to ten-year terms. A special committee is responsible for granting these loans, based
on policies approved by our Board of Directors.
        In addition, we occasionally engage in isolated transactions with related parties involving non-
material amounts, such as the payment of fees for legal services provided to us by Ritch, Mueller,
Heather y Nicolau, S.C., of which Luis Alfonso Nicolau Gutiérrez, a member of our Board of Directors,
Corporate Practice Committee and Audit Committee, is a partner.




                                                  126
                              DESCRIPTION OF OTHER INDEBTEDNESS
          The following description summarizes material terms of certain of our loan agreements and credit
facilities, including such agreements and facilities of our subsidiaries. The description is only a summary
and is not intended to describe all of the terms of the credit arrangements that may be important.
       In general, our loan agreements and credit facilities contain restrictions such as limitations on
substantial transfers of assets, payments of dividends and debt incurrence.
Revolving Loan Agreement with Banco Santander, S.A.
         On September 29, 2015, we renewed a twelve-month revolving credit facility with Banco
Santander, S.A. for a total amount of Ps.200 million. The credit facility was secured by a mortgage on the
Fiesta Inn Aeropuerto hotel, which is owned by our subsidiaries Gran Operadora Posadas, S.A. de C.V.,
Operadora del Golfo de México, S.A de C.V., and YIPA, S.A. de C.V.
        This credit facility has certain borrowing limitations and events of default including, among others,
non-payment of principal and interest, cross-acceleration, breach of affirmative and negative covenants,
bankruptcy, liquidation or insolvency, delivery of inaccurate or false information and change of control. As
of the date of this offering memorandum, the outstanding balance was Ps.0.
Convertible Debt of Inmobiliaria del Sudeste, S.A. de C.V.
        On December 10, 2003, our subsidiary Inmobiliaria del Sudeste, S.A. de C.V. (as successor to
our subsidiary Hotelera Prestadora de Servicios del Sudeste, S.A. de C.V.) which operates the Fiesta
Americana Mérida hotel entered into a loan agreement with Palace Holding, S.A. de C.V. and our
subsidiary Promotora Inmobiliaria Hotelera, S.A. de C.V. (as successor to our subsidiary Inmobiliaria
Hotelera Posadas, S.A., de C.V.). The loan is convertible into shares of Inmobiliaria del Sudeste, S.A. de
C.V. The date for conversion or maturity of the loan is December 9, 2018. As of March 31, 2016, the
outstanding amount of the loan was U.S.$1.4 million, of which U.S.$0.7 million is debt of Palace Holding,
S.A. de C.V. The loan accrues interest at the one-month Libor rate plus a margin of 300 basis points.




                                                    127
                                     DESCRIPTION OF THE NOTES

     Posadas has issued U.S.$50,000,000 aggregate principal amount of New Notes in connection with
this offering (the “Offering”) pursuant to an Indenture dated as of June 30, 2015 (the “Indenture”), among
Posadas, as Issuer, the Guarantors (as defined below), The Bank of New York Mellon, as trustee (the
“Trustee”), Registrar, New York Paying Agent and New York Transfer Agent, and The Bank of New York
Mellon (Luxembourg) S.A., as Luxembourg Listing Agent, Luxembourg Paying Agent and Luxembourg
Transfer Agent, under which we initially issued U.S.$350,000,000 aggregate principal amount of Existing
Notes (as defined below). The following summaries of certain provisions of the Indenture do not purport to
be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the
Indenture. A copy of the Indenture is available for inspection at the offices of the Issuer and any Paying
Agent during regular business hours. In addition, for so long as any Notes are listed on the Luxembourg
Stock Exchange for trading on the Euro MTF Market and the rules of such exchange shall so require,
copies of the Indenture may be obtained upon request to the Luxembourg Paying Agent. As used in this
“Description of the Notes,” the terms “Posadas” and “Issuer” refer to Grupo Posadas, S.A.B. de C.V., a
sociedad anónima bursátil de capital variable organized under the laws of the United Mexican States, or
Mexico, but not its subsidiaries. All references to “U.S.$” or “Dollars” are to United States of America
Dollars.

     The New Notes will constitute a further issuance of, and form a single series with, our outstanding
7.875% Senior Notes due 2022 issued on June 30, 2015 in the principal amount of U.S.$350,000,000
(the “Existing Notes”). Provisions that apply equally to the Existing Notes and the New Notes may be
described collectively as regarding the “Notes.” The New Notes sold pursuant to Rule 144A under the
Securities Act will trade under the same CUSIP and ISIN numbers and have identical terms as the
Existing Notes held in the Rule 144A global note from the closing date, other than their date of issue and
their initial price to the public. The New Notes sold pursuant to Regulation S under the Securities Act will
have identical terms as the Existing Notes held in the Regulation S global note, other than their date of
issue and their initial price to the public. Through the 40th day following delivery of the New Notes, New
Notes sold pursuant to Regulation S under the Securities Act will have temporary CUSIP and ISIN
numbers. Thereafter, such Notes will trade under the same CUSIP and ISIN numbers as the Existing
Notes held in the Regulation S global note.

General

    The New Notes and the Guarantees will be senior unsecured obligations of the Issuer and the
Guarantors, ranking equal in right of payment with all other senior unsecured obligations of the Issuer and
the Guarantors. The New Notes and the Guarantees will be effectively subordinated to all existing and
future secured debt of the Issuer and the Guarantors to the extent of the assets securing such debt. As of
March 31, 2016, after giving pro forma effect to the sale of the New Notes offered hereby and the
application of the gross proceeds therefrom, all as described under “Use of Proceeds,” the Issuer and the
Guarantors would have no secured debt outstanding.

     The New Notes also will be effectively subordinated to any debt, preferred stock obligations and other
liabilities of the Issuer’s Subsidiaries who will not be Guarantors. As of March 31, 2016, Grupo Posadas,
S.A.B. de C.V. together with the Guarantors represented 90.9% and 94.1% of the Issuer’s consolidated
revenues and total assets, respectively, for the three months ended March 31, 2016.

    The claims of the Holders with respect to the Notes are subject to the prior payment of all liabilities
(whether or not for borrowed money) and to any preferred stock interest of such Subsidiaries. There can
be no assurance that, after providing for all prior claims, there would be sufficient assets available from
the Issuer and the Guarantors to satisfy the claims of the Holders of Notes. Additionally, the Issuer is
dependent upon the distribution of the earnings of its Subsidiaries, whether in the form of dividends,
advances or payments on account of intercompany obligations, to service its debt obligations. See “Risk
Factors.”




                                                     128
     Additional notes may be issued from time to time (the “Additional Notes”) subject to the limitations set
forth under “—Certain Covenants—Limitation on Indebtedness.” Any Additional Notes subsequently
issued under the Indenture will be treated as a single class with the Notes issued in the Offering for all
purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers
to purchase, provided that if any such Additional Notes are not fungible with the Notes for U.S. federal
income tax purposes, such Additional Notes will be issued with a CUSIP and ISIN number different from
those assigned to the Notes.

Payment, Transfer and Exchange

    The New Notes will bear interest at the rate per annum shown on the front cover of this offering
memorandum from the Closing Date, or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually (to Holders of record at the close of business on the
June 15 or December 15 (whether or not a Business Day) immediately preceding the Interest Payment
Date) on June 30 and December 30 of each year. The next interest payment date on the Notes, including
the New Notes, is June 30, 2016. Interest on the Notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months.

     Principal of, and interest on, the Notes will be payable, and the Notes may be exchanged or
transferred, at the office or agency of Posadas (i) in New York, New York (which initially will be the
corporate trust office of the New York Paying Agent) and (ii) so long as any Notes are listed on the
Luxembourg Stock Exchange for trading on the Euro MTF Market, in Luxembourg (which initially will be
the office of The Bank of New York Mellon (Luxembourg), S.A., the “Luxembourg Paying Agent”), or at
the option of the holder and subject to any fiscal or other laws or regulations applicable thereto, at any
other office or agency maintained by Posadas for such purpose; provided that, at the option of Posadas,
payment of interest may be made by check mailed to the address of the holders as such address appears
in the register maintained by the Trustee.

    If the due date for payment of any amount in respect of principal or interest on any Note is not a
Business Day, the holder thereof shall not be entitled to payment of the amount due until the next
succeeding Business Day and shall not be entitled to any further interest or other payment in respect of
any such delay. As used in the Indenture regarding payment, “Business Day” means a day on which
banks in New York, New York, Mexico City, Mexico, and the relevant place of payment are open for
business, are not required or permitted to be closed and are carrying out transactions in Dollars.

    The Notes will be issued in denominations of U.S.$150,000 principal amount and any integral
multiples of U.S.$1,000 in excess thereof. No service charge will be made for any registration of transfer
or exchange of Notes, but Posadas may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.

Guarantees

    The Notes will be jointly and severally guaranteed by each Mexican Wholly Owned Restricted
Subsidiary of Posadas except for (i) any Receivables Entity, (ii) Service Subsidiaries that do not have in
excess of U.S.$500,000 of assets or did not have greater than U.S.$500,000 of net income (on a
consolidated basis with its Subsidiaries) in the twelve-month period ended March 31, 2015 or (iii) certain
immaterial subsidiaries which cannot provide guarantees for local regulatory reasons. Following the Issue
Date, the Notes will be guaranteed by additional Restricted Subsidiaries of the Issuer to the extent
required under “—Additional Guarantees.”

    The Guarantee of a Guarantor will be released:

     (1)     in connection with any sale of other disposition of all of the Capital Stock of such Guarantor to
a Person other than the Issuer or any Subsidiary of the Issuer, if the sale complies with the provisions set
forth under “—Certain Covenants—Asset Sales;” or




                                                     129
    (2)     if the Issuer designates such Guarantor to be an Unrestricted Subsidiary in accordance with
the provisions set forth under “—Certain Covenants—Limitation on Designations of Unrestricted
Subsidiaries.”

   The amount of each Guarantee will be limited to the extent required under applicable fraudulent
conveyance laws to cause such Guarantee to be enforceable.

Redemption at Maturity

    The Notes will mature on June 30, 2022, unless earlier repurchased or redeemed pursuant to the
terms thereof and the Indenture. At maturity, the Notes will be repaid at 100% of the principal amount plus
accrued and unpaid interest.

Optional Redemption

  Optional Redemption With a Make-Whole Premium

    Prior to June 30, 2019, the Issuer will have the right, at its option, to redeem any of the Notes, in
whole or in part, at any time or from time to time prior to their maturity at a redemption price equal to the
greater of (1) 100% of the principal amount of such Notes and (2) the sum of the present value of each
remaining scheduled payment of principal and interest thereon (exclusive of interest accrued to the date
of redemption) up to and including June 30, 2019, assuming payment of the redemption price for that
date as set forth below, discounted to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points (the “Make-Whole
Amount”), plus in each case any accrued and unpaid interest on the principal amount of the Notes to the
date of redemption.

    “Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-
annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption date.

    “Comparable Treasury Issue” means the United States Treasury security or securities selected by an
Independent Investment Banker as having an actual or interpolated maturity that would be utilized, at the
time of selection and in accordance with customary financial practice, in pricing new issues of corporate
debt securities of maturity of June 30, 2019.

    “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the
Issuer.

   “Comparable Treasury Price” means, with respect to any redemption date (1) the average of the
Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest
such Reference Treasury Dealer Quotation or (2) if fewer than four such Reference Treasury Dealer
Quotations are obtained, the average of all such quotations.

     “Reference Treasury Dealer” means Citigroup Global Markets Inc., J.P. Morgan Securities LLC and
Merrill Lynch, Pierce, Fenner & Smith Incorporated or any of their affiliates which are primary United
States government securities dealers and not less than two other leading primary United States
government securities dealers in New York City reasonably designated by the Issuer; provided that if any
of the foregoing cease to be a primary United States government securities dealer in New York City (a
“Primary Treasury Dealer”), the Issuer will substitute therefor another Primary Treasury Dealer.

    “Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and
any redemption date, the average, as determined by an Independent Investment Banker, of the bid and
asked price for the Comparable Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at
3:30 p.m. New York time on the third Business Day preceding such redemption date.



                                                    130
  Optional Redemption Without a Make-Whole Premium

     On and after June 30, 2019, the Issuer may redeem the Notes, in whole or in part, at the redemption
prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus
accrued and unpaid interest thereon, if any, to but excluding the applicable redemption date, subject to
the right of Holders of Notes of record on the relevant record date to receive interest due on the relevant
interest payment date, if redeemed during the twelve-month period beginning on of each of the years
indicated below:

                    Year                                          Percentage

                    2019                                          103.938%

                    2020                                          101.969%

                    2021 and thereafter                           100.000%

  Optional Redemption With Proceeds of Equity Offerings

    In addition, at any time, or from time to time, on or prior to June 30, 2018, the Issuer may, at its
option, use all or any portion of the net cash proceeds of one or more Equity Offerings to redeem up to
35% of the aggregate principal amount of the Notes issued at a redemption price equal to 107.875% of
the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; provided
that at least 65% of the aggregate principal amount of Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of
any Equity Offering, the Issuer shall consummate such redemption not more than 90 days after the
consummation of that Equity Offering.

  Selection and Notice of Redemption

    In the event that less than all of the Notes are to be redeemed at any time, selection of the Notes for
redemption will be made in accordance with applicable DTC procedures and in compliance with the
requirements of the principal national securities exchange, if any, on which the Notes are listed; provided
that no Notes of a principal amount of U.S.$1,000 or less shall be redeemed in part.

     Notice of an optional redemption will be mailed or transmitted electronically at least 10 but not more
than 60 days before the redemption date to each Holder of a Note to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note will
state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions
thereof called for redemption as long as the Issuer has deposited with the paying agent funds in
satisfaction of the applicable redemption price plus accrued and unpaid interest, if any, to the date of
redemption pursuant to the Indenture.

    Any redemption and any notice of redemption thereof may, at the Issuer’s discretion, be subject to
one or more conditions precedent, including but not limited to, completion of an Equity Offering or Change
of Control, issuance of Indebtedness or another corporate transaction. For the avoidance of doubt, in no
event shall a condition precedent to any redemption permit the redemption date to be more than 60 days
after the date of redemption notice.

  Redemption for Tax Reasons

     The Notes may be redeemed, at the option of Posadas, in whole but not in part, at any time, upon
giving not less than 30 or more than 60 days’ notice to Holders, at a redemption price equal to 100% of
the principal amount thereof, together with accrued and unpaid interest to the date fixed for redemption, if
Posadas, or any Guarantor has become or would become obligated to pay any Additional Amounts (as



                                                    131
defined below) on the next date on which any payment is due under the Notes or the Guarantees but only
if such Additional Amount is attributable to any tax, duty, levy, impost, assessment or other governmental
charge imposed or levied by any Relevant Jurisdiction (as defined below) or of any subdivision thereof or
by any authority or agency therein or thereof having power to tax at a rate greater than 4.9%, as a result
of any change in, or amendment to (1) the laws, treaties, rules or regulations of any Relevant Jurisdiction
or of any political subdivision thereof or by any authority or agency of or in a Relevant Jurisdiction having
power to tax; or (2) the interpretations relating to those laws, treaties, rules or regulations, that have
general application, made by any legislative body, governmental or regulatory agency or authority of a
Relevant Jurisdiction or of any political subdivision or by any authority or agency of or in a Relevant
Jurisdiction having power to tax, including the publication of any regulatory determination occurring after
the date hereof, or if later, the date a jurisdiction became a Relevant Jurisdiction, and which obligation
cannot be avoided by the use of reasonable measures available to Posadas or any Guarantor, as
applicable (for the avoidance of doubt, in the case of any Guarantor, reasonable measures shall include
causing payment to be made by another Guarantor).

    A notice of redemption may not be issued earlier than 90 days prior to the earliest date on which the
Issuer or any Guarantor would be obligated to pay such Additional Amounts were a payment on the
Notes or the Guarantees then due.

     Prior to the publication or delivery to holders of any notice of redemption pursuant to this provision,
the Issuer will deliver to the Trustee:

    •   a certificate signed by one of the Issuer’s duly authorized representatives stating that the Issuer is
        entitled to effect the redemption and setting forth a statement of facts showing that the conditions
        precedent to the Issuer’s right to redeem have occurred; and

    •   an opinion of legal counsel (which may be the Issuer’s counsel) of recognized standing to the
        effect that the Issuer has or will become obligated to pay such Additional Amounts as a result of
        such change or amendment.

This notice, once delivered to the Trustee, will be irrevocable. The Issuer will give notice to Holders of the
Notes pursuant to the provisions described under “—Notices” of any redemption it proposes to make at
least 30 days (but not more than 60 days) before the redemption date.

    The term “Relevant Jurisdiction” as used herein means (1) Mexico, (2) any jurisdiction in which the
Issuer or any Guarantor (including any successor entity) is then incorporated, engaged in business or
resident for tax purposes or (3) any jurisdiction by or through which payment is made.

Additional Amounts

    Posadas is required by Mexican law to deduct Mexican withholding taxes at a rate of 4.9% (subject to
certain exceptions) from payments of interest to investors who are not residents of Mexico for tax
purposes, and Posadas will pay additional amounts on those payments (and certain other payments) to
the extent described below (“Additional Amounts”).

    The Issuer and the Guarantors will pay to Holders of the Notes such Additional Amounts as may be
necessary so that every net payment of interest (including any premium paid upon redemption of the
Notes and any discount deemed interest under the law of any Relevant Jurisdiction) or principal to the
Holders will not be less than the amount provided for in the Notes to be then due and payable under the
Notes. By net payment, we mean the amount that we or our paying agent pay any Holder after deducting
or withholding an amount for or on account of any present or future taxes, duties, assessments or other
governmental charges imposed with respect to that payment by any Relevant Jurisdiction or any political
subdivision or taxing authority thereof or therein.

     The Issuer’s and the Guarantors’ obligation to pay Additional Amounts is subject to several important
exceptions. The Issuer and the Guarantors will not be required to pay Additional Amounts to any Holder
for or on account of any of the following:


                                                     132
    •   any taxes, duties, assessments or other governmental charges imposed solely because at any
        time there is or was a connection between the Holder and a Relevant Jurisdiction (other than the
        mere receipt of a payment or the ownership or holding of a Note);

    •   any tax that is an estate, inheritance, gift, sales, personal property or similar tax, assessment or
        other governmental charge imposed with respect to the Notes;

    •   any taxes, duties or other similar governmental charges imposed (or imposed at a higher rate)
        solely because the Holder or any other Person fails to comply with any certification, identification
        or other reporting requirement concerning the nationality, residence, identity or connection with
        the Relevant Jurisdiction, for tax purposes, of the Holder or any beneficial owner of the Note if
        compliance is required by law, regulation thereunder or by an applicable income tax treaty to
        which the Relevant Jurisdiction is a party, as a precondition to exemption from, or reduction in the
        rate of, the tax or other similar governmental charge and we have given the Holders at least 30
        days’ notice that Holders will be required to provide such information and identification;

    •   any tax, duty, assessment or other governmental charge payable otherwise than by deduction or
        withholding from payments on the Notes (but excluding stamp or similar taxes);

    •   any payment on the Note to a Holder that is a fiduciary or partnership or a person other than the
        sole beneficial owner of any such payment, to the extent that a beneficiary or settlor with respect
        to such fiduciary, a member of such a partnership or the beneficial owner of the payment would
        not have been entitled to the Additional Amounts had the beneficiary, settlor, member or
        beneficial owner been the Holder of the Note; and

    •   any combination of the above.

     The exceptions to the obligations to pay Additional Amounts stated in the third bullet point above will
not apply if the provision of information, documentation or other evidence described in the applicable
bullet point would be materially more onerous, in form, in procedure or in the substance of information
disclosed, to a Holder or beneficial owner of a Note (taking into account any relevant differences between
U.S. and the Relevant Jurisdiction’s law, regulations or administrative practice) than comparable
information or other reporting requirements imposed under U.S. tax law, regulations and administrative
practice (such as IRS Forms W-8BEN, W-8BEN-E, and W-9).

     The exceptions to the obligations to pay Additional Amounts stated in the third bullet point above will
not apply if, with respect to taxes imposed by Mexico or any political subdivision or taxing authority
thereof, Article 166, Section II, of the Mexican income tax law (or a substantially similar successor of such
Article, whether included in any law or regulation) is in effect, unless (a) the provision of the information,
documentation or other evidence described in the applicable bullet point is expressly required by statute,
regulation, or published administrative practice of general applicability in order to apply Article 166,
Section II, of the Mexican income tax law (or a substantially similar successor of such Article, whether
included in any law or regulation), (b) the Issuer or a Guarantor, as applicable, cannot obtain the
information, documentation or other evidence necessary to comply with the applicable laws and
regulations on our own through reasonable diligence and without requiring it from Holders, and (c) the
Issuer or a Guarantor, as applicable, otherwise would meet the requirements for application of Article
166, Section II, of the Mexican income tax law (or a substantially similar successor of such Article,
whether included in any law or regulation). Additionally, the third bullet point above shall not be construed
to require that any Holder register with the Mexican Ministry of Finance and Public Credit to obtain
eligibility for an exemption or a reduction of Mexican withholding tax.

     The Issuer and the Guarantors will provide the Trustee with documentation satisfactory to the Trustee
evidencing the payment of taxes in respect of which any Additional Amount have been paid. The issuer or
a Guarantor, as applicable, will make copies of such documentation available to the Holders of the Notes
or the relevant paying agent upon request.




                                                     133
    Any reference in this offering memorandum, the Indenture or the Notes to principal, premium, interest
or any other amount payable in respect of the Notes by us will be deemed also to refer to any Additional
Amount that may be payable with respect to that amount under the obligations referred to in this section.

     In the event of any merger or other transaction described and permitted under “—Limitation on
Merger, Consolidation and Sale of Assets,” in which the surviving entity is a corporation organized and
validly existing under the laws of a country other than Mexico, all references to a Relevant Jurisdiction,
under this “Additional Amounts” section and under “Redemption for Tax Reasons” will be deemed, for the
avoidance of doubt, to include such country and any political subdivision therein or thereof, law or
regulations of such country, and any taxing authority of such country or any political subdivision therein or
thereof, respectively.

Repurchase at the Option of Holders

  Change of Control

    The Indenture will provide that, upon the occurrence of a Change of Control, each Holder will have
the right to require that the Issuer purchase all or a portion of such Holder’s Notes pursuant to the offer
described below (the “Change of Control Offer”), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest, if any, thereon to the date of purchase (the “Change of Control
Payment”).

      Within 30 days following the date upon which the Change of Control occurs, the Issuer must send, by
first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of
the Change of Control Offer. Such notice will state, among other things, the purchase date, which will be
no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control
Payment Date”). Holders electing to have a Note purchased pursuant to a Change of Control Offer will be
required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse
of the Note completed, to the paying agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control Payment Date.

    On the Change of Control Payment Date, the Issuer will, to the extent lawful:

    (1)     accept for payment all Notes or portions of Notes properly tendered pursuant to the Change
of Control Offer;

     (2)     deposit with the paying agent an amount equal to the Change of Control Payment in respect
of all Notes or portions of Notes properly tendered; and

     (3)      deliver or cause to be delivered to the Trustee the Notes properly accepted together with an
officers’ certificate stating the aggregate principal amount of Notes or portions of Notes being purchased
by the Issuer.

    The paying agent will promptly mail to each Holder of Notes properly tendered the Change of Control
Payment for such Notes, and the Trustee will promptly authenticate and mail to each Holder a new Note
in a principal amount equal to any unpurchased portion of the Notes surrendered, if any; provided,
however, that each new Note will be in a principal amount of U.S.$150,000 or integral multiples of
U.S.$1,000 thereafter.

     If a Change of Control Offer is required to be made, there can be no assurance that the Issuer will
have available funds sufficient to pay the Change of Control purchase price for all the Notes that might be
delivered by Holders seeking to accept the Change of Control Offer. In the event the Issuer is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Issuer expects that it would seek
third party financing to the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Issuer would be able to obtain such financing.




                                                    134
     Neither the Board of Directors of the Issuer nor the Trustee may waive the covenant relating to a
Holder’s right to require the purchase of Notes upon a Change of Control. Restrictions in the Indenture
described herein on the ability of the Issuer and the Restricted Subsidiaries to incur additional
Indebtedness, to grant Liens on their property, to make Restricted Payments and to make Asset Sales
may also make more difficult or discourage a takeover of the Issuer, whether favored or opposed by the
management of the Issuer. Consummation of any such transaction in certain circumstances may require
the purchase of the Notes, and there can be no assurance that the Issuer or the acquiring party will have
sufficient financial resources to effect such purchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult or discourage any leveraged
buyout of the Issuer or any of its Subsidiaries by the management of the Issuer. While such restrictions
cover a wide variety of arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction.

    The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations to the extent such laws and regulations are applicable in connection with a
Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict
with the “Change of Control” provisions of the Indenture, the Issuer shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its obligations under the
“Change of Control” provisions of the Indenture by virtue thereof.

Certain Covenants

  Limitation on Indebtedness

    (a)     Under the terms of the Indenture, Posadas will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness; provided, however, that Posadas may Incur
Indebtedness and any Restricted Subsidiary may Incur Indebtedness if on the date of the Incurrence of
such Indebtedness, the Consolidated Interest Coverage Ratio would be greater than 2.5 to 1.0.

     The foregoing restrictions will not apply to any of the following Incurrence of Indebtedness
(collectively, “Permitted Indebtedness”):

        (i)     Indebtedness under the Notes issued in this Offering in an aggregate principal amount
    not to exceed U.S.$350 million;

          (ii)     Indebtedness under Credit Facilities at any time outstanding in an amount not to exceed
    the greater of (x) U.S.$75.0 million and (y) 10% of Consolidated Net Tangible Assets (reduced by the
    amount of any prepayment thereof with the Net Cash Proceeds of any Asset Sale pursuant to clause
    (iii)(a) of the first paragraph of “—Asset Sales”);

        (iii)    Indebtedness of Posadas and the Restricted Subsidiaries (not otherwise described in
    clauses (i) and (ii) above and subject to the provisions of clause (d) below) outstanding on the Closing
    Date;

         (iv)     Indebtedness of the Issuer owed to a Restricted Subsidiary and Indebtedness of any
    Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided, however, that
    (x) any Indebtedness owed by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary that is
    not a Guarantor shall be subordinated to prior payment in full of the Notes and (y) upon any such
    Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any
    Person other than the Issuer or a Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as
    applicable, shall be deemed to have Incurred Indebtedness not permitted by this clause (iv) and
    provided further, that the Issuer, its parent companies and any Restricted Subsidiary shall agree to
    vote such intercompany Indebtedness, or provide such consents in connection with such
    intercompany Indebtedness, in any restructuring pursuant to any Mexican Restructuring, in a manner
    that is consistent with the vote of, or the consents provided by, the holders of the Notes and other
    unaffiliated creditors of the same class as the Notes;


                                                   135
     (v)      Indebtedness of the Issuer or any Restricted Subsidiary issued in exchange for, or the
net proceeds of which are used to refinance or refund, Indebtedness permitted by the Indenture
(other than Indebtedness outstanding under subclauses (a)(ii), (a)(iv), (a)(vi), (a)(vii), (a)(viii), (a)(ix),
(a)(x), (a)(xi), (a)(xii), (a)(xiii), (a)(xiv) and (a)(xv)) and any refinancing or refunding thereof in an
amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees
and expenses); provided that (A) Indebtedness the proceeds of which are used to refinance or refund
the Notes or Indebtedness that is pari passu with, or subordinate in right of payment to, the Notes
shall only be permitted under this subclause (a)(v) if (x) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness, by its terms or
by the terms of any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining
Notes, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the
Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant
to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in
right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes; (B) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not have a Stated Maturity earlier than the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at
least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; and (C)
the obligors with respect to such new Indebtedness are the obligors on the Indebtedness to be
refinanced or refunded (such new Indebtedness under this subclause (a)(v), “Refinancing
Indebtedness”);

     (vi)    Indebtedness (A) in respect of workers’ compensation claims, self-insurance obligations,
bid, reimbursement, performance, surety or appeal bonds or obligations provided in the ordinary
course of business, including guarantees and letters of credit functioning or supporting these bonds
or obligations (in each case other than for an obligation for money borrowed); (B) under Hedging
Obligations; provided that such agreements (x) are designed solely to protect Posadas or its
Restricted Subsidiaries against fluctuations in foreign currency exchange rates, commodity prices or
interest rates and (y) do not increase the Indebtedness of the obligor outstanding at any time other
than as a result of fluctuations in foreign currency exchange rates, interest rates or commodity prices
or by reason of fees, indemnities and compensation payable thereunder; and (C) arising from
agreements providing for indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing any obligations of
Posadas or any of its Restricted Subsidiaries pursuant to such agreements, in any case incurred in
connection with the disposition of any business, assets or Subsidiary of Posadas (other than
guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business,
assets or Subsidiary of Posadas for the purpose of financing such acquisition), in a principal amount
not to exceed the gross proceeds actually received by Posadas or any Restricted Subsidiary in
connection with such disposition;

    (vii)    Indebtedness of Posadas and its Restricted Subsidiaries, to the extent the net proceeds
thereof are promptly deposited to defease the Notes as described under “—Defeasance”;

   (viii) guarantees of the Notes and guarantees of Indebtedness of Posadas or any Restricted
Subsidiary by any Guarantor;

    (ix)   guarantees by Posadas of Indebtedness of any Restricted Subsidiary permitted
hereunder;

    (x)     additional Indebtedness of Posadas and the Restricted Subsidiaries in an aggregate
principal amount not to exceed U.S.$50.0 million at any one time outstanding;

    (xi)     Indebtedness of Posadas and the Restricted Subsidiaries having a maturity no later than
one year after the incurrence thereof in an amount incurred for working capital purposes; provided
that such Indebtedness, together with all other Indebtedness outstanding under this clause (xi) at the
time of incurrence, does not to exceed 15% of Consolidated Net Tangible Assets of Posadas;


                                                  136
        (xii)    Indebtedness of a Restricted Subsidiary Incurred and outstanding on the date on which
    such Restricted Subsidiary was acquired by Posadas (other than Indebtedness Incurred (a) to
    provide all or any portion of the funds utilized to consummate the transaction or series of related
    transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was
    otherwise acquired by Posadas or (b) otherwise in connection with, or in contemplation of, such
    acquisition); provided, however, that at the time such Restricted Subsidiary is acquired by Posadas,
    Posadas would have been able to Incur U.S.$1.00 of additional Indebtedness pursuant to the first
    paragraph of this covenant;

        (xiii)   Indebtedness under Permitted Vacation Club Financing Facilities in an amount not to
    exceed the greater of (x) U.S.$100.0 million at any one time outstanding (reduced by the amount of
    any prepayment thereof with the Net Cash Proceeds of any Asset Sale pursuant to clause (iii)(a) of
    the first paragraph of “—Asset Sales”) and (y) 80% of the amount of the accounts receivable of the
    Vacation Club Business (excluding accounts receivables sold, conveyed or transferred to a
    Receivables Entity in connection with a Receivables Transaction) at the time such Indebtedness is
    Incurred;

        (xiv)   Indebtedness of the Issuer or any of its Restricted Subsidiaries arising from the honoring
    by a bank or other financial institution of a check, draft or similar instrument inadvertently (including
    daylight overdrafts paid in full by the close of business on the day such overdraft was Incurred) drawn
    against insufficient funds in the ordinary course of business; provided that such Indebtedness is
    extinguished within five Business Days of Incurrence; and

        (xv)    Indebtedness of the Issuer or any Restricted Subsidiary represented by Capitalized
    Lease Obligations or Purchase Money Indebtedness, in each case Incurred for the purpose of
    acquiring or financing all or any part of the purchase price or cost of construction or improvement of
    property or equipment used in the business of the Issuer or such Restricted Subsidiary in an
    aggregate amount at any time not to exceed the greater of (x) U.S.$25.0 million and (y) 2.5% of
    Consolidated Net Tangible Assets.

    (b)     For purposes of determining compliance with any U.S. dollar-denominated restriction on the
Incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in
a non-U.S. currency will be calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was Incurred or, in the case of revolving credit Indebtedness, first committed;
provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a non-U.S.
currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing,
such U.S. dollar-denominated restriction will be deemed not to have been exceeded so long as the
principal amount of such Refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness Incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, will be
calculated based on the currency exchange rate applicable to the currencies in which such Refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.

    (c)     For purposes of determining any particular amount of Indebtedness: (i) guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (ii) any Liens granted pursuant to the
equal and ratable provisions of the Indenture shall not be treated as Indebtedness.

     (d)     For purposes of determining compliance with this covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness described herein,
Posadas, in its sole discretion, shall classify, and from time to time may reclassify, such item of
Indebtedness; provided that all Indebtedness of Posadas and its Restricted Subsidiaries outstanding on
the Closing Date (x) under Credit Agreements (after giving effect to the use of proceeds contemplated by
this offering memorandum) shall be deemed to have been incurred under clause (a)(ii) above and (y)
described in clause (a)(xiii) shall be deemed to have been incurred under clause (a)(xiii).



                                                    137
Limitation on Restricted Payments

     Posadas will not, and will not cause or permit any of the Restricted Subsidiaries to, directly or
indirectly:

     (a)     declare or pay any dividend or make any distribution (other than (i) dividends or distributions
payable in Qualified Capital Stock of Posadas and (ii) in the case of Restricted Subsidiaries, dividends or
distributions to Posadas or any other Restricted Subsidiary and pro rata dividends or distributions payable
to the other holders of the same class of Capital Stock of such Restricted Subsidiary) on or in respect of
shares of its Capital Stock to holders of such Capital Stock;

    (b)      purchase, redeem or otherwise acquire or retire for value any Capital Stock of Posadas or
acquire shares of any class of such Capital Stock other than Capital Stock owned by Posadas or any
Wholly Owned Restricted Subsidiary (other than in exchange for its Capital Stock) which is not
Disqualified Stock;

    (c)      make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment (other than the purchase, redemption, prepayment or other acquisition of any such
subordinated Indebtedness in anticipation of any such sinking fund obligation, principal installment or final
maturity, in each case, due within one year of such purchase, redemption, prepayment or other
acquisition), any Indebtedness that is subordinate or junior in right of payment to the Notes or the
Guarantees; or

    (d)     make any Investment (other than Permitted Investments)

(each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to as a “Restricted
Payment”), if at the time of such Restricted Payment or immediately after giving effect thereto:

    (1)     a Default or an Event of Default shall have occurred and be continuing;

    (2)    Posadas is not able to incur at least U.S.$1.00 of additional Indebtedness pursuant to the first
paragraph of the covenant described under “—Limitation on Indebtedness”; or

   (3)      the aggregate amount of Restricted Payments (including such proposed Restricted Payment)
made after the Closing Date (the amount expended for such purpose, if other than in cash, being the Fair
Market Value of such property as determined reasonably and in good faith by the Board of Directors of
Posadas) shall exceed the sum of:

    (v)      50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of Posadas earned during the period beginning on April 1, 2015
and ending on the last date of the most recent fiscal quarter for which financial statements are available
prior to the date of such Restricted Payment (the “Reference Date”) (treating such period as a single
accounting period); plus

     (w)     100% of the Net Cash Proceeds received by Posadas from any Person (other than a
Subsidiary of Posadas) subsequent to the Closing Date and on or prior to the Reference Date (a) as a
contribution to the common equity capital of Posadas by any holder of Posadas’ Capital Stock or (b) from
the issuance and sale of Qualified Capital Stock of Posadas; plus

    (x)      without duplication of any amounts included in clause (3)(w) above, 100% of the Net Cash
Proceeds received by Posadas from any Person (other than a Subsidiary of Posadas) subsequent to the
Closing Date and on or prior to the Reference Date from the issuance and sale of debt securities or
Disqualified Stock of Posadas that has been converted into Qualified Capital Stock of Posadas; plus

    (y)     without duplication, the sum of:




                                                    138
    (1)      the aggregate amount returned in cash on or with respect to Investments (other than
Permitted Investments) made subsequent to the Closing Date whether through interest payments,
principal payments, dividends or other distributions or payments;

    (2)     the net cash proceeds received by Posadas or any of the Restricted Subsidiaries from the
disposition of all or any portion of any Investment (other than a Permitted Investment) made after the
Closing Date (other than to a Subsidiary of Posadas); and

    (3)     upon Revocation of the status of an Unrestricted Subsidiary as an Unrestricted Subsidiary,
the Fair Market Value of Posadas’ and the Restricted Subsidiaries’ Investment in such Subsidiary;

provided, however, no amount will be included under this clause (y) to the extent it is included in
Consolidated Net Income; plus

    (z)     U.S.$20.0 million.

    Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph will
not prohibit:

    (1)     the payment of any dividend within 60 days after the date of declaration of such dividend if
the dividend would have been permitted on the date of declaration;

    (2)     if no Default shall have occurred and be continuing, the acquisition of any shares of Capital
Stock of Posadas, either (i) solely in exchange for shares of Qualified Capital Stock of Posadas or (ii)
through the application of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of Posadas) of shares of Qualified Capital Stock of Posadas;

    (3)      if no Default shall have occurred and be continuing, the acquisition of any Indebtedness of
Posadas that is subordinate or junior in right of payment to the Notes either (i) solely in exchange for
shares of Qualified Capital Stock of Posadas or (ii) through the application of the net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of Posadas) of shares of Qualified
Capital Stock of Posadas or (iii) Refinancing Indebtedness;

    (4)     additional Restricted Payments pursuant to this clause (4) not to exceed U.S.$10.0 million (or
the equivalent in other currencies) in the aggregate;

    (5)    payments to holders of Disqualified Stock of Posadas issued in accordance with the terms of
the Indenture to the extent such payments are included in the calculation of Consolidated Interest
Expense; and

   (6)      any principal payment on, purchase, defeasance, redemption, prepayment, decrease or other
acquisition or retirement for value of, prior to any scheduled final maturity, scheduled repayment or
scheduled sinking fund payment, of the Convertible Debentures.

    In determining the aggregate amount of Restricted Payments made subsequent to the Closing Date
in accordance with clause (3) of the first paragraph of this covenant, amounts expended pursuant to
clauses (1), (2)(ii), (3)(ii), (4) and (5) shall be included in such calculation.

  Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

    Under the terms of the Indenture, Posadas will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any such Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary, (ii) pay
any Indebtedness owed to Posadas or any other Restricted Subsidiary, (iii) make loans or advances to
Posadas, or (iv) transfer any of its property or assets to Posadas or any other Restricted Subsidiary.

    The foregoing provisions will not restrict any encumbrances or restrictions:


                                                    139
    (a)     existing on the Closing Date in the Indenture, or any other agreements in effect on the
Closing Date, and any extensions, refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements
are not materially more restrictive than those encumbrances or restrictions in effect on the Closing Date;

    (b)     existing under or by reason of applicable law or regulation;

    (c)     existing with respect to any Person or the property or assets of such Person acquired by
Posadas or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or assets of such Person so
acquired;

    (d)      in the case of clause (iv) above in the case of a transfer of any of the property or assets of a
Restricted Subsidiary to Posadas or any other Restricted Subsidiary (i) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (ii) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or assets of Posadas or any Restricted
Subsidiary not otherwise prohibited by the Indenture, or (iii) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness;

    (e)      with respect to a Restricted Subsidiary (or any of its property or assets) and imposed
pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of
the Capital Stock of, or property and assets of, such Restricted Subsidiary;

    (f)     contained in the terms of (i) any Indebtedness incurred by any Restricted Subsidiary for the
purpose of an Asset Acquisition if the Incurrence of such Indebtedness otherwise complies with clause (a)
of the “—Limitation on Indebtedness” covenant and any extensions, refinancings, renewals or
replacements of such Indebtedness; provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements taken as a whole are no less favorable in any
material respect to the Holders than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced;

    (g)      contained in the terms of any Indebtedness or any agreement pursuant to which such
Indebtedness was issued if (i) the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in such Indebtedness or agreement, (ii)
the encumbrance or restriction is not materially more disadvantageous to the Holders of the Notes than is
customary in comparable financings (as determined by Posadas in good faith), and (iii) Posadas delivers
an Opinion of Mexican Counsel to the Trustee to the effect that any such encumbrance or restriction will
not materially affect Posadas’ ability to make principal or interest payments on the Notes; or

     (h)      any encumbrance or restriction with respect to a Receivables Entity in connection with
Receivables Transaction; provided that such encumbrances and restrictions are customarily required by
the institutional sponsor or arranger of such Receivables Transaction in similar types of documents
relating to the purchase of similar receivables, other rights to payment or inventory in connection with the
financing thereof.

     Nothing contained in this covenant will prevent Posadas or any Restricted Subsidiary from (a)
creating, incurring, assuming or suffering to exist any Liens otherwise permitted under the “—Limitation
on Liens” covenant or (b) restricting the sale or other disposition of property or assets of Posadas or any
of its Restricted Subsidiaries that secure Indebtedness of Posadas or any of its Restricted Subsidiaries.

Limitation on Liens

    Under the terms of the Indenture, Posadas will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or properties securing any
Indebtedness, without making effective provision for all of the Notes and all other amounts due under the



                                                     140
Indenture to be directly secured equally and ratably with (or, if the Indebtedness to be secured by such
Lien is subordinated in right of payment to the Notes, prior to) the Indebtedness secured by such Lien
until such time as such Indebtedness is no longer secured by a Lien, other than Permitted Liens.

Limitation on Asset Sales

   Under the terms of the Indenture, Posadas will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless:

        (i)     the consideration received by Posadas or such Restricted Subsidiary is at least equal to
    the Fair Market Value of the assets sold or disposed of as determined in good faith by Posadas’
    Board of Directors (including as to the value of all non-cash consideration);

        (ii)     at least 75% of the consideration received by Posadas or such Restricted Subsidiary, as
    the case may be, from such Asset Sale shall be in the form of cash or Temporary Cash Investments
    and is received at the time of such disposition; provided that the amount of:

            (a)       any liabilities (as shown on the Issuer’s or such Restricted Subsidiary’s most recent
        balance sheet), of the Issuer or any of its Restricted Subsidiaries (other than contingent liabilities
        and liabilities that are by their terms subordinated to the Notes) that are assumed by the
        transferee of any such assets shall be deemed to be cash for purposes of this clause (ii); and

           (b)      any securities, notes or other obligations received by the Issuer or any such
        Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted
        Subsidiary into cash (to the extent of the cash received) within 30 days following the closing of
        such Asset Sale shall be deemed to be cash for purposes of this clause (ii); and

         (iii)   an amount equal to 100% of the Net Cash Proceeds from such Asset Sale is either
    applied to (a) the repayment of Indebtedness of the Issuer or any Restricted Subsidiary which is
    secured by a Permitted Lien (with a corresponding reduction in the commitment with respect thereto)
    or the repayment of Senior Indebtedness that matures prior to the Notes; or (b) the investment in or
    acquisition of assets related to a Permitted Business, in each case, within 365 days from the later of
    the date of such Asset Sale or the receipt of the Net Cash Proceeds. Any Net Cash Proceeds from
    Asset Sales that are not applied or invested as provided in the preceding paragraph will be deemed
    to constitute “Excess Proceeds.”

    On the 365th day after an Asset Sale, if the aggregate amount of Excess Proceeds from such Asset
Sale exceeds U.S.$25.0 million, Posadas will be required to make an offer (“Asset Sale Offer”) to all
holders of Notes and, to the extent required by the terms thereof, to all holders of other Senior
Indebtedness outstanding with similar provisions requiring Posadas to make an offer to purchase such
Senior Indebtedness with the proceeds from any Asset Sale (“Pari Passu Notes”) to purchase the
maximum principal amount of Notes and any Pari Passu Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest to the date of purchase, in accordance with the procedures set forth in the
Indenture; provided, however, that if at any time any non-cash consideration received by Posadas or any
Restricted Subsidiary, as the case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to any such non-cash
consideration) or Temporary Cash Investments, then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance
with this covenant. To the extent that the aggregate amount of Notes and Pari Passu Notes so validly
tendered and not properly withdrawn pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Posadas may use any remaining Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset at
zero. Posadas may satisfy its obligations under this covenant with respect to the Net Cash Proceeds of
an Asset Sale by making an Asset Sale Offer prior to the expiration of the relevant 365-day period.




                                                    141
     The Asset Sale Offer will remain open for a period of 20 Business Days following its commencement,
except to the extent that a longer period is required by applicable law (the “Asset Sale Offer Period”). No
later than five Business Days after the termination of the Asset Sale Offer Period (the “Asset Sale
Purchase Date”), Posadas will purchase the principal amount of Notes required to be purchased pursuant
to this covenant (the “Asset Sale Offer Amount”) or, if less than the Asset Sale Offer Amount has been so
validly tendered, all Notes validly tendered in response to the Asset Sale Offer. If the aggregate principal
amount of Notes surrendered by Holders thereof and other Pari Passu Notes surrendered by holders or
lenders thereof, collectively, exceeds the amount of Excess Proceeds, the Trustee shall select the Notes
and Pari Passu Notes to be purchased on a pro rata basis on the basis of the aggregate principal amount
of tendered Notes and Pari Passu Notes.

     If the Asset Sale Purchase Date is on or after an interest record date and on or before the related
interest payment date, any accrued and unpaid interest will be paid to the Person in whose name a Note
is registered at the close of business on such record date, and no additional interest will be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.

     On or before the Asset Sale Purchase Date, Posadas will, to the extent lawful, accept for payment, on
a pro rata basis to the extent necessary, the Asset Sale Offer Amount of Notes and Pari Passu Notes or
portions thereof so validly tendered and not properly withdrawn pursuant to the Asset Sale Offer, or if less
than the Asset Sale Offer Amount has been validly tendered and not properly withdrawn, all Notes and
Pari Passu Notes so validly tendered and not properly withdrawn. Posadas will deliver to the Trustee an
Officers’ Certificate stating that such Notes and Pari Passu Notes or portions thereof were accepted for
payment by Posadas in accordance with the terms of this covenant. Posadas or the Paying Agent, as the
case may be, will promptly (but in any case not later than five Business Days after the Asset Sale
Purchase Date) mail or deliver to each tendering Holder of Notes an amount equal to the purchase price
of the Notes so validly tendered and not properly withdrawn by such Holder and accepted by Posadas for
purchase, and Posadas will promptly issue a new Note, and the Trustee, upon delivery of an Officers’
Certificate from Posadas will authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted will be
promptly mailed or delivered by Posadas to the Holder thereof. Posadas will publicly announce the results
of the Asset Sale Offer on the Asset Sale Purchase Date.

    The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations to the extent such laws and regulations are applicable in connection with
the repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the “Limitation on Asset Sales” provisions of the Indenture, the
Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the “Limitation on Asset Sales” provisions of the Indenture by virtue
thereof.

Limitation on Sale and Leaseback Transactions

   Posadas will not, and will not permit any of the Restricted Subsidiaries to, enter into any Sale and
Leaseback Transaction; provided that Posadas or any Restricted Subsidiary may enter into a Sale and
Leaseback Transaction if:

    (1)     Posadas or that Restricted Subsidiary, as applicable, could have

       (a)     incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to
    such Sale and Leaseback Transaction pursuant to the first paragraph of the covenant described
    under “—Limitation on Indebtedness”; and

        (b)    to the extent such lease is a Capitalized Lease, incurred a Lien to secure such
    Indebtedness pursuant to “—Limitation on Liens” above;

    (2)     the proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market
Value of the property sold; and


                                                    142
    (3)    the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the
proceeds of such transaction are applied in compliance with the covenant described under “—Asset
Sales.”

Limitation on Transactions with Affiliates.

    (a)      Posadas will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the
benefit of, any Affiliate of Posadas (each, an “Affiliate Transaction”), other than:

          (i)         Affiliate Transactions permitted under paragraph (b) below; and

          (ii)        certain Affiliate Transactions meeting the following requirements:

              (a)     the terms of such Affiliate Transaction are no less favorable than those that could
          reasonably be expected to be obtained in a comparable transaction at such time on an arm’s-
          length basis from a Person that is not an Affiliate of Posadas;

              (b)      in the event that such Affiliate Transaction involves aggregate payments, or transfers
          of property or services with a Fair Market Value, in excess of U.S.$5.0 million (or the equivalent in
          other currencies), the terms of such Affiliate Transaction shall be approved by a majority of the
          members of the Board of Directors of Posadas or such Restricted Subsidiary, as the case may
          be, such approval to be evidenced by a Board Resolution stating that such members of the Board
          of Directors have determined that such transaction complies with clause (a) immediately above;

              (c)      in the event that such Affiliate Transaction involves aggregate payments, or transfers
          of property or services with a Fair Market Value, in excess of U.S.$15.0 million (or the equivalent
          in other currencies), the terms of such Affiliate Transaction will be set forth in an Officers’
          Certificate delivered to the Trustee stating that such transaction complies with clauses (a) and (b)
          immediately above; and

               (d)      in the event that such Affiliate Transaction involves aggregate payments, or transfers
          of property or services with a Fair Market Value, in excess of U.S.$20.0 million (or the equivalent
          in other currencies), the Issuer will, prior to the consummation thereof, obtain a favorable opinion
          as to the fairness of such Affiliate Transaction to the Issuer and any such Restricted Subsidiary, if
          any, from a financial point of view from an independent financial advisor and file the same with
          Trustee.

    (b)          The restrictions set forth in clause (a) shall not apply to:

         (i)          reasonable fees and compensation paid to, and indemnity provided on behalf of,
    officers, directors or employees of Posadas or any Restricted Subsidiary as determined in good faith
    by the Board of Directors of Posadas or senior management;

       (ii)          transactions exclusively between or among Posadas and any of the Restricted
    Subsidiaries or exclusively between or among such Restricted Subsidiaries;

        (iii)        any agreement as in effect as of the Closing Date the material terms of which are
    described in this offering memorandum or any amendment thereto or any transaction contemplated
    thereby (including pursuant to any amendment thereto in effect on the date hereof) or in any
    replacement agreement thereto so long as any such amendment or replacement agreement is not
    more disadvantageous to the Holders in any material respect than the original agreement as in effect
    on the Closing Date;

          (iv)           Restricted Payments permitted by the Indenture;




                                                          143
       (v)         the sale, conveyance or other transfer of accounts receivable in connection with a
    Receivables Transaction; and

        (vi)        loans and advances to executive committee members, employees and officers of
    Posadas and the Restricted Subsidiaries in the ordinary course of business for bona fide business
    purposes not in excess of an aggregate of U.S.$3.0 million at any time outstanding.

Additional Guarantees

     If, after the Closing Date, (a) any Person becomes a Mexican Wholly Owned Restricted Subsidiary of
Posadas other than (i) a Receivables Entity, (ii) Service Subsidiaries that do not have in excess of
U.S.$500,000 of assets and do not have greater than U.S.$500,000 of net income (on a consolidated
basis with its Subsidiaries) in any twelve-month period following the Closing Date or (iii) certain immaterial
subsidiaries which cannot provide guarantees due to local regulatory reasons, as determined in good
faith by the Board of Directors or (b) Posadas otherwise elects to have any Restricted Subsidiary become
a Subsequent Guarantor, then, in each such case, Posadas shall cause such Restricted Subsidiary to:

         (i)     execute and deliver to the Trustee a supplemental indenture in form and substance
    satisfactory to the Trustee pursuant to which such Wholly Owned Restricted Subsidiary shall
    unconditionally guarantee all of the Issuer’s obligations under the Notes and the Indenture as a
    Subsequent Guarantor; and

        (ii)     deliver to the Trustee one or more Opinions of Counsel that such supplemental indenture
    (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b)
    constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its
    terms.

Limitation on Business Activities

    The Issuer will not, and will not permit any Restricted Subsidiary to, enter into any line of business
other than a Permitted Business.

Limitation on Designations of Unrestricted Subsidiaries

    After the Closing Date, Posadas may designate any Restricted Subsidiary of Posadas as an
“Unrestricted Subsidiary” under the Indenture (a “Designation”) only if:

   (1)     no Default shall have occurred and be continuing at the time of or after giving effect to such
Designation;

    (2)       Posadas would be permitted under the Indenture to make a Restricted Payment pursuant to
the first paragraph of the covenant described under “—Limitation on Restricted Payments” at the time of
Designation (assuming the effectiveness of such Designation) in an amount equal to the Fair Market
Value of such Subsidiary on such date; and

      (3)    Posadas would be permitted to incur U.S.$1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described under “—Limitation on Indebtedness” at the time of Designation
(assuming the effectiveness of such Designation).

     Notwithstanding anything contained herein, Posadas may designate any Restricted Subsidiary as an
“Unrestricted Subsidiary” under the Indenture in connection with the payment of any dividend or
distribution payable solely in the Qualified Capital Stock of such Restricted Subsidiary as permitted by
clauses (7) or (8) of the second paragraph of the covenant described under “—Limitation on Restricted
Payments” if such dividend or distribution constitutes in excess of 50% of the Capital Stock of such
Restricted Subsidiary.

   The Indenture will further provide that Posadas shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time:


                                                     144
     (x)    provide direct or indirect credit support for, be directly or indirectly liable for or guarantee any
Indebtedness of any Unrestricted Subsidiary (including any undertaking agreement or instrument
evidencing such Indebtedness) (except that Posadas and the Guarantors may guarantee or otherwise
provide credit support for up to U.S.$5.0 million of obligations of an Unrestricted Subsidiary for a period
not to exceed 270 days); or

    (y)     be directly or indirectly liable for any Indebtedness which provides that the holder thereof may
(upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect
to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action
against such Unrestricted Subsidiary), except, in the case of clause (x), to the extent permitted under the
covenant described under “—Limitation on Restricted Payments.”

   The Indenture will further provide that Posadas may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (“Revocation”), whereupon such Subsidiary shall then constitute a Restricted
Subsidiary, if

   (1)      no Default shall have occurred and be continuing at the time and after giving effect to such
Revocation;

    (2)      immediately after giving effect to such Revocation, Posadas would be permitted to incur
U.S.$1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under “—
Limitation on Indebtedness”; and

     (3)    all Liens and Indebtedness of such Unrestricted Subsidiaries outstanding immediately
following such Revocation would, if incurred at such time, have been permitted to be incurred for all
purposes of the Indenture.

     All Designations and Revocations must be evidenced by an officers’ certificate of Posadas delivered
to the Trustee certifying compliance with the foregoing provisions.

Reporting

     Under the terms of the Indenture, Posadas will furnish or cause to be furnished to the Trustee,
holders of Notes and the Luxembourg Stock Exchange, (i) as soon as available but in any event not later
than 120 days after the close of each of its fiscal years, a consolidated balance sheet, consolidated
statement of income, consolidated statement of changes in shareholders’ equity and consolidated
statement of cash flows for such fiscal year of Posadas, (ii) as soon as available but in any event not later
than 60 days after the end of each of the first three quarters of each of its fiscal years a consolidated
balance sheet, consolidated statement of income and consolidated statement of changes in shareholders’
equity for such fiscal quarter of Posadas, and which, in the case of the annual financial statements, will be
audited by and accompanied by a report thereon of an independent public accountant selected by
Posadas. Each such report shall include a “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” that describes the financial condition and results of operations of Posadas and
its consolidated Subsidiaries (and each report with respect to any fiscal year (but not with respect to fiscal
quarters) shall show in reasonable detail, either on the face of the financial statements or in the footnotes
thereto and in Management’s Discussion and Analysis of Financial Condition and Results of Operations,
the financial condition and results of operations of the Issuer and the Guarantors separate from the
financial condition and results of operations of the non-Guarantor Subsidiaries of the Issuer, if any).

    Delivery of such reports, information and documents to the Trustee is for informational purposes only
and the Trustee's receipt of such reports shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including the Issuer's compliance
with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's
Certificates).




                                                      145
Use of Proceeds

Posadas agrees to use the proceeds from the sale of the Notes as set forth under “Use of Proceeds” in
this offering memorandum.

Covenant Suspension

     If on any date following the Issue Date (i) the Notes have Investment Grade Ratings from at least two
Rating Agencies, and (ii) no Default has occurred and is continuing under the Indenture (the occurrence
of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant
Suspension Event”), the Issuer and its Restricted Subsidiaries will not be subject to the following
covenants (collectively, the “Suspended Covenants”):

    (1) “—Certain Covenants—Limitation on Indebtedness;”

    (2) “—Certain Covenants—Limitation on Restricted Payments;”

    (3) “—Certain Covenants—Limitation on Asset Sales;”

   (4) “—Certain Covenants—Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries;”

    (5) “—Certain Covenants—Limitation on Transactions with Affiliates;”

    (6) “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries;” and

    (7) clause (ii) of the first paragraph of “—Merger, Consolidation and Sale of Assets.”

    In the event that the Issuer and its Restricted Subsidiaries are not subject to the Suspended
Covenants under the Indenture for any period of time as a result of the foregoing, and on any subsequent
date (the “Reversion Date”) at least two Rating Agencies no longer rate the Notes Investment Grade, then
the Issuer and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants
under the Indenture.

     The period of time between the occurrence of a Covenant Suspension Event and the Reversion Date
is referred to in this description as the “Suspension Period.” In the event of any such reinstatement, no
action taken or omitted to be taken by the Issuer or any of its Restricted Subsidiaries prior to such
reinstatement will give rise to a Default or Event of Default under the Indenture with respect to Notes;
provided that (1) with respect to Restricted Payments made after any such reinstatement, the amount of
Restricted Payments made will be calculated as though the covenant described under “—Certain
Covenants—Limitation on Restricted Payments” had been in effect prior to, but not during, the
Suspension Period, provided that any Subsidiaries designated as Unrestricted Subsidiaries during the
Suspension Period shall automatically become Restricted Subsidiaries on the Reversion Date (subject to
the Issuer’s right to subsequently designate them as Unrestricted Subsidiaries pursuant to “—Certain
Covenants—Limitation on Designations of Unrestricted Subsidiaries”), and (2) all Indebtedness Incurred,
or Disqualified Capital Stock or Preferred Stock issued, during the Suspension Period will be classified to
have been Incurred or issued pursuant to clause (iii) of the second paragraph of “—Certain Covenants—
Limitation on Indebtedness.”

    The Issuer will promptly provide the Trustee with written notice of any Covenant Suspension Event or
of any Reversion Date. In the absence of such notice, the Trustee shall be entitled to assume that no
Covenant Suspension Date or Reversion Date (as applicable) has occurred.

    The Notes may never achieve or maintain Investment Grade Ratings.




                                                    146
Merger, Consolidation and Sale of Assets

     Posadas will not (a) in one or more related transactions, consolidate with or merge into or reorganize
with or into, or directly or indirectly, transfer, convey, sell, lease or otherwise dispose of all or substantially
all of its properties and assets as an entirety to, any other Person or (b) permit any Guarantor to, in one or
more related transactions, consolidate with or merge into or reorganize with or into, or directly or
indirectly, transfer, convey, sell, lease or otherwise dispose of all or substantially all of its properties and
assets as an entirety to, any other Person in each case unless: (i) the Person formed by the
consolidation, merger or reorganization, if it is not Posadas or the Guarantor, or that acquired by transfer,
conveyance, sale, lease or other disposition Posadas or such Guarantor’s assets and property (any such
Person, a “Successor”), (x) is engaged in a Permitted Business and (y) shall expressly assume, by
executing a supplemental indenture, all the obligations of Posadas under the Notes and the Indenture or
of such Guarantor under the Guarantees or shall concurrently execute a supplemental indenture as a
Subsequent Guarantor, guaranteeing, on a joint and several basis with each of the other Guarantors, all
obligations of Posadas under the Notes and the Indenture; (ii) in the case of clause (a), immediately after
giving effect to such transaction in accordance with the Indenture (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction), Posadas or such Successor, as the case may be, either (A)would be
permitted to incur at least U.S.$1.00 of additional Indebtedness pursuant to the first paragraph of the
covenant described under “—Limitation on Indebtedness” or (B) (1) Posadas’ or such Successor’s
Consolidated Interest Coverage Ratio would be equal to or greater than Posadas’ Consolidated Interest
Coverage Ratio immediately prior to the transaction and (2) the ratings on the Notes by at least two
Rating Agencies then rating the Notes would be equal to or higher than such ratings immediately prior to
the transaction (it being understood that in the event that less than two Rating Agencies are providing a
rating for the Notes, then this prong (2) cannot be satisfied and therefore this entire clause (B) is not
available to be relied upon by Posadas); (iii) immediately after giving effect to such transaction in
accordance with the Indenture (including the substitution thereunder of any Successor for a Guarantor or
a subsidiary, as the case may be) and treating any Indebtedness incurred by Posadas or any Successor
or any Subsidiary of either of them as a result of such transaction as having been incurred at the time of
such transaction, no Default with respect to the Notes shall have occurred and be continuing; (iv) the
Issuer or any Successor will have delivered to the Trustee an Opinion of Mexican Counsel to the effect
that (a) the Holders of the Notes will not recognize income, gain or loss for Mexican income tax purposes
as a result of the transaction and will be subject to Mexican income tax in the same manner and on the
same amounts (assuming solely for this purpose that no Additional Amounts are required to be paid on
the Notes) and at the same times as would have been the case if the transaction had not occurred and
(b) no other taxes on income, including capital gains, will be payable by the Holders of the Notes under
the laws of Mexico relating to the acquisition, ownership or disposition of the Notes, including the receipt
of interest or principal thereon, as a result of the transaction; (v) the Issuer or any Successor will have
delivered to the Trustee an Opinion of U.S. Counsel to the effect that (a) the beneficial owners of the
Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the
transaction and will be subject to U.S. federal income tax in the same manner and on the same amounts
(assuming solely for this purpose that no Additional Amounts are required to be paid on the Notes) and at
the same times as would have been the case if the transaction had not occurred and (b) no other taxes
on income, including capital gains, will be payable by the beneficial owners of the Notes under the laws of
the United States relating to the acquisition, ownership or disposition of the Notes, including the receipt of
interest or principal thereon, as a result of the transaction; and (vi) Posadas has delivered to the Trustee
an Officers’ Certificate setting forth in reasonable detail information demonstrating compliance with the
foregoing requirements and an Opinion of Mexican Counsel and an Opinion of U.S. Counsel, each stating
that such consolidation, merger or reorganization and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with the provisions of the
Indenture and that the conditions precedent in the Indenture relating to such transaction have been
complied with.

    For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or substantially all of the properties and assets of one or more
Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and



                                                       147
assets of Posadas, shall be deemed to be the transfer of all or substantially all of the properties and
assets of Posadas.

    The Indenture will provide that upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of Posadas in accordance with the foregoing in which Posadas is not the
continuing corporation, the successor Person formed by such consolidation or into which Posadas is
merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for,
and may exercise every right and power of, Posadas under the Indenture and the Notes with the same
effect as if such surviving entity had been named as such.

      Notwithstanding the above, (x) any Guarantor may consolidate with, merge into or transfer all or part
of its properties and assets to Posadas or to another Guarantor and (y) Posadas may merge with an
Affiliate incorporated solely for the purpose of reincorporating Posadas in another jurisdiction to realize
tax or other benefits; provided that if such consolidation or merger constitutes a Change of Control, then
the provisions set forth under “—Repurchase at the Option of Holders—Change of Control” will apply.

    Although there is a limited body of case law interpreting the phrase “substantially all,” there is no
precise established definition of the phrase under applicable law. Accordingly, in certain circumstances
there may be a degree of uncertainty as to whether a particular transaction would involve “all or
substantially all” of the property or assets of a Person.

Events of Default

     The following events will be defined as “Events of Default” in the Indenture:

   (a)     failure to pay principal of any Note when the same becomes due and payable at maturity,
upon acceleration, redemption or otherwise;

    (b)     failure to pay interest on any Note when the same becomes due and payable, continued for a
period of 30 days;

    (c)     the default in the performance of or breach of any other covenant or agreement in the
Indenture and such default or breach continues for a period of 30 consecutive days after written notice by
the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;

    (d)      a default or defaults under the terms of any instruments evidencing or securing, or of any
agreements pursuant to which there may be issued, Indebtedness of Posadas or any Restricted
Subsidiary having an outstanding principal amount in excess of U.S.$20.0 million (or the equivalent
thereof in other currencies or currency units) individually or in the aggregate, which Indebtedness now
exists or is hereafter incurred, which default or defaults (i) result in the acceleration of the payment of
such Indebtedness and such Indebtedness has not been discharged in full or such acceleration has not
been rescinded or annulled within 10 days of such acceleration, or (ii) constitute the failure to pay all or
any part of such Indebtedness at the final Stated Maturity thereof (after the expiration of any applicable
grace period) and which shall not have been cured or waived;

    (e)     the rendering of a final judgment or judgments (not subject to appeal) or an order or orders
against Posadas or any Restricted Subsidiary in an aggregate amount in excess of U.S.$25.0 million (or
the equivalent thereof in other currencies or currency units), individually or in the aggregate, which is
neither discharged nor bonded in full within 60 days thereafter (or which, if bonded, thereafter becomes
unbonded);

     (f)     certain events of bankruptcy affecting the Issuer, any Guarantor or any Principal Subsidiary;
or

    (g)     any of the Guarantees shall cease to be in full force and effect (except as contemplated by its
terms or the terms of the Indenture).




                                                     148
     If an Event of Default (other than an Event of Default specified in clause (f) above with respect to the
Issuer) occurs and is continuing under the Indenture, either the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to Posadas (and to the
Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall,
declare the principal of, and accrued interest (together with any Additional Amounts) on, the Notes to be
immediately due and payable. Upon such a declaration of acceleration, such principal and accrued
interest shall be immediately due and payable. If an Event of Default specified in clause (f) above occurs
with respect to the Issuer, the principal of, and accrued interest (together with any Additional Amounts)
on, the Notes then outstanding shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in
principal amount of the outstanding Notes, by written notice to the Trustee, may waive all past defaults
and rescind and annul a declaration of acceleration and its consequences, if (i) all existing Events of
Default, other than the nonpayment of the principal of, and interest on, the Notes that have become due
solely by such declaration of acceleration, have been cured or waived, (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction and (iii) and any unpaid fees,
expenses or other amounts owed to the Trustee have been paid in full. For information as to the waiver of
defaults, see “—Modification and Waiver.”

     No Holder of any Note will have any right to institute any proceeding with respect to the Indenture or
the Notes unless: (i) the Holder gives the Trustee written notice of a continuing Event of Default; (ii) the
Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the
Trustee to institute such proceeding; (iii) such Holder or Holders offer the Trustee reasonable indemnity to
institute such proceeding as Trustee; (iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a
majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is
inconsistent with the request. However, such limitations do not apply to the right of any Holder of a Note
to receive payment of the principal of, or interest (together with Additional Amounts) on, such Note or to
bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes,
which right shall not be impaired or affected without the consent of the Holder. The Trustee shall not be
charged with knowledge of any Default or Event of Default with respect to the Notes (other than a
payment default of principal, premium or interest) unless a written notice of such Default or Event of
Default shall have been given to an officer of the Trustee with direct responsibility for the administration of
the Indenture and the Notes, by Posadas or any Holder of Notes.

     The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the
Trustee must mail to each Holder notice of the uncured Default within 90 days after it occurs. Except in
the case of a Default in the payment of principal of, premium, interest or Additional Amounts on any Note,
the Trustee may withhold notice if and so long as a committee of trust officers of the Trustee in good faith
determines that withholding the notice is in the interest of the Holders. In addition, Posadas is required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the
signers thereof know of any Default that occurred during the previous year. Posadas is also required to
deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any events which
would constitute certain Defaults, their status and what action Posadas is taking or proposes to take in
respect thereof.

Satisfaction and Discharge

     The Indenture provides that it will be discharged and shall cease to be of further effect (except as to
rights of registration of transfer or exchange of Notes which shall survive until all Notes have been
canceled and certain other limited provisions including, but not limited to, certain rights of the Trustee) as
to all outstanding Notes and the Trustee, on written demand of and at the expense of Posadas, shall
execute proper instruments acknowledging satisfaction and discharge of this Indenture, when either:

    (a)     all Notes theretofore authenticated and delivered (other than (i) Notes which have been
destroyed, lost or stolen and which have been replaced or paid as provided in the Indenture and (ii) Notes
for whose payment money has theretofore been deposited in trust or segregated and held in trust by



                                                     149
Posadas and thereafter repaid to Posadas or discharged from such trust) have been delivered to the
Trustee for cancellation; or

     (b)       (i) either (A) Posadas shall have given notice to the Trustee and mailed a notice of
redemption to each Holder of the redemption of all of the Notes under arrangements satisfactory to the
Trustee for the giving of such notice or (B) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable; (ii) Posadas has irrevocably deposited or caused to be
deposited with the Trustee in trust an amount of U.S. legal tender or U.S. government obligations
sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for the principal of, premium, if any, and interest on the Notes to the date of such
deposit; (iii) no Default with respect to the Indenture or the Notes shall have occurred and be continuing
on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to which Posadas is a party or
by which it is bound; (iv) Posadas has paid or caused to be paid all other sums payable under the
Indenture by Posadas; and (v) Posadas has delivered to the Trustee (A) irrevocable instructions to apply
the deposited money toward payment of the Notes at the maturity or redemption thereof, and (B) an
officers’ certificate and an Opinion of U.S. Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of the Indenture have been complied with and that
such satisfaction and discharge does not result in a default under any agreement or instrument then
known to such counsel which binds or affects Posadas.

Defeasance

     The Indenture will provide that, at the option of Posadas, (a) Posadas will be discharged from any
and all obligations in respect of the outstanding Notes (except for, among other matters, certain
obligations of Posadas to register the transfer or exchange of the Notes, and to replace lost, stolen or
mutilated Notes and certain obligations of Posadas with respect to the rights of the Trustee) (“Legal
Defeasance”) or (b) Posadas may omit to comply with “—Repurchase at the Option of Holders—Change
of Control,” clause (b)(i) of “—Merger, Consolidation and Sale of Assets” and the covenants set forth
above under “—Certain Covenants,” excluding the covenant set forth under “—Certain Covenants—
Reporting” (collectively, the “Defeased Covenants”), and such omission will not be deemed to be an
Event of Default under clause (c) or clause (d) (but only with respect to clause (b)(ii) under “—Merger,
Consolidation and Sale of Assets”) under “—Events of Default” (the “Defeased Events of Default”) under
the Indenture and the Notes (“Covenant Defeasance”), in either case (a) or (b) on the 271st day after
irrevocable deposit with the Trustee, in trust, of U.S. dollars and/or U.S. government obligations which will
provide money in an amount sufficient in the opinion of an independent accounting firm nationally
recognized in the United States to pay the principal of, and each installment of interest on, the
outstanding Notes and Additional Amounts then known. With respect to clause (b), the obligations under
the Indenture other than the Defeased Covenants and the Events of Default other than the Defeased
Events of Default shall remain in full force and effect. Such trust may be established only if, among other
things, (i) Posadas has delivered to the Trustee an Opinion of Mexican Counsel to the effect that the
Holders of the Notes will not recognize gain or loss for Mexican income tax purposes as a result of such
deposit and defeasance and will be subject to Mexican income tax on the same amount, in the same
manner and at the same times as would have been the case if such deposit and defeasance had not
occurred; (ii) Posadas has delivered to the Trustee an Opinion of U.S. Counsel to the effect that the
beneficial owners of the Notes will not recognize gain or loss for United States federal income tax
purposes as a result of such deposit and defeasance and will be subject to United States federal income
tax on the same amount, in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (which United States federal income tax opinion in the case of
Legal Defeasance, must be based on a change in law occurring after the date hereof or a ruling received
by Posadas from the United States Internal Revenue Service); (iii) no Event of Default or event that with
the passing of time or the giving of notice, or both, would constitute an Event of Default shall have
occurred or be continuing during the 271st day period referred to above; (iv) Posadas has delivered to the
Trustee an Opinion of U.S. Counsel to the effect that such deposit shall not cause the Trustee or the trust
so created to be subject to the Investment Company Act of 1940; (v) with respect to an election by
Posadas under clause (a) Posadas has delivered to the Trustee an Opinion of Mexican Counsel to the



                                                     150
effect that Posadas has paid all Additional Amounts due in respect of the Notes; (vi) with respect to an
election by Posadas under clause (a) Posadas has delivered to the Trustee an officers’ certificate to the
effect that as a result of such deposit and defeasance the Notes will no longer be considered a liability of
Posadas under IFRS; and (vii) certain other customary conditions precedent set forth in the Indenture are
satisfied.

     In the event Posadas exercises its option to omit compliance with certain covenants and provisions of
the Indenture as described in the immediately preceding paragraph and the Notes are declared due and
payable because of the occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. government obligations on deposit with the Trustee will be sufficient to pay amounts due on
the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes
at the time of the acceleration resulting from such Event of Default. However, Posadas will remain liable
for such payments.

Modification and Waiver

     Modifications of the Indenture, except as noted below, may be made by Posadas and the Trustee
with the consent of the Holders of not less than a majority in aggregate principal amount of the
outstanding Notes; provided, however, that no such modification may, without the consent of the Holder
of each outstanding Note affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on any Note, (ii) reduce the principal amount of, or interest (including Additional
Amounts) on, any Note, (iii) change the place or currency of payment of principal of, or interest (including
Additional Amounts) on, any Note, (iv) impair the right to institute suit for the enforcement of any payment
on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any
Note, (v) reduce the above-stated percentage of outstanding Notes the consent of whose Holders is
necessary to modify the Indenture, (vi) change Posadas’ obligations under “—Reporting” in a manner
materially adverse to Holders, (vii) waive a default in the payment of principal of, or interest (including
Additional Amounts) on, the Notes, (viii) release any of the Guarantors from the Guarantees, (ix) reduce
the percentage of aggregate principal amount of outstanding Notes the consent of whose Holders is
necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain
defaults or (x) amend “Change of Control” provisions or “Asset Sale Offer” provisions at any time when
the Issuer is obligated to make a Change of Control Offer or an Asset Sale Offer.

     Notwithstanding the foregoing, from time to time, the Issuer and the Trustee, without the consent of
the holders of Notes, may amend the Indenture for certain specified purposes, including curing
ambiguities, defects or inconsistencies, so long as such change does not adversely affect the rights of
any of the holders of Notes in any material respect (which shall be evidenced by an opinion of counsel
delivered to the Trustee, upon which the Trustee may conclusively rely).

     The Holders of a majority in aggregate principal amount of the outstanding Notes, on behalf of all
Holders of Notes, may waive compliance by Posadas with certain restrictive provisions of the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding Notes, on behalf of all Holders
of Notes, may waive any past default under the Indenture, except a default in the payment of principal or
interest or in any covenant or provision that cannot be modified without the consent of the Holder of each
outstanding Note affected thereby.

Payments for Consent

    Posadas will not, and will not cause or permit any Subsidiary to, directly or indirectly, pay or cause to
be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture, the
Notes or the Guarantees unless such consideration is offered to be paid to all Holders who so consent,
waive or agree to amend in the time frame set forth in solicitation documents relating to such consent,
waiver or amendment. Notwithstanding the foregoing, Posadas may, and may permit its Subsidiaries, to
make any payment of consideration for, or as an inducement to, any consent, waiver or amendment of
any of the terms or provisions of the Indenture, the Notes or the Guarantees in connection with an
exchange offer that excludes (i) holders or beneficial owners of the Notes that are not “qualified


                                                    151
institutional buyers” as defined in Rule 144A under the Securities Act, “non-U.S. Persons” as defined in
Regulation S under the Securities Act, or institutional “accredited investors” as defined in subparagraphs
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act, and (ii) holders or beneficial owners of the
Notes in any jurisdiction (other than the United States) where the inclusion of such holders or beneficial
owners would require Posadas or any such Subsidiary to comply with the registration requirements or
other similar requirements under any securities laws of such jurisdiction, or the solicitation of such
consent, waiver or amendment from, or the granting of such consent or waiver, or the approval of such
amendment by, holders or beneficial owners in such jurisdiction would be unlawful, in each case as
determined by Posadas in its sole discretion.

Concerning the Trustee

     The Indenture provides that, except during the continuance of a Default, the Trustee will not be liable
except for the performance of such duties as are specifically set forth in such Indenture. If an Event of
Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the conduct of such person’s
own affairs. Subject to the provisions set forth in the Indenture, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any Holder of the Notes, unless
such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.

Notices

      All notices to Holders of the Notes shall be deemed to have been duly given (i) upon the mailing of
such notices to Holders of the Notes at their registered addresses as recorded in the Issuer’s register and
(ii) for as long as the Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF
Market, upon publication in a leading daily newspaper of general circulation in Luxembourg (which is
expected to be the Luxemburger Wort) or on the website of the Luxembourg Stock Exchange at
www.bourse.lu, in each case not later than the latest date, and not earlier than the earliest date,
prescribed in the Indenture for the giving of such notice.

Governing Law and Submission to Jurisdiction

    The Notes, the Guarantees and the Indenture will be governed by, and construed in accordance with,
the laws of the State of New York without regard to principles of conflicts of laws. Posadas and the
Guarantors will submit to the jurisdiction of the US. Federal and New York state courts located in the
Borough of Manhattan, The City of New York, and each such party will submit to the jurisdiction of the
courts of its own corporate domicile (domicilio social) in respect of actions brought against it as a
defendant, for purposes of all legal actions and proceedings instituted in connection with the Notes, the
Guarantees and the Indenture. Posadas and each Guarantor has appointed, and Posadas has agreed to
cause any Subsequent Guarantor to appoint National Corporate Research, Ltd., 10 East 40th. Street,
10th floor, New York, NY 10016 as its authorized agent upon which process may be served in any such
action in Federal or state court in the Borough of Manhattan, The City of New York.

Prescription

    Under the laws of the State of New York, claims for payment of interest, premium (if any) and
repayment of principal on the Notes generally will be barred if an action is not commenced within six
years after payment is due or within the period otherwise provided for under New York law.

Certain Definitions

    Set forth below is a summary of certain of the defined terms used in the covenants and other
provisions of the Indenture. Reference is made to the Indenture for the full definition of all terms as well
as any other capitalized term used herein for which no definition is provided.




                                                    152
    “Acquired Indebtedness” means Indebtedness of a Person or any of its Subsidiaries existing at the
time such Person becomes a Restricted Subsidiary or at the time it merges or consolidates with the
Issuer or any of its Restricted Subsidiaries or is assumed in connection with the acquisition of assets from
such Person. Acquired Indebtedness will be deemed to have been Incurred at the time such Person
becomes a Restricted Subsidiary or at the time it merges or consolidates with the Issuer or a Restricted
Subsidiary or at the time such Indebtedness is assumed in connection with the acquisition of assets from
such Person.

    “Additional Notes” has the meaning set forth under the section entitled “General.”

    “Affiliate” means, with respect to any specified Person, any other Person which directly or indirectly
through one or more Persons controls, or is controlled by, or is under common control with, such specified
Person. For the purposes of this definition, “control,” when used with respect to any specified Person,
means the power to direct the management and policies of such Person directly or indirectly, whether
through the ownership of Voting Stock, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

    “Affiliate Transaction” has the meaning set forth under “—Certain Covenants—Limitation on
Transactions with Affiliates.”

    “Asset Acquisition” means:

        (i)      an investment by Posadas or any of its Subsidiaries in any other Person under which that
    Person shall become a Restricted Subsidiary or shall be merged into or consolidated with Posadas or
    any of its Restricted Subsidiaries; provided that such Person’s primary business is related, ancillary or
    complementary to a Permitted Business, or

         (ii)    an acquisition by Posadas or any of its Restricted Subsidiaries of the property and assets
    of any Person other than Posadas or any of its Restricted Subsidiaries that constitute substantially all
    of a division or line of business of such Person; provided that the property and assets acquired are
    related, ancillary or complementary to a Permitted Business.

    “Asset Sale” means any direct or indirect sale, issuance, conveyance, lease (other than operating
leases entered into in the ordinary course of business), assignment, transfer or other disposition (other
than the granting of a Permitted Lien), including by way of merger, consolidation or Sale and Leaseback
Transaction, in one transaction or a series of related transactions by Posadas or any of its Restricted
Subsidiaries of:

    (a)     all or any of the Capital Stock of any Restricted Subsidiary, other than directors’ qualifying
shares or shares required by applicable law to be held by a Person other than Posadas or a Restricted
Subsidiary in order to maintain the corporate status of such Subsidiary,

    (b)       all or substantially all of the property and assets of an operating unit or business of Posadas
or any of its Restricted Subsidiaries, or

    (c)     any other property and assets of Posadas or any of its Restricted Subsidiaries outside the
ordinary course of business of Posadas or such Restricted Subsidiary,

in each case, that is not governed by the provisions of the Indenture applicable to mergers,
consolidations, sales and leases of Posadas. However, “Asset Sale” shall not include:

        (i)    sales or other dispositions of inventory, receivables and other current assets, in the
    ordinary course of business, including any sale of time share, full or fractional ownership or
    membership interests in the ordinary course of the Vacation Club Business,

        (ii)    any Restricted Payment made under the “—Limitation on Restricted Payments” covenant
    or a Permitted Investment,



                                                    153
        (iii)   sales, transfers or other dispositions of assets with a Fair Market Value not in excess of
    U.S.$5.0 million in any transaction or series of related transactions,

        (iv)    the sale or other disposition of Temporary Cash Investments,

        (v)    any sale, transfer, assignment or other disposition of any property or equipment that has
    become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business
    of Posadas or its Subsidiaries,

       (vi)    the sale, conveyance or other transfer of accounts receivable in connection with a
    Receivables Transaction,

       (vii)  the issuance of Capital Stock by a Restricted Subsidiary of Posadas to Posadas or a
    Wholly Owned Restricted Subsidiary, or

       (viii)   any sale or disposition by Posadas or any Restricted Subsidiary to Posadas or any
    Restricted Subsidiary.

    “Attributable Indebtedness” in respect of a Sale and Leaseback Transaction means, as at the time of
determination, the greater of:

        (i)     the fair value of the property subject to such arrangement; and

        (ii)    the present value (discounted at the rate of interest implicit in such transaction,
    determined in accordance with IFRS) of the total obligations of the lessee for rental payments during
    the remaining term of the lease included in such Sale and Leaseback Transaction (including any
    period for which such lease has been extended).

    “Average Life” shall mean, when applied to any Indebtedness at any date, the number of years
obtained by dividing (a) the original aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each scheduled installment, sinking
fund, serial maturity or other required payment of principal including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such
date and the making of such payment.

    “Board of Directors” means, with respect to any Person, the board of directors of such Person (or
other similar governing body) or any duly authorized committee thereof.

    “Board Resolution” means, with respect to any Person, a copy of a resolution certified by the
Secretary or an Assistant Secretary (or equivalent officer) of such Person to have been duly adopted by
the Board of Directors of such Person and to be in full force and effect on the date of such certification,
and delivered to the Trustee.

    “Business Day” has the meaning set forth under “—General.”

     “Capital Stock” means, (i) with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated, whether voting or non-voting) in the
equity of such Person, whether now outstanding or issued after the date of the Indenture, including,
without limitation, all common stock and preferred stock and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.

    “Capitalized Lease” means, as applied to any Person, any lease of any property (whether real,
personal or mixed) which, in conformity with IFRS, is required to be accounted for as a capital lease.

    “Capitalized Lease Obligations” means, as at any date of determination, the capitalized amount
shown as a liability in respect of all Capitalized Leases on the balance sheet of such Person prepared in
conformity with IFRS.



                                                    154
    “Change of Control” means the occurrence of one or more of the following events:

    (1)         the Permitted Holders shall cease to (a) be the “beneficial owners” (as such term is used
in Rule 13d-3 promulgated under the Exchange Act) of at least 35% of the outstanding Voting Stock of
Posadas or (b) have the power to elect a majority of the Board of Directors of Posadas; or

     (2)         there is consummated any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of Posadas to any Person or Group,
together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the
Indenture) unless such sale, lease, exchange or other transfer is to one acquiror and the Permitted
Holders (a) are the beneficial owners (as defined above) of at least 35% of the outstanding Voting Stock
of the acquiror and (b) have the power to elect a majority of the Board of Directors of the acquiror;

provided, however, that a “Change of Control” shall not be deemed to have occurred if at least two of the
Rating Agencies then rating the Notes shall have publicly announced prior to the consummation of the
Change of Control that no downgrade shall occur as a result of such events (it being understood that if
less than two Rating Agencies are then providing a rating for the Notes, then this proviso shall not apply
and a “Change of Control” shall be deemed to have occurred solely if clause (1) or clause (2) above is
satisfied).

   “Change of Control Offer” has the meaning set forth under “—Repurchase at the Option of Holders—
Change of Control.”

    “Change of Control Payment” has the meaning set forth under “—Repurchase at the Option of
Holders—Change of Control.”

    “Change of Control Payment Date” has the meaning set forth under “—Repurchase at the Option of
Holders—Change of Control.”

    “Closing Date” means the first date on which the Notes are originally issued under the Indenture.

    “Commission” means the Securities and Exchange Commission, as from time to time constituted, or if
at any time after the execution of the Indenture such Commission is not existing and performing the
applicable duties now assigned to it, then the body or bodies performing such duties at such time.

     “Commodity Agreements” means any forward commodity contract, commodity swap agreement,
commodity option agreement or other similar agreement or arrangement entered into by Posadas or any
of its Subsidiaries.

     “Common Stock” of any Person means any and all shares, interests or other participations in, and
other equivalents (however designated and whether voting or non-voting) of such Person’s common
stock, whether outstanding on the Closing Date or issued after the Closing Date, and includes, without
limitation, all series and classes of such common stock.

   “Consolidated Assets” means, as at any date of determination, the aggregate of all of the assets of
Posadas and its Subsidiaries, determined on a consolidated basis in accordance with IFRS.

    “Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus, to the
extent such amount was deducted in calculating such Consolidated Net Income:

    (a)     Consolidated Interest Expense,

    (b)     Consolidated Income Tax Expense,

    (c)     depreciation expense,




                                                    155
    (d)     amortization expense, and

    (e)     expense attributable to impairment of assets, including goodwill.

    “Consolidated Income Tax Expense” means, with respect to any Person for any period, the provision
for or payment of federal, state, local and any other income taxes in any other jurisdiction where such
Person and its Subsidiaries may operate or be subjected to, and any statutorily mandated employee profit
sharing payable by such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) for
such period as determined on a consolidated basis in accordance with IFRS.

   “Consolidated Interest Coverage Ratio” means, as at any date of determination, the ratio of (i)
Consolidated EBITDA of a Person for the period of the most recently completed four consecutive fiscal
quarters for which financial statements are in existence (a “Test Period”) to (ii) Consolidated Interest
Expense of such Person for such Test Period; provided that, for purposes of this definition, Consolidated
EBITDA and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for
such Test Period to:

        (i)     the incurrence of any Indebtedness by such Person or any of its Subsidiaries (Restricted
    Subsidiaries in the case of the Issuer) or the issuance of any Preferred Stock by any such Subsidiary
    (Restricted Subsidiary in the case of the Issuer) (and the application of the proceeds thereof) and any
    repayment of other Indebtedness by such Person or any of its Subsidiaries (Restricted Subsidiaries in
    the case of the Issuer) or redemption of other Preferred Stock by any such Subsidiary (Restricted
    Subsidiary in the case of the Issuer) (and the application of the proceeds therefrom) (other than the
    incurrence or repayment of Indebtedness in the ordinary course of business for working capital
    purposes pursuant to any revolving credit arrangement) occurring during the applicable Test Period
    for which Consolidated EBITDA or Consolidated Interest Expense is being calculated or at any time
    subsequent to the last day of such Test Period and on or prior to the date of determination, as if such
    incurrence, issuance, repayment, or redemption, as the case may be (and the application of the
    proceeds thereof), occurred on the first day of the Test Period (except that, in making such
    computation, the amount of Indebtedness under any revolving credit facility outstanding on the date
    of such calculation will be computed based on (i) the average daily balance of such Indebtedness
    during such quarter or such shorter period for which such facility was outstanding or (ii) if such facility
    was created after the end of such quarter, the average daily balance of such Indebtedness during the
    period from the date of creation of such facility to the date of calculation);

         (ii)     any Asset Sale or acquisition, including, without limitation, any acquisition giving rise to
    the need to make such calculation as a result of such Person or any of its Subsidiaries (including any
    Person who becomes a Subsidiary as a result of such Asset Acquisition) (Restricted Subsidiaries in
    the case of the Issuer) incurring Indebtedness and also including any Consolidated EBITDA
    (including any pro forma expense and cost reductions calculated on a basis consistent with
    Regulation S-X under the Exchange Act) associated with any such Asset Sale or acquisition)
    occurring during the Test Period or at any time subsequent to the last day of the Test Period and on
    or prior to the date of determination, as if such Asset Sale or acquisition (including the incurrence of,
    or assumption or liability for, any such Indebtedness) occurred on the first day of the Test Period;

        (iii)    the Investment in any Subsidiary (Restricted Subsidiary in the case of the Issuer) (or any
    Person who becomes a Subsidiary (Restricted Subsidiary in the case of the Issuer) or is merged with
    or into such Person) or an acquisition of assets, including any acquisition of assets occurring in
    connection with a transaction causing a calculation to be made hereunder, since the beginning of any
    Test Period, by such Person, or any Subsidiary (Restricted Subsidiary in the case of the Issuer) (by
    merger or otherwise), as if such Investment or acquisition of assets occurred on the first day of the
    Test Period;

        (iv)    any Asset Sale or any Investment or any acquisition of assets that would have required
    any adjustment pursuant to clauses (ii) or (iii) above if made by such Person or any of its Subsidiaries
    (Restricted Subsidiaries in the case of the Issuer) during such Test Period, by any Person that
    subsequently became a Subsidiary (Restricted Subsidiary in the case of the Issuer) or was merged


                                                     156
    with or into such Person or any of its Subsidiaries since the beginning of such Test Period) since the
    beginning of such Test Period, as if such Investment or acquisition of assets occurred on the first day
    of the Test Period; and

        (v)     the payment of any dividend or distribution permitted by clauses (7) or (8) of the second
    paragraph of the covenant described under “—Limitation on Restricted Payments” occurring during
    the applicable Test Period for which Consolidated EBITDA or Consolidated Interest Expense is being
    calculated or at any time subsequent to the last day of such Test Period and on or prior to the date of
    determination, as if such payment occurred on the first day of the Test Period.

    In calculating Consolidated Interest Expense for purposes of determining the denominator (but not
the numerator) of this Consolidated Interest Coverage Ratio:

        (i)     interest on outstanding Indebtedness determined on a fluctuating basis as of the date of
    determination and which will continue to be so determined thereafter shall be deemed to have
    accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the
    date of determination;

        (ii)    if interest on any Indebtedness actually incurred on the date of determination may
    optionally be determined at an interest rate based upon a factor of a prime or similar rate, a
    eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the date of
    determination will be deemed to have been in effect during the Test Period; and

        (iii)    notwithstanding clause (i) or (ii) of this paragraph, interest on Indebtedness determined
    on a fluctuating basis, to the extent such interest is covered by Hedging Obligations, shall be deemed
    to accrue at the rate per annum resulting after giving effect to the operation of these agreements.

     “Consolidated Interest Expense” for any period means the sum, without duplication, of the total
interest expense of a Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) for
such period, determined on a consolidated basis in accordance with IFRS and including, to the extent not
included in such interest expense, without duplication:

    (a)     imputed interest on Capitalized Lease Obligations and Attributable Indebtedness,

   (b)       commissions, discounts and other fees and charges owed with respect to letters of credit
securing financial obligations and bankers’ acceptance financings,

    (c)     the net costs or gains associated with obligations under Hedging Obligations,

     (d)    amortization of debt issuance costs, debt discount or premium and other financing fees and
expenses except, in the case of the Issuer or any of its Restricted Subsidiaries, any such costs, discount
or premium and fees and expenses resulting from the issuance of the Notes hereunder or the application
of the proceeds thereof to prepay Indebtedness,

    (e)     the interest portion of any deferred payment obligations,

    (f)     all other non-cash interest expense,

    (g)     capitalized interest,

     (h)     any premiums, fees, discounts, expenses and losses on the sale of accounts receivable (and
any amortization thereof) payable by such Person or its Subsidiaries (Restricted Subsidiaries in the case
of the Issuer) in connection with a Receivables Transaction,

    (i)     the product of (a) all dividend payments on any series of Disqualified Stock of such Person or
any Preferred Stock of any Subsidiary (Restricted Subsidiaries in the case of the Issuer) (other than any
such Disqualified Stock or any Preferred Stock held by such Person or a Wholly Owned Restricted
Subsidiary or to the extent paid in Qualified Capital Stock), multiplied by (b) a fraction, the numerator of


                                                    157
which is one and the denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the
Issuer), expressed as a decimal, and

    (j)           all interest payable with respect to discontinued operations.

    Total interest expense will be determined after giving effect to any net payment made or received by
such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) with respect to
Interest Rate Agreements.

   “Consolidated Net Income” means, for any period, net income of a Person and its Subsidiaries
(Restricted Subsidiaries in the case of the Issuer) on a consolidated basis, determined in accordance with
IFRS; provided that there shall be excluded from such Consolidated Net Income:

        (i)       any net income of any Subsidiary (Restricted Subsidiary in the case of the Issuer) for any
    period to the extent (i) such Subsidiary (Restricted Subsidiary in the case of the Issuer) is subject to
    restrictions, directly or indirectly, on the making of distributions or dividends and (ii) at the time of
    determination of Consolidated Net Income, (x) the net income of such Subsidiary (Restricted
    Subsidiary in the case of the Issuer) for such period has not been paid as dividends or distributions by
    such Subsidiary (Restricted Subsidiary in the case of the Issuer), directly or indirectly, to such Person
    and (y) such restrictions prohibit the net income of such Subsidiary (Restricted Subsidiary in the case
    of the Issuer) for such period from being paid as a dividend or distribution by such Subsidiary
    (Restricted Subsidiary in the case of the Issuer), directly or indirectly, to such Person (for the
    avoidance of doubt, if for any period of determination, such Subsidiary (Restricted Subsidiary in the
    case of the Issuer) is able to make a distribution or dividend to such Person of any amount of its net
    income, such amount shall be included in determining such Person’s Consolidated Net Income for
    such period); provided that, notwithstanding the foregoing, such Person’s equity in a net loss of any
    such Subsidiary (Restricted Subsidiary in the case of the Issuer) for such period shall be included in
    determining such Consolidated Net Income;

         (ii)    any gain or loss realized upon the sale or other disposition of any assets of such Person,
    its consolidated Subsidiaries (Restricted Subsidiaries in the case of the Issuer) or any other Person
    (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed
    of in the ordinary course of business and any gain or loss realized upon the sale or other disposition
    of any Capital Stock of such Person and any gain or loss realized upon the sale or other disposition of
    any Capital Stock of any Person which is not sold or otherwise disposed of in the ordinary course of
    business;

          (iii)       extraordinary gains or losses;

          (iv)        any gain (or loss) from foreign exchange translation or change in net monetary position;

        (v)      all other non-cash charges of such Person and its Subsidiaries (Restricted Subsidiaries in
    the case of the Issuer) (excluding any such non-cash charge to the extent that it represents an
    accrual of or reserve for cash expenditures in any future period);

          (vi)        the cumulative effect of a change in accounting principles; and

          (vii)       deferred income taxes.

    Notwithstanding the foregoing, for the purposes of the covenant described under “—Certain
Covenants—Limitation on Restricted Payments” only, there shall be excluded from Consolidated Net
Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of
Investments or return of capital to the Issuer or a Restricted Subsidiary to the extent such repurchases,
repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (3)(z) of the first paragraph of such covenant.




                                                          158
    “Consolidated Net Tangible Assets” of any Person means the aggregate amount of assets (less
applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities
and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense (to the
extent included in said aggregate amount of assets) and other like intangibles, as shown on the balance
sheet of such Person for the most recently ended fiscal quarter for which financial statements are
available, determined on a consolidated basis in accordance with IFRS. Consolidated Net Tangible
Assets shall be determined as of the time of the occurrence of the event(s) giving rise to the requirement
to determine Consolidated Net Tangible Assets and after giving effect to such event(s).

   “Consolidated Revenues” means, for any period, revenues of a Person and its Subsidiaries
(Restricted Subsidiaries in the case of the Issuer), determined on a consolidated basis in accordance with
IFRS.

    “Consolidated Total Indebtedness” means, with respect to a Person as of any date of determination,
an amount equal to the aggregate amount (without duplication) of all Indebtedness of such Person and its
Subsidiaries (Restricted Subsidiaries in the case of the Issuer) outstanding at such time.

    “Covenant Defeasance” has the meaning set forth under “—Defeasance.”

    “Credit Agreements” means, collectively (i) the Ps.200.0 million revolving credit agreement between
Banco Santander, S.A. and Posadas and (ii) the loan agreement among Inmobiliaria del Sudeste, S.A. de
C.V., Palace Holding, S.A. de C.V. and Promotora Inmobiliaria Hotelera, S.A. de C.V. (as successor to
Inmobiliaria Hotelera Posadas, S.A. de C.V.) dated as of December 10, 2003.

     “Credit Facilities” means one or more debt facilities (which may be outstanding at the same time and
including, without limitation, the Credit Agreements) providing for revolving credit loans, term loans or
letters of credit and, in each case, as such agreements may be amended, refinanced or otherwise
restructured, in whole or in part from time to time with respect to all or any portion of the Indebtedness
under such agreement or agreements or any successor or replacement agreement or agreements and
whether by the same or any other agent, lender or group of lenders.

     “Currency Agreements” mean any spot or forward foreign exchange agreements and currency swap,
currency option or other similar financial agreements or arrangements entered into by Posadas or any of
its Subsidiaries.

    “Debt to EBITDA Ratio” means, with respect to any Person as of any date of determination, the ratio
of the aggregate amount of Consolidated Total Indebtedness for such Person as of such date to
Consolidated EBITDA for such Person for the Test Period; provided that, for purposes of this definition,
Consolidated Total Indebtedness and Consolidated EBITDA shall be calculated after giving effect on a
pro forma basis for such Test Period to:

        (i)     the incurrence of any Indebtedness by such Person or any of its Subsidiaries (Restricted
    Subsidiaries in the case of the Issuer) or the issuance of any Preferred Stock by any such Subsidiary
    (Restricted Subsidiary in the case of the Issuer) (and the application of the proceeds thereof) and any
    repayment of other Indebtedness by such Person or any of its Subsidiaries (Restricted Subsidiaries in
    the case of the Issuer) or redemption of other Preferred Stock by any such Subsidiary (Restricted
    Subsidiary in the case of the Issuer) (and the application of the proceeds therefrom) (other than the
    incurrence or repayment of Indebtedness in the ordinary course of business for working capital
    purposes pursuant to any revolving credit arrangement) occurring during the applicable Test Period
    for which Consolidated EBITDA or Consolidated Total Indebtedness is being calculated or at any time
    subsequent to the last day of such Test Period and on or prior to the date of determination, as if such
    incurrence, issuance, repayment, or redemption, as the case may be (and the application of the
    proceeds thereof), occurred on the first day of the Test Period (except that, in making such
    computation, the amount of Indebtedness under any revolving credit facility outstanding on the date
    of such calculation will be computed based on (i) the average daily balance of such Indebtedness
    during such quarter or such shorter period for which such facility was outstanding or (ii) if such facility



                                                     159
    was created after the end of such quarter, the average daily balance of such Indebtedness during the
    period from the date of creation of such facility to the date of calculation);

         (ii)     any Asset Sale or acquisition, including, without limitation, any acquisition giving rise to
    the need to make such calculation as a result of such Person or any of its Subsidiaries (including any
    Person who becomes a Subsidiary as a result of such Asset Acquisition) (Restricted Subsidiaries in
    the case of the Issuer) incurring Indebtedness and also including any Consolidated EBITDA
    (including any pro forma expense and cost reductions calculated on a basis consistent with
    Regulation S-X under the Exchange Act) associated with any such Asset Sale or acquisition)
    occurring during the Test Period or at any time subsequent to the last day of the Test Period and on
    or prior to the date of determination, as if such Asset Sale or acquisition (including the incurrence of,
    or assumption or liability for, any such Indebtedness) occurred on the first day of the Test Period;

        (iii)    the Investment in any Subsidiary (Restricted Subsidiary in the case of the Issuer) (or any
    Person who becomes a Subsidiary (Restricted Subsidiary in the case of the Issuer) or is merged with
    or into such Person) or an acquisition of assets, including any acquisition of assets occurring in
    connection with a transaction causing a calculation to be made hereunder, since the beginning of any
    Test Period, by such Person, or any Subsidiary (Restricted Subsidiary in the case of the Issuer) (by
    merger or otherwise), as if such Investment or acquisition of assets occurred on the first day of the
    Test Period;

         (iv)    any Asset Sale or any Investment or any acquisition of assets that would have required
    any adjustment pursuant to clauses (ii) or (iii) above if made by such Person or any of its Subsidiaries
    (Restricted Subsidiaries in the case of the Issuer) during such Test Period, by any Person that
    subsequently became a Subsidiary (Restricted Subsidiary in the case of the Issuer) or was merged
    with or into such Person or any of its Subsidiaries since the beginning of such Test Period) since the
    beginning of such Test Period, as if such Investment or acquisition of assets occurred on the first day
    of the Test Period; and

        (v)     the payment of any dividend or distribution permitted by clauses (7) or (8) of the second
    paragraph of the covenant described under “—Limitation on Restricted Payments” occurring during
    the applicable Test Period for which Consolidated EBITDA or Consolidated Total Indebtedness is
    being calculated or at any time subsequent to the last day of such Test Period and on or prior to the
    date of determination, as if such payment occurred on the first day of the Test Period.

   “Default” means any event that is, or after the giving of notice or passage of time or both would be, an
Event of Default.

    “Defeased Covenants” has the meaning set forth under “—Defeasance.”

    “Defeased Events of Default” has the meaning set forth under “—Defeasance.”

   “Designation” has the meaning set forth under “—Certain Covenants—Limitation on Designations of
Unrestricted Subsidiaries.”

     “Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by
its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior
to the final Maturity of the Notes; provided, however, that only the amount of such Capital Stock that
matures or is redeemable prior to the maturity of the Notes shall be deemed to be Disqualified Stock.

   “Equity Offering” means a public or private offer and sale of Capital Stock of the Issuer other than to a
Subsidiary.

    “Event of Default” means the occurrence of any of the events set forth under “Events of Default.”




                                                     160
    “Exchange Act” means the United States Securities Exchange Act of 1934 (or any successor statute),
as amended and the rules and regulations of the Commission promulgated thereunder.

     “Fair Market Value” means the price that would be paid in an arm’s-length transaction between an
informed and willing seller under no compulsion to sell and an informed and willing buyer under no
compulsion to buy, as determined in good faith by the Board of Directors (whose determination shall be
conclusive) and evidenced by a resolution of the Board of Directors.

    “Fitch” means Fitch Ratings Ltd. and its successors.

     “guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly
guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase
or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation
of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term “guarantee” shall not include endorsements for
collection or deposit in the ordinary course of business. The term “guarantee” used as a verb has a
corresponding meaning.

    “Guarantees” mean the joint and several guarantees by the Guarantors and the Subsequent
Guarantors of Posadas’ obligations under the Notes and the Indenture for the benefit of the Holders and
the Trustee.

   “Guarantor” means each Person that has executed a Guarantee of the Notes on the Closing Date
and any Subsequent Guarantor.

   “Hedging Obligations” of any Person means the obligations of such Person pursuant to any Interest
Rate Agreement, Commodity Agreement or Currency Agreement.

    “Holder” means any registered holder, from time to time, of any Note.

    “IFRS” means International Financial Reporting Standards, as issued by the International Accounting
Standards Board, that are in effect as of the Issue Date (i.e., without giving effect to any amendment,
modification or change to such International Financial Reporting Standards after the Issue Date).

    “Incur” means, with respect to any Indebtedness, to incur, create, issue, assume, guarantee, acquire
or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently
or otherwise, such Indebtedness or other obligations or the recording, as required pursuant to IFRS or
otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and
“Incurrence,” “Incurred” and “Incurring” shall have meanings correlative to the foregoing); provided,
however, Indebtedness or Capital Stock of a Person or any of its Subsidiaries existing at the time such
Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition of assets or
otherwise) will be deemed to be incurred by such Restricted Subsidiary at the time it becomes a
Restricted Subsidiary whether or not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary; provided, further, however, that a
change in IFRS that results in an obligation of such Person that exists at such time becoming
Indebtedness will not be deemed an Incurrence of such Indebtedness.

     “Indebtedness” means, with respect to any Person at any date of determination (without duplication),
(i) all obligations of such Person, in respect of (a) borrowed money; (b) the outstanding principal amount
of any bonds, notes, loan stock, commercial paper, acceptance credits, debentures, and bills or
promissory notes drawn, accepted, endorsed, or issued by such Person (including, in the case of
Posadas and the Guarantors, the Notes and the Guarantees, respectively); (c) any credit to such Person
from, or other obligation of such Person to, a supplier of goods or services under any installment



                                                    161
purchase or similar arrangement in respect of goods or services (except trade accounts payable within
180 days that were Incurred in the ordinary course of business); (d) non-contingent obligations of such
Person to reimburse any other Person in respect of amounts paid under a letter of credit or similar
instrument (excluding any such letter of credit or similar instrument issued for the benefit of such Person
in respect of trade accounts in the ordinary course of business); (e) Capitalized Lease Obligations and (f)
any fixed or minimum premium payable on a redemption or replacement of any of the foregoing
obligations; (ii) all Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the Fair Market Value of such asset at such date of determination
and (B) the amount of such Indebtedness; (iii) all Indebtedness of other Persons guaranteed by such
Person to the extent such indebtedness is guaranteed by such Person; (iv) to the extent not otherwise
included in this definition, the net payment obligations of such Person and its Subsidiaries under Currency
Agreements, Commodity Agreements and Interest Rate Agreements; (v) all liabilities of such Person
(actual or contingent) under any conditional sale or transfer with recourse or obligation to repurchase,
including, without limitation, by way of discount or factoring of book debts or receivables; (vi) to the extent
not otherwise included in this definition, the Receivables Transaction Amount outstanding relating to any
Receivables Transaction; and (vii) all Disqualified Capital Stock of such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued and
unpaid dividends, if any. The amount of Indebtedness of any Person at any date shall be (without
duplication) the outstanding balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the occurrence of the contingency
giving rise to the obligation (unless the underlying contingency has not occurred and the occurrence of
the underlying contingency is entirely within the control of Posadas or its Subsidiaries); provided that the
amount outstanding at any time of any Indebtedness issued with original issue discount is the face
amount of such Indebtedness less the remaining unamortized portion of the original issue discount of
such Indebtedness at such time as determined in accordance with IFRS.

    “Indenture” has the meaning set forth in the first paragraph under “Description of the Notes.”

    “Independent Financial Advisor” means an investment banking firm, accounting firm or appraisal firm
of national standing; provided that such firm is not an Affiliate of the Issuer.

    “Interest Rate Agreements” mean any interest rate protection agreements and other types of interest
rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar
arrangements) entered into by Posadas or any of its Subsidiaries.

     “Investment” means any direct or indirect advance (other than advances to customers in the ordinary
course of business that are recorded as accounts receivable on the balance sheet of any Person or its
Subsidiaries), loan, or other extension of credit or equity capital contribution to (by means of my transfer
of cash or other property to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, any other Person. “Investment” shall exclude (i) extensions of trade credit by the
Issuer and the Restricted Subsidiaries on commercials reasonable terms in accordance with normal trade
practices of the Issuer or such Restricted Subsidiaries, as the case may be, (ii) Hedging Obligations
entered into in the ordinary course of business and in compliance with the Indenture, (iii) endorsements of
negotiable instruments and documents in the ordinary course of business and (iv) an acquisition of
assets, Capital Stock or other securities by Posadas for consideration exclusively consisting of Capital
Stock of Posadas. If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Capital
Stock of any Restricted Subsidiary (the “Referent Subsidiary”) such that, after giving effect to any such
sale or disposition, the Referent Subsidiary shall cease to be a Restricted Subsidiary, the Issuer shall be
deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Capital Stock of the Referent Subsidiary not sold or disposed of. Any Designation of a
Restricted Subsidiary as an Unrestricted Subsidiary shall be deemed to be an Investment by the Issuer in
an amount equal to the Fair Market Value of such Subsidiary on the date of such Designation, provided
that the Designation of a Restricted Subsidiary as an Unrestricted Subsidiary as permitted by the second



                                                     162
paragraph of the covenant described under “—Limitation on Designations of Unrestricted Subsidiaries”
shall not be deemed to be an Investment by the Issuer.

    “Investment Grade Ratings” means a rating of Baa3 or better by Moody’s (or its equivalent under any
successor rating category of Moody’s); a rating of BBB- or better by S&P (or its equivalent under any
successor rating category of S&P); a rating of BBB- or better by Fitch (or its equivalent under any
successor rating category of Fitch); and a rating equal to or higher than the equivalent investment grade
credit rating from any replacement Rating Agency selected by the Issuer.

    “Issue Date” means the first date of issuance of Notes under the Indenture.

    “Legal Defeasance” has the meaning set forth under “—Defeasance.”

     “Lien” means, with respect to any assets or property of any kind, any mortgage or deed of trust,
pledge, security interest, hypothecation, collateral, assignment, encumbrance, lien (statutory or
otherwise) or charge of any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the seller, or any agreement to give
any security interest).

     “Mexican Restructuring” means any case or other proceeding against the Issuer or any Subsidiary
with respect to it or its debts under any bankruptcy, concurso mercantil, quiebra, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, conciliador,
liquidator, custodian or other similar official of it or any substantial part of its property.

    “Mexican Wholly Owned Restricted Subsidiary” means a Wholly Owned Restricted Subsidiary
organized, incorporated or formed under the laws of Mexico.

    “Moody’s” means Moody’s Investors Service, Inc.

     “Net Cash Proceeds” means (a) with respect to any Asset Sale, the cash or readily marketable cash
equivalents received (including by way of sale or discounting of a note, installment receivable or other
receivable, but excluding any other consideration received in the form of assumption by the acquiror of
Indebtedness or other obligations relating to such properties or assets or received in any other noncash
form) therefrom by such Person, net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses Incurred and all federal, state, provincial, foreign and local taxes required to be
accrued as a liability under IFRS as a consequence of such asset disposition, (ii) all payments made by
such Person or its Subsidiaries on any Indebtedness that is secured by such assets in accordance with
the terms of any Lien upon or with respect to such assets or that must, by the terms of such Lien, or in
order to obtain a necessary consent to such asset disposition, or by applicable law, be repaid out of the
proceeds from such asset disposition, and (iii) appropriate amounts to be determined by Posadas or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with IFRS, against any liabilities
associated with such Asset Sale and retained by Posadas or any Restricted Subsidiary, as the case may
be, after such Asset Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, and (b) with respect to any issuance and sale of Capital Stock by a
Person, the proceeds to such Person of such issuance and sale in the form of cash or readily marketable
cash equivalents, net, in each case, of any attorney’s fees, accountants’ fees, underwriters’ or placement
agents’ fees, discounts or commissions, and brokerage and other fees incurred in connection with such
issuance and sale and net of taxes paid or payable by such Person as a result thereof.

    “Notes” means the 7.875% Senior Notes due 2022 to be issued by the Issuer.

   “Offering” means the offering of U.S.$350 million aggregate principal amount of Notes on the Closing
Date.




                                                     163
    “Opinion of Mexican Counsel” means a written opinion of counsel admitted to practice in Mexico and
of recognized standing in Mexico who may be counsel to Posadas and who shall be acceptable to the
Trustee; provided that such counsel may rely, as to any matters of U.S. law, on an Opinion of U.S.
Counsel.

    “Opinion of U.S. Counsel” means a written opinion of counsel admitted to practice in the State of New
York and of recognized standing in the United States who may be counsel to Posadas and who shall be
acceptable to the Trustee; provided that such counsel may rely, as to any matters of Mexican law, on an
Opinion of Mexican Counsel.

    “Pari Passu Notes” has the meaning set forth under “—Certain Covenants—Limitation on Asset
Sales.”

    “Permitted Business” means the business or businesses conducted by the Issuer and its Subsidiaries
as of the Issue Date and any business ancillary or complementary thereto.

     “Permitted Holders” means (i) any member of Posadas’ Board of Directors on the Closing Date, their
respective spouses, ancestors, siblings, descendants (including children or grandchildren by adoption)
and the descendants of any of his siblings; (ii) in the event of the incompetence or death of any of the
Persons described in clause (i), such Person’s estate, executor, administrator, committee or other
personal representative, in each case who at any particular date shall beneficially own or have the right to
acquire, directly or indirectly, Equity Interests of Posadas; (iii) any trust created for the benefit of the
Persons described in clause (i) or (ii) or any trust for the benefit of any such trust; or (iv) any investment
entity a majority of the voting Equity Interests of which are owned by any of the Persons described in
clause (i), (ii) or (iii).

    “Permitted Indebtedness” has the meaning set forth under “—Certain Covenants—Limitation on
Indebtedness.”

    “Permitted Investments” means:

   (a)      Investments by Posadas or any Restricted Subsidiary in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary or that will merge or
consolidate into Posadas or a Wholly Owned Restricted Subsidiary;

    (b)    Investments in a Person engaged in a Permitted Business not to exceed the greater of (x)
U.S.$50.0 million and (y) 2.5% of Consolidated Net Tangible Assets of the Issuer at any time outstanding;

    (c)     Investments in cash and Temporary Cash Investments;

   (d)      loans and advances to executive committee members, employees and officers of Posadas
and the Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in
excess of an aggregate of U.S.$2.0 million at any one time outstanding;

     (e)    Investments in Currency Agreements, Commodity Agreements and Interest Rate Agreements
entered into in the ordinary course of Posadas’ or a Restricted Subsidiary’s businesses to protect
Posadas or its Subsidiaries from fluctuations in interest rates, exchange rates and commodity prices and
not for speculative purposes;

    (f)     Investments in securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers;

    (g)     Investments made by Posadas or a Restricted Subsidiary as a result of consideration
received in connection with an Asset Sale made in compliance with the covenant described under “—
Certain Covenants—Asset Sales”;




                                                     164
   (h)      Investments by Posadas and its Restricted Subsidiaries in Unrestricted Subsidiaries in an
aggregate principal amount, measured based on the amount invested by Posadas and its Restricted
Subsidiaries, not to exceed the greater of (x) U.S.$75.0 million and (y) 7.5% of Consolidated Net Tangible
Assets of Posadas;

    (i)     Investments in a Receivables Entity in connection with a Receivables Transaction; provided
that such Investment in any such Person is in the form of any equity interest or interests in receivables
and related assets generated by the Issuer or any Restricted Subsidiary and transferred to such Person
in connection with a Receivables Transaction; and

   (j)      Investments by the Issuer or its Restricted Subsidiaries in connection with the sale of
vacation club memberships, full or fractional ownership or full ownership of vacation homes, land,
amenities and other improvements in the ordinary course of the Vacation Club Business.

    “Permitted Liens” means:

    (a)     Liens existing on the Closing Date and any extension, replacement or renewal thereof;

   (b)     Liens securing Indebtedness incurred under clauses (a)(ii) and (a)(xi) of the covenant
described under “—Certain Covenants—Limitation on Indebtedness”;

    (c)     Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to Posadas
or a Wholly Owned Subsidiary;

   (d)      Liens granted after the Closing Date on any assets or Capital Stock of Posadas or its
Subsidiaries created in favor of the Holders;

    (e)     Liens securing Refinancing Indebtedness which is Incurred to refinance secured
Indebtedness which is permitted to be Incurred or to exist under the Indenture; provided that such Liens
do not extend to or cover any property or assets of Posadas or any Subsidiary other than the property or
assets securing the Indebtedness being Refinanced;

    (f)     purchase money Liens securing Purchase Money Indebtedness or Capitalized Lease
Obligations Incurred to finance the acquisition or leasing of property of the Issuer or a Restricted
Subsidiary used in a Permitted Business; provided that: (i) the related Purchase Money Indebtedness
does not exceed the cost of such property together with the related costs of construction or improvement
of such property and shall not be secured by any property of the Issuer or any Restricted Subsidiary other
than the property so acquired, and (ii) the Lien securing such Indebtedness will be created within 365
days of such acquisition;

    (g)     in addition to Liens securing Indebtedness pursuant to paragraphs (a) through (f) above,
Liens securing Indebtedness in an amount not to exceed 5% of Consolidated Net Tangible Assets of
Posadas;

    (h)     Liens for taxes, assessments, governmental charges or claims that are being contested in
good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in conformity with IFRS shall have been
made;

    (i)       statutory and common law Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with IFRS shall have been made;

   (j)     Liens incurred or deposits made in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social security;



                                                    165
    (k)     Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed money);

    (l)     easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course
of business of Posadas and the Subsidiaries taken as a whole;

    (m)     leases or subleases granted to others that do not materially interfere with the ordinary course
of business of Posadas and the Subsidiaries, taken as a whole;

   (n)    Liens encumbering property or assets under construction arising from progress or partial
payments by a customer of Posadas or the Subsidiaries relating to such property or assets;

     (o)     Liens on property of, or on shares of Capital Stock or Indebtedness of any Person existing at
the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens
do not extend to or cover any property or assets of Posadas or any Restricted Subsidiary other than the
property or assets acquired;

    (p)     Liens in favor of Posadas or any Guarantor;

   (q)      Liens arising from the rendering of a final judgment or order against Posadas or any
Subsidiary that does not give rise to an Event of Default;

   (r)    Liens securing reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the products and proceeds thereof;

   (s)     Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;

     (t)      Liens on any assets acquired by Posadas or any Restricted Subsidiary after the Closing
Date, which Liens were in existence prior to the acquisition of such assets (to the extent that such Liens
were not created in contemplation of or in connection with such acquisition); provided that such Liens are
limited to the assets so acquired and the proceeds thereof;

    (u)      Liens arising by virtue of any statutory, regulatory, contractual or warranty requirements of
Posadas or any Restricted Subsidiary, including, without limitation, provisions relating to rights of offset
and set-off, bankers’ liens or similar rights and remedies;

   (v)      Liens upon specific items of inventory or other goods and proceeds of any Person securing
such Person’s obligations in respect of banker’s acceptance issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such inventory or other goods;

    (w)    Liens arising under any Permitted Vacation Club Financing Facilities and Liens in effect on
the Closing Date securing Indebtedness permitted under clause (xiii) of the second paragraph of the
covenant described under “—Certain Covenants—Limitation on Indebtedness.”

    (x)     Liens securing any Hedging Obligations so long as the Lien is incurred in the ordinary course
of business, and not for speculative purposes and pursuant to customary collateral provisions for Hedging
Obligations of such type; and

   (y)     Liens on accounts receivable or assets related to such accounts receivable incurred in
connection with a Receivables Transaction.

    “Permitted Vacation Club Financing Facilities” means one or more debt facilities the proceeds of
which are used in the Vacation Club Business; provided that such Indebtedness is not:



                                                    166
   (a)      an obligation of, or otherwise recourse, directly or indirectly, to the Issuer or any of its
Restricted Subsidiaries other than a Vacation Club Business Subsidiary or any Receivables Entity; or

    (b)     secured by any Lien on any asset of the Issuer or any of its Restricted Subsidiaries, other
than by a Lien on (i) properties and assets of the Vacation Club Business, (ii) property and assets to be
developed into a Vacation Club Business, and (iii) Receivables Entities and the Capital Stock of a
Receivables Entity.

    “Person” means any individual, corporation, partnership, limited liability company, trust or other
organization or any government or any agency or political subdivision thereof.

      “Principal Subsidiary” means, at any date of determination, (a) any Subsidiary of Posadas, that,
together with its Subsidiaries, on a consolidated basis, (i) had total assets (exclusive of assets owed to
such Subsidiary by Posadas or other Subsidiaries of Posadas) in excess of 5% of Consolidated Assets or
(ii) accounted for more than 5% of Consolidated Revenues, in each case determined by reference to the
consolidated financial statements of Posadas and its Subsidiaries for the most recently completed fiscal
quarter prior to the date of determination and (b) each Guarantor.

    “Purchase Money Indebtedness” means Indebtedness Incurred for the purpose of financing all or any
part of the purchase price, or other cost of construction or improvement of any property; provided that the
aggregate principal amount of such Indebtedness does not exceed the lesser of the Fair Market Value of
such property or such purchase price or cost, including any Refinancing Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of the
Refinancing.

    “Qualified Capital Stock” means any Capital Stock that is not Disqualified Stock.

    “Rating Agency” means (1) each of Fitch, Moody’s and S&P; and (2) if any of Fitch, Moody’s or S&P
ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the
Issuer’s control, a “nationally recognized statistical rating organization” within the meaning of Section
3(a)(62) of the Exchange Act, selected by the Issuer as a replacement agency for Fitch, Moody’s or S&P,
as the case may be.

    “Receivables Entity” means a Person in which the Issuer or any Restricted Subsidiary makes an
Investment and:

   (1)     to which the Issuer or any Restricted Subsidiary transfers receivables and related assets in
connection with a Receivables Transaction;

    (2)     which engages in no activities other than in connection with the Receivables Transaction;

    (3)     no portion of the Indebtedness or any other obligations (contingent or otherwise) of which:

    (a)    is guaranteed by the Issuer or any Restricted Subsidiary (excluding guarantees of Obligations
(other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings);

    (b)     is recourse to or obligates the Issuer or any Restricted Subsidiary in any way other than
pursuant to Standard Securitization Undertakings; or

    (c)     subjects any property or asset of the Issuer or any Restricted Subsidiary, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization
Undertakings;

    (4)    with which neither the Issuer nor any Restricted Subsidiary has any material contract,
agreement, arrangement or understanding (except in connection with a Receivables Transaction) other
than on terms no less favorable to the Issuer or such Restricted Subsidiary than those that might be



                                                     167
obtained at the time from Persons that are not Affiliates of the Issuer, other than fees payable in the
ordinary course of business in connection with servicing receivables; and

    (5)    to which neither the Issuer nor any Restricted Subsidiary has any obligation to maintain or
preserve such entity’s financial condition or cause such entity to achieve certain levels of operating
results.

    “Receivables Transaction” means any securitization, factoring, discounting or similar financing
transaction or series of transactions that may be entered into by the Issuer or any of its Restricted
Subsidiaries pursuant to which the Issuer or any of its Restricted Subsidiaries may sell, convey or
otherwise transfer to any Person (including a Receivables Entity), or may grant a security interest in, any
receivables (whether now existing or arising in the future) of the Issuer or any of its Restricted
Subsidiaries, and any assets related thereto, including all collateral, securing such receivables, all
contracts and all guarantees or other obligations in respect of such receivables, the proceeds of such
receivables and other assets which are customarily transferred, or in respect of which security interests
are customarily granted, in connection with securitization, factoring or discounting involving receivables.

    “Receivables Transaction Amount” means the amount of obligations outstanding under the legal
documents entered into as part of a Receivables Transaction on any date of determination that would be
characterized as principal if such Receivables Transaction were structured as a secured lending
transaction rather than a purchase.

   “Reference Date” has the meaning set forth under “—Certain Covenants—Limitation on Restricted
Payments.”

    “Referent Subsidiary” has the meaning set forth in the definition of Investment.

    “Refinance” means in respect of any security or Indebtedness, to refinance, extend, renew, refund,
repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or
replacement for, such security or Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall
have correlative meanings.

   “Refinancing Indebtedness” has the meaning set forth in the covenant described under “—Certain
Covenants—Limitation on Indebtedness.”

   “Restricted Payment” has the meaning set forth under “—Certain Covenants—Limitation on
Restricted Payments.”

    “Restricted Subsidiary” means any Subsidiary of Posadas that has not been designated by the Board
of Directors of Posadas, by a Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary
pursuant to and in compliance with the covenant described under “—Certain Covenants—Limitation on
Designations of Unrestricted Subsidiaries.”

   “Revocation” as the meaning set forth under “—Certain Covenants—Limitation on Designations of
Unrestricted Subsidiaries.”

   “S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill
Companies, Inc.

    “Sale and Leaseback Transaction” means any direct or indirect arrangement with any Person or to
which any such Person is a party, providing for the leasing to Posadas or a Restricted Subsidiary of any
property, whether owned by Posadas or any Restricted Subsidiary on the Closing Date or later acquired,
which has been or is to be sold or transferred by Posadas or such Restricted Subsidiary to such Person
or to any other Person from whom funds have been or are to be advanced on the security of such
property.

     “Senior Indebtedness” means all indebtedness of Posadas and the Guarantors ranking senior to, or
pari passu with, the Notes.


                                                    168
    “Service Subsidiaries” means Subsidiaries of Posadas which do not own, lease as lessee or manage
hotels and which are operated principally for the purpose of providing payroll, procurement, advertising or
other similar support services for Posadas and its Subsidiaries.

    “Standard Securitization Undertakings” means representations, warranties, covenants and
indemnities entered into by the Issuer or any Restricted Subsidiary which are reasonably customary in
securitization of receivables transactions.

     “Stated Maturity” means, (i) with respect to any debt security, the date specified in such debt security
as the fixed date on which the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of, or interest on, any debt security, the date
specified in such debt security as the fixed date on which such installment is due and payable.

    “Subsequent Guarantor” means any Restricted Subsidiary that after the Closing Date has pursuant to
a supplemental indenture executed a direct, unconditional and irrevocable guarantee of Posadas’
obligations under the Notes and the Indenture on the terms set forth in the Indenture.

     “Subsidiary” means, with respect to any Person, any corporation, association or other business entity
(i) of which Voting Stock representing more than 50% of the total voting power of the outstanding Voting
Stock is owned, directly or indirectly, by such Person or (ii) for which such Person may nominate or
appoint more than 50% of the members of the board of directors or persons performing similar functions
for such entity.

    “Successor” has the meaning set forth under “—Merger, Consolidation and Sale of Assets.”

    “Temporary Cash Investments” means any of the following:

   (1)      direct obligations of the United States of America or any agency thereof or obligations fully
and unconditionally guaranteed by the United States of America or any agency thereof, in each case,
maturing within 365 days of the date of acquisition;

    (2)      time deposit accounts, bank promissory notes, certificates of deposit and money market
deposits maturing within 365 days of the date of acquisition thereof issued by a bank or trust company
which is organized under the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of U.S.$200.0 million, or the foreign currency
equivalent thereof, and has outstanding debt which is rated “A,” or such similar equivalent rating, or
higher by S&P or Moody’s or any money market fund sponsored by a registered broker dealer or mutual
fund distributor;

    (3)     repurchase obligations with a term of not more than 30 days for underlying securities of the
types described in clause (1) above or clause (6) below entered into with a bank or trust company
meeting the qualifications described in clause (2) above or clause (9) below;

    (4)     commercial paper maturing not more than 90 days after the date of acquisition, issued by a
corporation, other than an Affiliate of Posadas, organized and in existence under the laws of the United
States of America, any state thereof or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of “P-1” or higher according to
Moody’s or “A-1” or higher according to S&P;

    (5)       securities with maturities of six months or less from the date of acquisition issued or fully and
unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at least “A” by S&P or Moody’s;

   (6)       Certificados de la Tesorería de la Federación (Cetes) or Bonos de Desarrollo del Gobierno
Federal (Bondes) issued by the Mexican government and maturing not more than 365 days after the
acquisition thereof;



                                                     169
   (7)       Investments in money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (1) through (6) above and (9) below;

    (8)      demand deposit accounts with U.S. banks or Mexican banks specified in clause (9) of this
definition maintained in the ordinary course of business; and

    (9)      certificates of deposit, bank promissory notes and bankers’ acceptances denominated in
pesos, maturing not more than 365 days after the acquisition thereof and issued or guaranteed by any
one of the four largest banks, based on assets as of the immediately preceding December 31, organized
under the laws of Mexico and which are not under intervention or controlled by the Instituto para la
Protección al Ahorro Bancario or any successor thereto or any banking subsidiary of a foreign bank which
has capital, surplus and undivided profits aggregating in excess of U.S.$200.0 million, or the foreign
currency equivalent thereof, and has outstanding debt which is rated “A,” or such similar equivalent rating,
or higher by S&P or Moody’s.

    “Test Period” has the meaning set forth in the definition of Consolidated Interest Coverage Ratio.

    “Trustee” has the meaning set forth in the first paragraph under “Description of the Notes.”

   “Unrestricted Subsidiary” of Posadas, means, initially Fundación Posadas, A.C., its successors and
Subsidiaries, and

    (1)    any Subsidiary of Posadas that at the time of determination shall be or continue to be
designated as such pursuant to and in compliance with the covenant described under “—Certain
Covenants—Limitation on Designations of Unrestricted Subsidiaries”; and

    (2)     any Subsidiary of an Unrestricted Subsidiary.

   “Vacation Club Business” means the vacation ownership business of Posadas and its Subsidiaries
described in this offering memorandum, and any related business involving the sale and operation of
membership interests, time share right of use, or full or fractional ownership interests.

    “Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having
the power to vote for the election of directors, managers or other voting members of the governing body
of such Person.

    “Wholly Owned” means, with respect to any Subsidiary of any Person, such Subsidiary if all of the
outstanding Capital Stock in such Subsidiary (other than any shares required that the relevant company
has two shareholders at all times as mandated by applicable law) is owned directly or indirectly by such
Person or one or more Wholly Owned Subsidiaries of such Person.




                                                    170
                                  BOOK-ENTRY; DELIVERY AND FORM
         The New Notes are being offered and sold in connection with the initial offering thereof solely to
“qualified institutional buyers,” as defined in Rule 144A under the Securities Act (“QIBs”), pursuant to Rule
144A and in offshore transactions to persons other than “U.S. persons,” as defined in Regulation S under
the Securities Act (“Non-U.S. Persons”), in reliance on Regulation S. Following the initial offering of the
New Notes, the New Notes may be sold to QIBs pursuant to Rule 144A, Non-U.S. Persons in reliance on
Regulation S and pursuant to other exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act, as described under “Transfer Restrictions.”
The Global Notes
        Rule 144A Global Notes. New Notes offered and sold to QIBs pursuant to Rule 144A were
issued in the form of one or more registered notes in global form, without interest coupons (collectively,
the “Rule 144A Global Note”). The Rule 144A Global Note will be deposited on the issue date with, or on
behalf of, The Depository Trust Company (“DTC”) and registered in the name of a nominee of DTC, or will
remain in the custody of the trustee pursuant to the FAST Balance Certificate Agreement between DTC
and the trustee. Interests in the Rule 144A Global Note will be available for purchase only by QIBs.
         Regulation S Global Notes. New Notes offered and sold in offshore transactions to Non-U.S.
Persons in reliance on Regulation S were initially issued in the form of one or more registered notes in
global form, without interest coupons (collectively, the “Regulation S Global Note”). Each Regulation S
Global Note will be deposited upon issuance with, or on behalf of, a custodian for DTC in the manner
described in the preceding paragraph.
         Except as set forth below, the Rule 144A Global Note and the Regulation S Global Note
(collectively, the “Global Notes”) may be transferred, in whole and not in part, solely to another nominee
of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be
exchanged for notes in physical, certificated form (“Certificated Notes”) except in the limited
circumstances described below.
         The New Notes will be subject to certain restrictions on transfer and will bear a restrictive legend
as set forth under “Transfer Restrictions.”
         All interests in the Global Notes may be subject to the procedures and requirements of DTC. Any
interests held through the Euroclear System (“Euroclear”) or Clearstream Banking S.A. of Luxembourg
(“Clearstream, Luxembourg”) may also be subject to the procedures and requirements of such systems.
Exchanges Among the Global Notes
          Prior to the expiration of the later of the 40th day after the later of the commencement of the
offering of the New Notes and the issue date (such period through and including such 40th day, the
“Distribution Compliance Period”), transfers by an owner of a beneficial interest in the Regulation S
Global Note to a transferee who takes delivery of such interest through the Rule 144A Global Note may
be made only in accordance with applicable procedures and upon receipt by the trustee of a written
certification from the transferor of the beneficial interest in the form provided in the indenture to the effect
that such transfer is being made to a person whom the transferor reasonably believes is (i) a QIB within
the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or (ii) pursuant to
another exemption from the registration requirements under the Securities Act and, in either case, in
accordance with all applicable securities laws of the United States or any other jurisdiction. Such written
certification will no longer be required after the expiration of the Distribution Compliance Record.
          Transfers by an owner of a beneficial interest in the Rule 144A Global Note to a transferee who
takes delivery of such interest through the Regulation S Global Note, whether before or after the
expiration of the Distribution Compliance Period, will be made only upon receipt by the trustee of a
certification from the transferor to the effect that such transfer is being made in accordance with
Regulation S under the Securities Act.
        Any beneficial interest in one of the Global Notes that is transferred to a person who takes
delivery in the form of an interest in another Global Note will, upon transfer, cease to be an interest in
such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be



                                                     171
subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
Certain Book-Entry Procedures for the Global Notes
        The descriptions of the operations and procedures of DTC, Euroclear and Clearstream,
Luxembourg set forth below are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems and are subject to change
by them from time to time. Neither we nor the initial purchaser take any responsibility for these operations
or procedures, and investors are urged to contact the relevant system or its participants directly to discuss
these matters.
        DTC has advised us that it is:
            •   a limited purpose trust company organized under the laws of the State of New York;
            •   a “banking organization” within the meaning of the New York Banking Law;
            •   a member of the Federal Reserve System;
            •   a “clearing corporation” within the meaning of the Uniform Commercial Code, as
                amended; and
            •   a “clearing agency” registered pursuant to Section 17A of the Exchange Act.
          DTC was created to hold securities for its participants (collectively, the “Participants”) and
facilitates the clearance and settlement of securities transactions between Participants through electronic
book-entry changes to the accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. DTC’s Participants include securities brokers and dealers (including the initial
purchaser), banks and trust companies, clearing corporations and certain other organizations. Indirect
access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the “Indirect Participants”) that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Investors who are not Participants may beneficially own
securities held by or on behalf of DTC only through Participants or Indirect Participants.
        We expect that pursuant to procedures established by DTC (1) upon deposit of each Global Note,
DTC will credit the accounts of Participants designated by the initial purchaser with an interest in the
Global Note and (2) ownership of the Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the interests of Participants) and
the records of Participants and the Indirect Participants (with respect to the interests of persons other
than Participants).
          The laws of some jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the Notes
represented by a Global Note to such persons may be limited. In addition, because DTC can act only on
behalf of its Participants, who in turn act on behalf of persons who hold interests through Participants, the
ability of a person having an interest in notes represented by a Global Note to pledge or transfer such
interest to persons or entities that do not participate in DTC’s system, or to otherwise take actions in
respect of such interest, may be affected by the lack of a physical definitive security in respect of such
interest.
          So long as DTC or its nominee is the registered owner of a Global Note, DTC or such nominee,
as the case may be, will be considered the sole owner or holder of the notes represented by the Global
Note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have notes represented by such Global Note registered in their names,
will not receive or be entitled to receive physical delivery of certificated notes, and will not be considered
the owners or holders thereof under the indenture for any purpose, including with respect to the giving of
any direction, instruction or approval to the trustee thereunder. Accordingly, each holder owning a
beneficial interest in a Global Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant through which such holder
owns its interest, to exercise any rights of a holder of notes under the indenture or such Global Note. We



                                                     172
understand that under existing industry practice, in the event that we request any action of holders of
Notes, or a holder that is an owner of a beneficial interest in a Global Note desires to take any action that
DTC, as the holder of such Global Note, is entitled to take, DTC would authorize the Participants to take
such action and the Participants would authorize holders owning through such Participants to take such
action or would otherwise act upon the instruction of such holders. Neither we nor the trustee will have
any responsibility or liability for any aspect of the records relating to or payments made on account of
Notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such Notes.
         Payments with respect to the principal of, and premium, if any, and interest on (including
additional interest, if any), any notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the trustee to or at the direction of DTC or its
nominee in its capacity as the registered holder of the Global Note representing such notes under the
indenture. Under the terms of the indenture, we and the trustee may treat the persons in whose names
the notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving
payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee
has or will have any responsibility or liability for the payment of such amounts to owners of beneficial
interests in a Global Note (including principal, premium, if any, and interest, including additional interest, if
any). Payments by the Participants and the Indirect Participants to the owners of beneficial interests in a
Global Note will be governed by standing instructions and customary industry practice and will be the
responsibility of the Participants or the Indirect Participants and DTC.
        Transfers between Participants in DTC will be effected in accordance with DTC’s procedures, and
will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream,
Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating
procedures.
         Subject to compliance with the transfer restrictions applicable to the Notes, cross-market
transfers between the Participants in DTC, on the one hand, and Euroclear or Clearstream, Luxembourg
participants, on the other hand, will be effected through DTC in accordance with DTC’s rules on behalf of
Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg,
as the case may be, by the counterparts in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, Luxembourg,
as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Notes in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and
Clearstream, Luxembourg participants may not deliver instructions directly to the depositories for
Euroclear or Clearstream, Luxembourg.
         Because of time zone differences, the securities account of a Euroclear or Clearstream,
Luxembourg participant purchasing an interest in a Global Note from a Participant in DTC will be credited,
and any such crediting will be reported to the relevant Euroclear or Clearstream, Luxembourg participant,
during the securities settlement processing day (which must be a business day for Euroclear and
Clearstream, Luxembourg) immediately following the settlement date of DTC. Cash received in Euroclear
or Clearstream, Luxembourg as a result of sales of interests in the Global Notes by or through a
Euroclear or Clearstream, Luxembourg participant to a Participant in DTC will be received with value on
the settlement date of DTC but will be available in the relevant Euroclear or Clearstream, Luxembourg
cash account only as of the business day for Euroclear or Clearstream, Luxembourg following DTC’s
settlement date.
         Although DTC, Euroclear and Clearstream, Luxembourg have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear
and Clearstream, Luxembourg, they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. Neither we nor the trustee will have
any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their respective
participants or indirect participants of their respective obligations under the rules and procedures
governing their operations.



                                                      173
Certificated Notes
        If:
              •   we notify the trustee in writing that DTC is no longer willing or able to act as a depositary
                  or DTC ceases to be registered as a clearing agency under the Exchange Act and a
                  successor depositary is not appointed within 90 days of such notice or cessation; or
              •   an event of default has occurred and is continuing and the registrar has received a
                  request from DTC to issue certificated notes,
then, upon surrender by DTC of the Global Notes, certificated notes will be issued to each person that
DTC identifies as the beneficial owner of the notes represented by the Global Notes. Upon any such
issuance, the trustee is required to register such certificated notes in the name of such person or persons
(or the nominee of any thereof) and cause the same to be delivered thereto.
         Neither we nor the trustee shall be liable for any delay by DTC or any Participant or Indirect
Participant in identifying the beneficial owners of the related Notes and each such person may
conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the respective principal amounts, of the Notes to be
issued).
         In the event that certificated notes are issued, so long as the Notes are listed on the Luxembourg
Stock Exchange, the Issuer will notify the Luxembourg Stock Exchange and the holders of the Notes via a
notice to be published in the Luxemburger Wort which shall contain material information in regards to, but
not limited to, the time and means of transfer or exchange of the Notes for certificated notes.




                                                      174
                                                 TAXATION

        The following summary is based on the federal tax laws of Mexico and the United States as in
effect on the date of this offering memorandum, and is subject to changes in Mexican or U.S. law,
including changes that could have retroactive effect. The following summary does not take into account
or discuss the tax laws of any country other than the federal laws of Mexico or the United States and does
not purport to be a comprehensive description of all the tax considerations that may be relevant to a
decision to purchase the New Notes. Prospective purchasers in all jurisdictions are advised to consult
their own tax advisors as to Mexican, U.S. or other tax consequences of the purchase, ownership and
holding, and disposition of the New Notes. Holders that are not U.S. Holders (as defined below) should
consult their tax advisors with respect to whether they reside in a country that has entered into a tax
treaty with Mexico which is effective, and, if so, the conditions and requirements for obtaining benefits
under any such tax treaty, if any such benefits shall arise.
General Mexican Tax Considerations
         The following is a summary of the main Mexican federal income tax consequences for non-
Mexican tax residents in connection with the purchase, ownership and holding or disposition of New
Notes, and is based upon the federal tax laws and regulations of Mexico as in effect on the date of this
offering memorandum, all of which are subject to change.
        This summary does not purport to be a comprehensive description of all Mexican tax
considerations that may be relevant to a decision to purchase, hold or dispose of the New Notes. This
summary deals only with Mexican federal tax laws as applicable to non-Mexican tax resident Holders of
New Notes that do not have a permanent establishment in Mexico. This summary does not address any
tax consequences under the laws of any state or municipality of Mexico or under treaties to avoid double
taxation entered into by Mexico with other countries; or any tax consequences under the laws of the
United States, Luxembourg or any other taxing jurisdiction. This summary has not been reviewed or
approved by, and no ruling in respect of the accuracy of this summary has been, or will be sought or has
been issued by the Ministry of Finance and Public Credit or the Servicio de Administración Tributaria
(Mexican Tax Administration Service), or SAT, or any other Mexican taxing authority. Consequently, no
assurance can be given that any such authority will not assert, or that a court will not sustain, a position
contrary to that summarized below.
      PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
MEXICAN AND NON-MEXICAN CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
HOLDING, AND DISPOSITION OF NEW NOTES, INCLUDING, IN PARTICULAR, THE EFFECT OF
ANY FOREIGN (NON-MEXICAN), STATE, OR MUNICIPAL TAX OR THE EFFECT OF ANY TAX
TREATIES EXECUTED BY MEXICO.
        Mexican Federal Tax Considerations
          An individual is a resident of Mexico for tax purposes, and hence the content of this summary will
not be applicable to such person, if such person has established his or her home in Mexico. When such
person has a home in another country, the individual will be considered a resident of Mexico for tax
purposes if his/her center of vital interests is located in Mexico. Under Mexican law, an individual’s center
of vital interests is located in Mexico if, among other things, (i) more than 50% of such individual’s total
income, in any calendar year, derives from Mexican sources, or (ii) such individual’s principal center of
professional activities is located in Mexico. Mexican nationals who filed a change of tax residence to a
country or jurisdiction that does not have a comprehensive exchange of information agreement with
Mexico and where his/her income is subject to a preferential tax regime as defined by the Mexican law,
will be considered Mexican residents for tax purposes during the year of the filing of the notice of such
residence change and during the following three years. Mexican nationals that are employed by the
Mexican government are deemed residents of Mexico, even if his/her center of vital interests is located
outside of Mexico. Unless otherwise proven, Mexican nationals are deemed residents of Mexico for tax
purposes.
        A legal entity is a resident of Mexico for tax purposes, and hence the content of this summary will
not be applicable to such entity, if it maintains the principal administration of its business or the effective



                                                     175
location of its management in Mexico. Under applicable regulations, the principal administration of a
business or the effective location of management is deemed to exist in Mexico if the individual or
individuals having the authority to decide or execute the decisions of control, management, operation or
administration are in Mexico. Furthermore, a permanent establishment in Mexico, for tax purposes, of a
foreign person will be required to pay taxes in Mexico in accordance with applicable tax laws on all
income attributable to such permanent establishment. Mexican tax residents, both individuals and legal
entities, are taxed on a worldwide income basis, regardless of the location of its source.
        The following is a general summary of the principal Mexican federal income tax consequences of
the purchase, ownership and holding, and disposition of the New Notes by holders that are not residents
of Mexico for tax purposes and that do not hold the New Notes through a permanent establishment for tax
purposes in Mexico to which the holding of the New Notes is attributable.
        Taxation of Interest
         Payment of Interest. Pursuant to the Mexican Income Tax Law, payments of interest (including
original issue discount and premiums, which are deemed interest under the Mexican income tax law) on
the New Notes made by us or the guarantors, to a non-resident of Mexico holding the New Notes will
generally be subject to Mexican withholding taxes at a rate of 4.9%, if, as expected, the following
requirements are satisfied:
             •   a notice has been filed with the CNBV describing the main characteristics of the New
                 Notes offering, including that the New Notes were the subject of an offering outside
                 Mexico, as specified in the second paragraph of article 7 of the Mexican Securities
                 Market Law;
             •   the New Notes, as expected, are placed in an offering outside of Mexico, through banks
                 or brokerage houses, in a country with which Mexico has in force a treaty for the
                 avoidance of double taxation (which currently includes the United States of America and
                 Luxembourg); and
             •   the information requirements specified from time to time by SAT under general rules,
                 including, after completion of the offering of the New Notes, the filing of certain
                 information related to the New Notes offering and this offering memorandum, are duly
                 satisfied.
         If any of the above-mentioned requirements is not met, the Mexican withholding tax applicable to
interest payments under the New Notes made to non-residents of Mexico, will be imposed at a rate of
10% or higher.
         In addition, if the effective beneficiaries, whether acting directly or indirectly, severally or jointly,
with related parties, receiving more than 5% of the aggregate amount of each interest payment under the
New Notes are (i) shareholders holding 10% or more of our voting stock, directly or indirectly, or (ii)
corporations or other entities having more that 20% of their stock owned directly or indirectly, jointly or
severally, by persons related to us, the Mexican withholding tax will be applied at a rate of 35%.
        As of the date of this offering memorandum, neither the U.S.-Mexico Tax Treaty nor the
Luxembourg-Mexico Tax Treaty is expected to have any effect on the Mexican tax consequences
described in this summary, because, as described above, under the Mexican income tax law, we expect
to be entitled to withhold taxes in connection with interest payments under the New Notes at a 4.9% rate.
         Payments of interest on the New Notes made by us to non-Mexican pension and retirement funds
will be exempt from Mexican withholding tax provided that:
             •   such fund is duly incorporated pursuant to the laws of its country of residence and is the
                 beneficial owner of the interest payment;
             •   such income is exempt from taxes in its country of residence; and
             •   such fund provides information to the Mexican Tax Administration Service from time to
                 time in accordance with the general rules issued thereby.



                                                      176
         Holders or beneficial owners of the New Notes may be requested to, subject to specified
exceptions and limitations, provide certain information or documentation necessary to enable us to apply
the appropriate Mexican withholding tax rate on interest payments under the New Notes made by us, to
such holders or beneficial owners. In the event that the specified information or documentation
concerning the holder or beneficial owner, if requested and required, is not timely provided completely or
at all, we may withhold Mexican tax from interest payments on the New Notes to that non-Mexican holder
or beneficial owner at the maximum applicable rate, but our obligation to pay Additional Amounts relating
to those withholding taxes will be limited as described under “Description of the Notes—Additional
Amounts.”
       We have agreed, subject to certain limitations and exceptions, to pay additional amounts
in respect of the above-mentioned Mexican withholding taxes in connection with interest
payments on the Notes. See “Description of the Notes—Additional Amounts.”
        Payments of Principal. Under existing Mexican law and regulations, payments of principal made
by us or any Mexican guarantor in respect of the New Notes to a non-resident of Mexico holding the New
Notes, will not be subject to Mexican withholding or similar taxes.
        Gains obtained from the Disposition of the New Notes. Pursuant to the Mexican Income Tax
Law, in certain cases gains realized by a non-Mexican resident from the disposition of New Notes may be
subject to income tax in Mexico. In this regard, if New Notes are transferred by a non-Mexican resident
investor to a Mexican resident or to a permanent establishment in Mexico for tax purposes of a non-
Mexican resident, gains, if any, would be subject to Mexican withholding tax pursuant to the rules
described above in respect of interest payments. The amount of deemed interest income will be
determined according to the rules established in the Mexican income tax law.
        Gains realized by a non-Mexican resident investor from the sale or other disposition of New
Notes transferred to another non-Mexican resident, would not be subject to Mexican withholding tax,
provided that neither transferor nor transferee have a permanent establishment in Mexico for tax
purposes.
         Imputed Interest on the Acquisition of New Notes. Under the Mexican Income Tax Law, any
discount received by a non-Mexican resident upon purchase of the New Notes, if acquired from a
Mexican resident or a non-Mexican resident with a permanent establishment in Mexico, is treated as
deemed interest income, and therefore, subject to taxes in Mexico. Such interest income is calculated as
the difference between the face value (plus accrued interest not yet subject to withholding) and the
purchase price of such New Notes. The Mexican seller must determine, pay and collect the tax on behalf
of the non-resident purchaser within 15 days after the sale. In such case, the applicable income tax rate
would be 10%.
         New Notes acquired at a discount by a non-Mexican resident with no permanent establishment in
Mexico from another non-Mexican resident with no permanent establishment in Mexico would not be
subject to income tax on imputed interest on the acquisition of the New Notes.
         Other Mexican Taxes. Under current Mexican tax laws and regulations, non-Mexican holders of
the New Notes are not subject to estate, gift, inheritance or similar taxes in connection with the holding or
disposition of the New Notes, nor will they be liable for Mexican stamp, registration or similar taxes with
respect to purchase or holding of the New Notes.
      THE ABOVE SUMMARY IS INTENDED TO OUTLINE CERTAIN MEXICAN FEDERAL TAX
LAWS AND REGULATIONS AND IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP OR DISPOSITION OF
THE NEW NOTES. PURSUANT TO ARTICLE 89 OF THE MEXICAN TAX CODE, RECIPIENTS OF
THIS OFFERING MEMORANDUM ARE HEREBY ADVISED THAT THE INFORMATION CONTAINED
HEREIN MAY BE CONTRARY TO THE INTERPRETATION OF THE MEXICAN FISCAL AUTHORITIES.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.




                                                    177
United States Federal Income Taxation
        General
         The following is a general summary of certain material U.S. federal income tax consequences of
the acquisition, ownership and disposition of New Notes to U.S. Holders (as defined below) who hold the
New Notes as capital assets (within the meaning of the U.S. Internal Revenue Code of 1986, as amended
(the “Code”)). It does not purport to be a comprehensive description of all the tax considerations that may
be relevant to the acquisition, ownership or disposition of the New Notes. In particular, it does not
discuss special tax considerations that may apply to certain types of taxpayers, including, without
limitation, the following: (i) financial institutions; (ii) insurance companies; (iii) dealers or traders in stocks,
securities, notional principal contracts or currencies; (iv) tax-exempt entities; (v) real estate investment
trusts; (vi) regulated investment companies; (vii) persons that hold the New Notes as part of a “hedging”
or “conversion” transaction or as a position in a “straddle” or as part of a “synthetic security” or other
integrated transaction for U.S. federal income tax purposes; (viii) partnerships, pass-through entities, or
persons that hold New Notes through partnerships or pass-through entities; (ix) “U.S. Holders” (as
defined below) that have a “functional currency” other than the U.S. dollar; and (x) certain U.S.
expatriates and former long-term residents of the United States. In addition, this summary does not
address the application of the “Medicare contribution tax” nor does it address federal estate and gift tax or
alternative minimum tax consequences or the indirect effects on the holders of interests in a holder of
New Notes. This summary also does not describe any tax consequences arising under the laws of any
taxing jurisdiction other than the U.S. federal government.
        No ruling has been or will be sought from the Internal Revenue Service (the “IRS”) regarding any
tax consequences relating to matters discussed herein. Consequently, no assurance can be given that
the IRS will not assert, or that a court will not sustain, a position contrary to any of those summarized
below.
       Each investor should consult its own tax advisor with respect to the U.S. federal, state, local and
non-U.S. tax consequences of acquiring, holding and disposing of New Notes.
         This summary is based on the Code, U.S. Treasury regulations and judicial and administrative
interpretations thereof, in each case as in effect or available on the date hereof. All of the foregoing is
subject to change, and any such change may apply retroactively and could affect the tax consequences
described below.
         As used in this section, the term “U.S. Holder” means a beneficial owner of New Notes that is for
U.S. federal income tax purposes: (i) a citizen or individual resident of the United States; (ii) a corporation
created or organized in or under the laws of the United States or any state thereof (including the District
of Columbia); (iii) any estate the income of which is subject to U.S. federal income tax regardless of its
source; or (iv) any trust if (A) a court within the United States is able to exercise primary supervision over
its administration and one or more U.S. persons have the authority to control all substantial decisions of
the trust or (B) the trust has a valid election in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person. If a partnership (or entity treated as such for U.S. federal income tax purposes)
holds New Notes, the tax treatment of a partner generally will depend upon the status of the partner and
upon the activities of the partnership. Partners of partnerships holding New Notes should consult their
own tax advisors.
        Qualified Reopening.
         The New Notes should be treated as having been issued in a “qualified reopening” for United
States federal income tax purposes. Debt instruments issued in a qualified reopening are deemed to be
part of the same issue as the original debt instruments. Under the treatment described in this paragraph,
the New Notes should be deemed to have the same issue date, the same issue price and the same
adjusted issue price as the existing notes. The remainder of this discussion assumes that the New Notes
are treated as issued in a “qualified reopening” for U.S. federal income tax purposes.
    Interest
         If you are a U.S. Holder, interest paid to you on a New Note (other than pre-acquisition accrued
interest as discussed below), including any amounts withheld and any additional amounts, will be


                                                       178
includible in your gross income as ordinary interest income in accordance with your method of tax
accounting.
         For U.S. foreign tax credit limitation purposes, interest on the New Notes will be treated as foreign
source income and such interest generally will constitute passive income. Subject to applicable
limitations, you will generally be entitled to a credit against your U.S. federal income tax liability, or
alternatively, a deduction in computing your U.S. federal taxable income, for Mexican income taxes
withheld. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific
classes of income. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all
income taxes paid or accrued in the taxable year to foreign countries and possessions of the United
States. The rules regarding foreign tax credits are complex, and you should consult your own tax advisor
concerning the availability and utilization of the foreign tax credit in your particular circumstances.
        Pre-Acquisition Accrued Interest.
         Although the application of the rules is not entirely clear, U.S. Holders should exclude from
income the portion of the interest payment paid on June 30, 2016 that relates to the period from
December 30, 2015 to the date the New Notes sold in this offering are acquired (“pre-acquisition accrued
interest”) and should reduce their adjusted tax basis by a corresponding amount. U.S. Holders should
consult their tax advisors regarding the proper tax treatment of pre-acquisition accrued interest.
        Bond Premium.
         U.S. Holders will be considered to have purchased the New Notes at a premium to the extent that
the purchase price exceeds the sum of the principal amount and the pre-issuance accrued interest and
may elect to amortize any such premium using a constant-yield method, over the remaining term of the
New Note. A U.S. holder may generally use the amortizable bond premium allocable to an accrual period
to offset interest required to be included in income with respect to the New Note in that accrual period. If a
U.S. Holder makes this election, the election generally will apply to all taxable debt instruments held
during or after such U.S. Holder’s taxable year for which the election is made. In addition, a U.S. Holder
may not revoke the election without the consent of the IRS. If a U.S. Holder elects to amortize the
premium, such U.S. Holder will be required to reduce tax basis in the New Note by the amount of the
premium amortized during such U.S. Holder’s holding period. If a U.S. Holder does not elect to amortize
premium, the amount of premium will be included in the tax basis in the New Note and will decrease the
gain or increase the loss otherwise recognized upon the disposition of the New Note. Therefore, if a U.S.
Holder does not elect to amortize premium and holds the New Note to maturity, such U.S. Holder
generally will be required to treat the premium as a capital loss when the note matures.
    Sale, Exchange or Other Taxable Disposition
         Upon the sale, exchange or other taxable disposition of a New Note you will recognize gain or
loss equal to the difference, if any, between the amount realized on the sale, exchange or other taxable
disposition (other than accrued and unpaid interest, which will be treated as interest as discussed above)
and your adjusted tax basis in the New Note. Your adjusted tax basis in a New Note generally will equal
the cost of the New Note to you. Any such gain or loss will be capital gain or loss. If your holding period
in a New Note exceeds one year at the time of the sale, exchange or other taxable disposition, such gain
or loss will be long-term capital gain or loss. Long-term capital gains of noncorporate taxpayers are
currently subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Any gain or loss realized on the sale, exchange or other taxable disposition of a New Note generally will
be treated as U.S. source gain or loss.
    U.S. Backup Withholding and Information Reporting
        Backup withholding and information reporting requirements apply to certain payments of principal
of, and interest on, an obligation and to proceeds of the sale or redemption of an obligation, to certain
noncorporate U.S. Holders. Information reporting generally will apply to payments of interest and to
proceeds from the sale or redemption of New Notes made within the United States to a holder of New
Notes (other than an exempt recipient, including a corporation, a payee that is not a U.S. person who
provides appropriate certification and certain other persons). Backup withholding will be required on
payments made within the United States on a New Note to a U.S. Holder, other than an exempt recipient,



                                                     179
such as a corporation, if the U.S. Holder fails to furnish its correct taxpayer identification number or
otherwise fails to comply with, or establish an exemption from, the backup withholding requirements.
Backup withholding is not an additional tax. Any amounts withheld from a payment to a holder of New
Notes under the backup withholding rules will be allowed as a credit against such holder’s U.S. federal
income tax liability and may entitle it to a refund, provided that the required information is timely furnished
to the Internal Revenue Service.
        The above description is not intended to constitute a complete analysis of all tax
consequences relating to the ownership of New Notes. Prospective purchasers of New Notes
should consult their own tax advisors concerning the tax consequences of their particular
situations.




                                                     180
                                         PLAN OF DISTRIBUTION
          Subject to the terms and conditions in the purchase agreement among us, the guarantors and
J.P. Morgan Securities LLC (the “initial purchaser”), we have agreed to sell to the initial purchaser, and
the initial purchaser has agreed to purchase from us, the entire principal amount of the New Notes.

        The purchase agreement provides that the initial purchaser will purchase all the New Notes if any
of them are purchased.
        The initial purchaser initially proposes to offer the New Notes for resale at the issue price that
appears on the cover of this offering memorandum. After the initial offering, the initial purchaser may
change the offering price and any other selling terms. The initial purchaser may offer and sell the New
Notes through certain of their affiliates.
        We will indemnify the initial purchaser and its controlling persons against certain liabilities,
including liabilities under the Securities Act, or contribute to payments that the initial purchaser may be
required to make in respect of those liabilities.
         The New Notes have not been registered under the Securities Act or the securities laws of any
other place. In the purchase agreement, the initial purchaser has agreed that:
            •    The New Notes may not be offered or sold within the United States or to U.S. persons
                 except pursuant to an exemption from the registration requirements of the Securities Act
                 or in transactions not subject to those registration requirements.
            •    During the initial distribution of the New Notes, it will offer or sell New Notes only to
                 qualified institutional buyers in compliance with Rule 144A and outside the United States
                 in compliance with Regulation S.
         In addition, until 40 days following the commencement of this offering, an offer or sale of New
Notes within the United States by a dealer (whether or not participating in the offering) may violate the
registration requirements of the Securities Act unless the dealer makes the offer or sale in compliance
with Rule 144A or another exemption from registration under the Securities Act.
         The Notes are an issue of securities for which there may not be an established trading market. In
addition, the New Notes are subject to certain restrictions on resale and transfer as described under
“Transfer Restrictions”. We have applied to increase the principal amount of Notes listed on the official list
of the Luxembourg Stock Exchange and trading on the Euro MTF Market so as to include the principal
amount of the New Notes. However, we cannot assure you that the listing application will be approved.
The initial purchaser has advised us that it intends to make a market in the Notes, but it is not obligated to
do so. The initial purchaser may discontinue any market making in the Notes at any time in their sole
discretion. Accordingly, we cannot assure you that a liquid trading market will exist for the Notes after this
opening, that you will be able to sell your Notes at a particular time or that the prices that you receive
when you sell will be favorable.
         Delivery of the New Notes was made on May 23, 2016, which was the fifth business day following
the date of pricing of the New Notes (such settlement cycle being herein referred to as “T+5”). Under Rule
15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market
generally are required to settle in three business days, unless the parties to any such trade expressly
agree otherwise. Accordingly, purchasers who wished to trade New Notes prior to closing were required,
by virtue of the fact that the New Notes initially settled T+5, to specify an alternate settlement cycle at the
time of any such trade to prevent a failed settlement.
        You should be aware that the laws and practices of certain countries require investors to pay
stamp taxes and other charges in connection with purchases of securities.
          In connection with the offering of the Notes, the initial purchaser may engage in overallotment,
stabilizing transactions and syndicate covering transactions. Overallotment involves sales in excess of the
offering size, which creates a short position for the initial purchaser. Stabilizing transactions involve bids
to purchase the Notes in the open market for the purpose of pegging, fixing or maintaining the price of the
Notes. Syndicate covering transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover short positions. Stabilizing transactions and syndicate

                                                     181
covering transactions may cause the price of the Notes to be higher than it would otherwise be in the
absence of those transactions. If the initial purchaser engages in stabilizing or syndicate covering
transactions, it may discontinue them at any time.
        The initial purchaser and its affiliates have performed commercial banking, investment banking
and advisory services for us and our affiliates from time to time for which they have received
compensation (including interest income), customary fees and reimbursement of expenses. The initial
purchaser and its affiliates may, from time to time, engage in transactions with and perform services for
us and our affiliates in the ordinary course of their business for which they may receive compensation
(including interest income), customary fees and reimbursement of expenses and under which they may
be entitled to other benefits (including security on our or our affiliates’ assets). The initial purchaser
served as a global coordinator and bookrunner in the offering of the Existing Notes, for which it received
customary fees.
Sales Outside the United States
         We are not making an offer to sell, or seeking offers to buy, the New Notes in any jurisdiction
where the offer and sale is not permitted. You must comply with all applicable laws and regulations in
force in any jurisdiction in which you purchase, offer or sell the New Notes or possess or distribute this
offering memorandum, and you must obtain any consent, approval or permission required for your
purchase, offer or sale of the New Notes under the laws and regulations in force in any jurisdiction to
which you are subject or in which you make such purchases, offers or sales. We will not have any
responsibility therefor.
    Mexico
         The Notes have not been and will not be registered with the National Securities Registry
maintained by the CNBV and may not be offered or sold publicly, or otherwise be the subject of
brokerage activities in Mexico, except pursuant to the private placement exemption set forth under article
8 of the Mexican Securities Market Law.
    European Economic Area
         In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a “Relevant Member State”), each initial purchaser has represented and
agreed that with effect from and including the date on which the Prospectus Directive is implemented in
that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an
offer of Notes which are the subject of the offering contemplated by this offering memorandum to the
public in that Relevant Member State other than:
             •   to any legal entity which is a qualified investor as defined in the Prospectus Directive;
             •   to fewer than 100 or, if the Relevant Member State has implemented the relevant
                 provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than
                 qualified investors as defined in the Prospectus Directive), as permitted under the
                 Prospectus Directive, subject to obtaining the prior consent of the initial purchaser for any
                 such offer; or
             •   in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Notes shall require the Company or any initial purchaser to publish a
prospectus pursuant to Article 3 of the Prospectus Directive.
         For the purposes of this provision, the expression an “offer of Notes to the public” in relation to
any Notes in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to
decide to purchase or subscribe for the Notes, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State, and the expression “Prospectus
Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant
implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive
means Directive 2010/73/EU.


                                                     182
    United Kingdom
         Each initial purchaser has represented and agreed that in the United Kingdom, this offering
memorandum is being distributed only to, and is directed only at, and any offer subsequently made may
only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who
have professional experience in matters relating to investments falling within Article 19 (5) of the Financial
Services and Markets Act of 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii)
who are high net worth companies (or persons to whom it may otherwise be lawfully communicated)
falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant
persons”). This offering memorandum must not be acted on or relied on in the United Kingdom by
persons who are not relevant persons. In the United Kingdom, any investment or investment activity to
which this offering memorandum relates is only available to, and will be engaged in with, relevant
persons.
    Hong Kong
           The Notes may not be offered or sold in Hong Kong by means of any other document other than
(i) in circumstances which do not constitute an offer to the public within the meaning of the Companies
Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the
Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or
(iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of
the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document
relating to the Notes may be issued or may be in the possession of any person for the purpose of issue
(in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of
Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons
outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures
Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
        Canada
         The Notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal
that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or
subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National
Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any
resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject
to, the prospectus requirements of applicable securities laws.
          Securities legislation in certain provinces or territories of Canada may provide a purchaser with
remedies for rescission or damages if this offering memorandum (including any amendment thereto)
contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the
purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or
territory. The purchaser should refer to any applicable provisions of the securities legislation of the
purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
         Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the
initial purchaser is not required to comply with the disclosure requirements of NI 33-105 regarding
underwriter conflicts of interest in connection with this offering.
        Japan
         The Notes offered in this offering memorandum have not been registered under the Securities
and Exchange Law of Japan, and the Notes have not been offered or sold and will not be offered or sold,
directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an
exemption from the registration requirements of the Securities and Exchange Law, and (ii) in compliance
with any other applicable requirements of Japanese law.
        Singapore
        This offering memorandum has not been registered as a prospectus with the Monetary Authority
of Singapore. Accordingly, this offering memorandum and any other document or material in connection
with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or


                                                     183
distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription
or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to
a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in
accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in
accordance with the conditions of, any other applicable provision of the SFA, in each case subject to
compliance with conditions set forth in the SFA.
        Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person
which is:
            •   a corporation (which is not an accredited investor (as defined in Section 4A of the SFA))
                the sole business of which is to hold investments and the entire share capital of which is
                owned by one or more individuals, each of whom is an accredited investor; or
            •   a trust (where the trustee is not an accredited investor) whose sole purpose is to hold
                investments and each beneficiary of the trust is an individual who is an accredited
                investor,
            •   shares, debentures and units of shares and debentures of that corporation or the
                beneficiaries’ rights and interest (howsoever described) in that trust shall not be
                transferred within six months after that corporation or that trust has acquired the notes
                pursuant to an offer made under Section 275 of the SFA except:
            •   to an institutional investor (for corporations, under Section 274 of SFA) or to a relevant
                person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is
                made on terms that such shares, debentures and units of shares and debentures of that
                corporation or such rights and interest in that trust are acquired at a consideration of not
                less than U.S.$200,000 (or its equivalent in a foreign currency) for each transaction,
                whether such amount is to be paid for in cash or by exchange of securities or other
                assets, and further for corporations, in accordance with the conditions specified in
                Section 275 of the SFA;
            •   where no consideration is or will be given for the transfer; or
            •   where the transfer is by operation of law.
Switzerland
         This offering memorandum does not constitute an issue prospectus pursuant to Article 652a or
Article 1156 of the Swiss Code of Obligations and the Notes will not be listed on the SIX Swiss Exchange.
Therefore, this offering memorandum may not comply with the disclosure standards of the listing rules
(including any additional listing rules or prospectus schemes) of the SIX Swiss Exchange. Accordingly,
the Notes may not be offered to the public in or from Switzerland, but only to a selected and limited circle
of investors who do not subscribe to the Notes with a view to distribution. Any such investors will be
individually approached by the initial purchaser from time to time.
Chile
        Notice to Prospective Investors in Chile
        Pursuant to Law No. 18,045 of Chile (the Chilean Securities Market Law) and Rule (Norma de
Carácter General) No. 336, dated June 27, 2012, issued by the SVS, the notes may be privately offered
in Chile to certain “qualified investors” identified as such by SVS Rule 336 (which in turn are further
described in Rule N° 216, dated June 12, 2008, of the SVS). SVS Rule 336 requires the following
information to be provided to prospective investors in Chile:
        1. Date of commencement of the offer: May 16, 2016. The offer of the notes is subject to Rule
(Norma de Carácter General) No. 336, dated June 27, 2012, issued by the Superintendency of Securities
and Insurance of Chile (Superintendencia de Valores y Seguros de Chile or “SVS”).




                                                    184
        2. The subject matter of this offer are securities not registered with the Securities Registry
(Registro de Valores) of the SVS, nor with the Foreign Securities Registry (Registro de Valores
Extranjeros) of the SVS, due to the notes not being subject to the oversight of the SVS.
        3. Since the notes are not registered in Chile there is no obligation by the issuer to make publicly
available information about the notes in Chile.
         4. The notes shall not be subject to public offering in Chile unless registered with the relevant
Securities Registry of the SVS.
        Información a los Inversionistas Chilenos
         De conformidad con la ley N° 18.045, de mercado de valores y la Norma de Carácter General N°
336 (la “NCG 336”), de 27 de junio de 2012, de la Superintendencia de Valores y Seguros de Chile (la
“SVS”), los bonos pueden ser ofrecidos privadamente a ciertos “inversionistas calificados”, a los que se
refiere la NCG 336 y que se definen como tales en la Norma de Carácter General N° 216, de 12 de junio
de 2008, de la SVS.
        La siguiente información se proporciona a potenciales inversionistas de conformidad con la NCG
336:
       1. La oferta de los bonos comienza el 16 de mayo de 2016, y se encuentra acogida a la Norma
de Carácter General N° 336, de fecha 27 de junio de 2012, de la SVS.
        2. La oferta versa sobre valores no inscritos en el Registro de Valores o en el Registro de
Valores Extranjeros que lleva la SVS, por lo que tales valores no están sujetos a la fiscalización de esa
Superintendencia.
        3. Por tratarse de valores no inscritos en Chile no existe la obligación por parte del emisor de
entregar en Chile información pública sobre los mismos.
        4. Estos valores no podrán ser objeto de oferta pública en Chile mientras no sean inscritos en el
Registro de Valores correspondiente.




                                                     185
                                       TRANSFER RESTRICTIONS
        Because the following restrictions will apply with respect to the resale of the Notes, purchasers
are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of the Notes.
          None of the Notes has been registered under the Securities Act or any state securities laws, and
they may not be offered or sold within the United States or to, or for the account or benefit of, U.S.
persons except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. Accordingly, the Notes are being offered and sold only (A) to
“qualified institutional buyers” (as defined in Rule 144A promulgated under the Securities Act, or Rule
144A) (“QIBs”) in compliance with Rule 144A and (B) outside the United States to persons other than
U.S. persons (“non-U.S. purchasers,” which term shall include dealers or other professional fiduciaries in
the United States acting on a discretionary basis for non-U.S. beneficial owners (other than an estate or
trust)) in reliance upon Regulation S under the Securities Act, or Regulation S. As used herein, the terms
“United States” and “U.S. person” have the meanings given to them in Regulation S.
        Each purchaser of Notes will be deemed to have represented and agreed as follows:
          1. It is purchasing the Notes for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is either (A) a QIB, and is aware that the sale
to it is being made in reliance on Rule 144A or (B) a non-U.S. purchaser that is outside the United States
(or a non- U.S. purchaser that is a dealer or other fiduciary as referred to above).
         2. It acknowledges that the Notes are being offered in a transaction not involving any public
offering in the United States within the meaning of the Securities Act; that the Notes have not been
registered under the Securities Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as set forth below.
         3. It shall not resell or otherwise transfer any of such Notes except (A) to us or any of our
subsidiaries, (B) inside the United States to a QIB in a transaction complying with Rule 144A, (C) outside
the United States in compliance with Rule 904 under the Securities Act, (D) in accordance with an
exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel
if we so request), or (E) pursuant to an effective registration statement under the Securities Act.
          4. It agrees that it will give to each person to whom it transfers the Notes notice of any
restrictions on transfer of such Notes.
         5. It acknowledges that prior to any proposed transfer of Notes in certificated form or of beneficial
interests in a note in global form (a “global note”) (in each case other than pursuant to an effective
registration statement) the holder of Notes or the holder of beneficial interests in a global note, as the
case may be, may be required to provide certifications and other documentation relating to the manner of
such transfer and submit such certifications and other documentation as provided in the indenture.
        6. It understands that the Rule 144A notes will bear a legend substantially to the following effect
unless otherwise agreed by us:
       THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT EITHER (A) IT IS A “QUALIFIED
INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO US OR ANY OF OUR
SUBSIDIARIES THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT (IF AVAILABLE), (D) IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF


                                                     186
COUNSEL IF WE SO REQUEST), OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED
STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THIS LEGEND CAN ONLY BE REMOVED AT THE OPTION OF THE ISSUER.
         7. It understands that the Regulation S notes will bear a legend substantially to the following
effect unless otherwise agreed by us:
      PRIOR TO EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS
DEFINED IN REGULATION S (“REGULATION S”) UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), THIS SECURITY MAY NOT BE REOFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN
REEGULATION S) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED
IN REGULATION S) EXCEPT TO A “QUALIFIED INSTITUTIONAL BUYER” IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF
THE INDENTURE REFERRED TO HEREIN.
        8. It acknowledges that the foregoing restrictions apply to holders of beneficial interests in the
Notes, as well as holders of the Notes.
          9. It acknowledges that the trustee will not be required to accept for registration of transfer any
Notes acquired by it, except upon presentation of evidence satisfactory to us and the trustee that the
restrictions set forth herein have been complied with.
         10. It acknowledges that we, the initial purchaser and others will rely upon the truth and accuracy
of the foregoing acknowledgments, representations and agreements and agrees that if any of the
acknowledgments, representations or agreements deemed to have been made by its purchase of the
Notes is no longer accurate, it shall promptly notify us and the initial purchaser. If it is acquiring the Notes
as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment
discretion with respect to each such account and it has full power to make the foregoing
acknowledgments, representations, and agreements on behalf of each account.




                                                     187
                                               LEGAL MATTERS
        Certain legal matters in connection with the offering of the Notes will be passed upon with respect
to New York and U.S. law by Curtis, Mallet-Prevost, Colt & Mosle LLP New York, New York, counsel to
Posadas, and by Davis Polk & Wardwell LLP, New York, New York, counsel to the initial purchaser, and,
with respect to Mexican law, by Curtis-Mallet-Prevost, Colt & Mosle, S.C., Mexico City, Mexico, counsel to
Posadas, and by Ritch, Mueller, Heather y Nicolau, S.C., Mexico City, Mexico, counsel to the initial
purchaser. Mr. Luis Alfonso Nicolau Gutiérrez, a partner at Ritch, Mueller, Heather y Nicolau, S.C.,
serves as an independent director of Grupo Posadas, S.A.B. de C.V.




                                                   188
                                    INDEPENDENT AUDITORS
        Our consolidated financial statements as of December 31, 2015, 2014 and 2013, and for each of
the three years in the period ended December 31, 2015, included herein, were audited by Galaz,
Yamazaki, Ruiz Urquiza, S.C., a member firm of Deloitte Touche Tohmatsu Limited, independent
auditors, as stated in their report which is included herein.




                                                189
                                GENERAL LISTING INFORMATION
       1.      The New Notes have been accepted for clearance and settlement through DTC,
Euroclear and Clearstream. The CUSIP, Common Code and ISIN numbers for the Notes are as follows:
                                                      Restricted Global Note   Regulation S Global Note
CUSIP                                                   400489 AH3               P4983G AQ3
Common Code                                             125546200                125546641
ISIN                                                    US400489AH37             USP4983GAQ30
                                   th
Through July 2, 2016 (the 40 day following delivery of the New Notes), the New Notes sold pursuant to
Regulation S will have temporary CUSIP and ISIN numbers. The temporary CUSIP of the Regulation S
New Notes is P4983G AR1, the temporary ISIN of such notes is USP4983GAR13 and the temporary
Common Code of such notes is 138603385. After July 2, 2016, such Regulation S New Notes will trade
under the same CUSIP and ISIN numbers set forth in the table above.
          2.       Copies of our audited consolidated annual financial statements at and for the year ended
December 31, 2015, our unaudited interim financial statements for the period ended March 31, 2016, our
future audited consolidated annual financial statements, and our future unaudited consolidated quarterly
financial statements, if any, and the indenture (including forms of notes), as well as English-language
copies of the articles of association and by-laws (estatutos sociales) of Grupo Posadas, S.A.B. de C.V.,
will be available free of charge at the offices of the principal paying agent and any other paying agent,
including the Luxembourg listing agent. In addition, from and after the date the Notes are admitted to
listing with the Official List of the Luxembourg Stock Exchange and so long as it is required by the rules of
such exchange, English-language copies of the articles of association and by-laws (estatutos sociales) of
the guarantors will be made available, upon request, at the offices of the Luxembourg listing agent.
          3.       Except as disclosed in this offering memorandum, there has been no material adverse
change in our financial position since March 31, 2016, the date of our latest financial statements included
in this offering memorandum.
          4.       Except as disclosed in this offering memorandum, we are not involved in any litigation or
arbitration proceedings relating to claims or amounts that are material in the context of this offering, nor
so far as we are aware is any such litigation or arbitration threatened.
          5.       The Notes are currently listed on the Official List of the Luxembourg Stock Exchange and
trade on the Euro MTF Market. We have applied to increase the principal amount of Notes listed on the
Official List of the Luxembourg Stock Exchange and trading on the Euro MTF Market so as to include the
principal amount of the New Notes. We will comply with any undertakings assumed or undertaken by us
from time to time to the Luxembourg Stock Exchange in connection with the Notes, and we will furnish to
them all such information as the rules of the Luxembourg Stock Exchange may require in connection with
the listing of the Notes.
          6.       As required under the Mexican Securities Market Law, we will notify the CNBV of the
offering of the New Notes outside Mexico. Such notice will be delivered to the CNBV to comply with a
legal requirement and for information purposes only, and the delivery to, and the receipt by, the CNBV of
such notice, does not imply any certification as to the investment quality of the New Notes or our
solvency, liquidity or credit quality. The information contained in this offering memorandum is exclusively
our responsibility and has not been reviewed or authorized by the CNBV. The acquisition of the New
Notes by an investor who is a resident of Mexico will be made under its own responsibility.
          7.       We have obtained all necessary consents, approvals and authorizations, including in
respect of the subsidiary guarantors, in connection with the issuance and performance of the New Notes
pursuant to resolutions adopted by our Board of Directors on April 20, 2016.
          8.       Galaz, Yamazaki, Ruiz Urquiza, S.C., a member firm of Deloitte Touche Tohmatsu
Limited, has agreed to the inclusion of its report in this offering memorandum in the form and context in
which it is included.




                                                    190
                    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Grupo Posadas, S. A. B. de C. V. and Subsidiaries Audited Consolidated Financial Statements
                                                                                                                                                                                        Page
Independent Auditors’ Report....................................................................................................................................................... F-4
Consolidated statements of financial position as of December 31, 2015, 2014, and 2013............................................................. F-6
Consolidated statements of comprehensive (loss) income for the years ended December 31, 2015,
       2014, and 2013....................................................................................................................................................................... F-7
Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2015,
       2014, and 2013....................................................................................................................................................................... F-9
Consolidated statement of cash flows for the years ended December 31, 2015, 2014, and 2013 ................................................ F-10
Notes to consolidated financial statements ................................................................................................................................. F-12




Grupo Posadas, S. A. B. de C. V. and Subsidiaries Unaudited Condensed Consolidated Interim Financial Statements
                                                                                                                                                                                        Page
Unaudited condensed consolidated interim statement of financial position as of March 31, 2016 ............................................. F-54
Unaudited condensed consolidated interim statements of comprehensive income (loss) for the three
       months ended March 31, 2016 and 2015 ............................................................................................................................. F-55
Unaudited condensed consolidated interim statements of changes in stockholders’ equity for the three
       months ended March 31, 2016 and 2015 ............................................................................................................................. F-57
Unaudited condensed consolidated interim statements of cash flows for the three months ended
       March 31, 2016 and 2015 .................................................................................................................................................... F-58
Notes to unaudited condensed consolidated interim financial statements .................................................................................... F-59




                                                                                            F-1
Grupo Posadas, S. A. B. de C. V. and
Subsidiaries

Consolidated Financial Statements for
the Years Ended December 31, 2015,
2014 and 2013, and Independent
Auditors’ Report Dated February 17,
2016




              F-2
Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Independent Auditors’ Report and Consolidated
Financial Statements for 2015, 2014 and 2013

Table of contents                                             Page



Independent Auditors’ Report                                  F-4

Consolidated Statements of Financial Position                 F-6

Consolidated Statements of Comprehensive (Loss) Income        F-7

Consolidated Statements of Changes in Stockholders’ Equity    F-9

Consolidated Statements of Cash Flows                        F-10

Notes to the Consolidated Financial Statements               F-12




                                                 F-3
Independent Auditors’ Report to the Board
of Directors and Stockholders of Grupo
Posadas, S. A. B. de C. V.

We have audited the accompanying consolidated financial statements of Grupo Posadas, S. A. B. de C. V. and
Subsidiaries (the Entity), which comprise the consolidated statements of financial position as of December 31, 2015,
2014 and 2013, and the consolidated statements of comprehensive (loss) income, consolidated statements of changes
in stockholders’ equity and consolidated statements of cash flows for the years then ended, and a summary of
significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, as issued by the International Accounting Standards
Board, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.

Independent Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with International Standards on Auditing. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the Entity’s preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.




                                                          F-4
Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Grupo Posadas, S. A. B. de C. V. and Subsidiaries as of December 31, 2015, 2014 and 2013 and their financial
performance and their cash flows for the years then ended in accordance with International Financial Reporting
Standards, as issued by the International Accounting Standards Board.

Other matters

The accompanying consolidated financial statements have been translated into English for the convenience of
readers.


Galaz, Yamazaki, Ruiz Urquiza, S. C.
Member of Deloitte Touche Tohmatsu Limited




C.P.C. Fernando Loera Aguilar

February 17, 2016




                                                           F-5
      Grupo Posadas, S. A. B. de C. V. and Subsidiaries

      Consolidated Statements of Financial Position
      As of December 31, 2015, 2014 and 2013
      (In thousands of Mexican pesos)


      Assets                                           Notes         2015               2014               2013           Liabilities and stockholders’ equity            Notes       2015              2014             2013

      Current assets:                                                                                                     Current liabilities:
       Cash and cash equivalents                         6     $       763,810      $     997,792      $     706,365       Current portion of long-term debt               17     $        1,399    $    1,449,957   $       2,498
                                                                                                                           Trade accounts payable                          16            438,432           400,101         348,327
       Investments in securities                         7             450,000            519,073            525,351       Other liabilities and accrued expenses                      1,100,236           805,688         769,125
                                                                                                                           Income tax payable                              18            240,885           280,272         597,538
       Accounts and notes receivable - Net               8            2,496,491          2,627,080          2,251,204      Deferred income of Vacation Club                              253,639            65,822          60,875
                                                                                                                           Current portion of long-term value added tax                   95,726           133,539         101,703
       Inventories                                                         33,750             34,068             35,803    Liabilities directly associated with assets     10
                                                                                                                             classified as held for sale                                   6,384             6,423         -
       Prepaid expenses                                                158,797            133,311            121,866                 Total current liabilities                         2,136,701         3,141,802        1,880,066
                                                                                                                          Long-term liabilities:
       Vacation Club inventory                           9             198,485            286,968            105,996       Debt                                            17          6,242,282         4,432,316        4,555,080
                                                                                                                           Accrued liabilities                             19            436,767           343,898          276,050
       Other current assets                                                62,085             27,733             35,383    Value added tax payable                                       319,932           248,719          165,051
                                                                                                                           Deferred income of Vacation Club                               703,538          508,858          394,198
       Assets classified as held for sale               10                 59,184             50,910         -             Income tax payable                              18            310,240           533,148          702,233
                                                                                                                           Deferred income tax                             18           -                 -               1,158,482




F-6
                Total current assets                                  4,222,602          4,676,935          3,781,968                Total long-term liabilities                       8,012,759         6,066,939        7,251,094
                                                                                                                                     Total liabilities                                10,149,460         9,208,741        9,131,160


                                                                                                                          Stockholders’ equity:
      Non-current assets:                                                                                                   Contributed capital:
          Long-term notes receivable                    11            2,285,534          1,726,722          1,513,309        Capital stock                                 22            495,881           495,937         495,937
                                                                                                                             Contributions for future capital increases                    4,828            12,516          12,516
           Long-term accounts receivable                12             -                  -                  396,679         Share repurchase reserve                                     16,856            16,800         133,509
                                                                                                                             Shares held in trust                                       -                 -                 (3,322)
           Vacation Club inventory in construction                     403,262            303,150            239,944         Additional paid-in capital                                  157,429           157,429         157,429
                                                                                                                                                                                         674,994           682,682         796,069
           Property and equipment - Net                 13            6,285,962          6,267,293          6,337,625      Earned capital:
                                                                                                                            Share repurchase reserve                                     535,556           535,556          559,371
           Investment in associates                     14                  1,129              1,879             35,437     Retained earnings                                          2,172,779         2,645,031        1,776,394
                                                                                                                            Other items of comprehensive
           Other assets                                 15             404,920            269,362            214,415         income                                                       47,424            27,244           25,982
                                                                                                                                                                                       2,755,759         3,207,831        2,361,747
           Deferred tax assets                          18             173,554                72,610         -                    Total controlling interest                           3,430,753         3,890,513        3,157,816
                                                                                                                           Non-controlling interest                                      196,750           218,697          230,401
                Total non-current assets                              9,554,361          8,641,016          8,737,409             Total stockholders’ equity                           3,627,503         4,109,210        3,388,217

      Total assets                                             $     13,776,963     $   13,317,951     $   12,519,377     Total liabilities and stockholders’ equity              $   13,776,963    $   13,317,951   $   12,519,377


      See accompanying notes to consolidated financial statements.
Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Consolidated Statements of Comprehensive (Loss)
Income
For the years ended December 31, 2015, 2014 and 2013
(In thousands of Mexican pesos, except (loss) earnings per share)


                                                Notes         2015                2014                2013

Continuing operations
 Revenue                                         24     $     6,901,221      $   5,848,278       $   8,550,358
 Cost of sales                                   24           4,209,784          3,667,834           5,953,657
  Gross profit                                                2,691,437          2,180,444           2,596,701

 Administration expenses                         24            815,126             745,305             703,104
 Sale and development expenses                   24            126,879             105,726             110,563
 Depreciation, amortization, real estate
   leasing and impairment of assets                             801,646            739,026           1,641,401
 Other expenses, net                                                479             45,669             183,213
 Interest expense                                               508,840            417,669             393,659
 Interest income                                                (34,457)           (22,509)           (113,084)
 Commissions and financial expenses                             100,080             60,763              57,711
 Exchange loss, net                                             708,553            427,934              29,996
 Equity in losses of associates                                     750             12,595               4,863
                                                              3,027,896          2,532,178           3,011,426

     Loss before income tax                                   (336,459)           (351,734)           (414,725)

 Income tax expense (benefit)                    18            131,334           (1,061,257)         1,161,883
    (Loss) profit from continuing
      operations                                              (467,793)            709,523           (1,576,608)

Discontinued operations
 (Loss) profit from discontinued operations                      (2,612)                 8,718        (181,206)

     Consolidated (loss) income for the year                  (470,405)            718,241           (1,757,814)

Other comprehensive income (loss)
 Exchange differences on translating foreign
   operations                                                        7,516          10,844                   2,049
 Remeasurement of defined benefit
   obligation                                                   12,664               (9,582)             8,795
                                                                20,180                1,262             10,844

     Consolidated comprehensive (loss)
      income for the year                               $     (450,225)      $     719,503       $   (1,746,970)


                                                                                                     (Continued)




                                                        F-7
                                                               2015                  2014                2013

Consolidated (loss) income for the year
 attributable to:
    Controlling interest                               $        (470,208)      $      716,817      $    (1,753,264)
    Non-controlling interest                                        (197)               1,424               (4,550)

          Consolidated (loss) income for the
           year                                        $        (470,405)      $      718,241      $    (1,757,814)

Consolidated comprehensive (loss) income
 for the year attributable to:
   Controlling interest                                $        (450,028)      $      718,079      $    (1,742,420)
   Non-controlling interest                                         (197)               1,424               (4,550)

          Consolidated comprehensive
           (loss) income for the year                  $        (450,225)      $      719,503      $    (1,746,970)

(Loss) earnings per share:
  From continuing and discontinued
   operations -
   Basic and diluted (loss) earnings per
     common share (in pesos)                           $              (0.95)   $            1.45   $            (3.57)
  From continuing operations -
   Basic and diluted (loss) earnings per
     common share (in pesos)                           $              (0.94)   $            1.43   $            (3.20)

Weighted average shares                                      495,929,856           495,937,601         492,496,017


                                                                                                        (Concluded)


See accompanying notes to consolidated financial statements.




                                                       F-8
      Grupo Posadas, S. A. B. de C. V. and Subsidiaries

      Consolidated Statements of Changes in Stockholders’ Equity
      For the years ended December 31, 2015, 2014 and 2013
      (In thousands of Mexican pesos)


                                                                                                           Contributed capital                                                                                               Earned capital
                                                                                   Contributions for        Shares repurchase                               Additional paid-in       Shares repurchase                                   Other items of         Non-controlling      Total stockholders’
                                                             Capital stock      future capital increases         reserve         Shares held in trust            capital                  reserve              Retained earnings     comprehensive income          interest                 equity

      Beginning balance as of January, 2013            $           489,427      $              17,523      $         133,509     $            (3,322)   $               25,451   $           559,371       $         3,609,315       $            15,138    $          376,485       $      5,222,897

       Capital increase by issuing shares in trust                    6,510                -                        -                     -                          131,978                -                         -                       -                       -                       138,488
       Dividends paid                                             -                        -                        -                     -                         -                       -                             (73,520)            -                       -                       (73,520)
       Dividends paid to non-controlling interest                 -                        -                        -                     -                         -                       -                         -                       -                           (43,608)            (43,608)
       Partial payment of convertible debt                        -                            (5,007)              -                     -                         -                       -                         -                       -                            (2,170)             (7,177)
       Acquisition of non-controlling interest and
        stock purchase surplus                                    -                        -                        -                     -                         -                       -                           (6,137)               -                           (95,756)           (101,893)
       Consolidated comprehensive loss                            -                        -                        -                     -                         -                       -                       (1,753,264)                   10,844                   (4,550)         (1,746,970)

      Balance as of December 31, 2013                              495,937                     12,516                133,509                  (3,322)                157,429                 559,371                 1,776,394                    25,982               230,401              3,388,217

       Capital increase by issuing shares in trust                -                        -                        -                         3,322                 -                             7,669               -                       -                       -                          10,991
       Decrease shares repurchase reserve                         -                        -                        (116,709)             -                         -                           (31,484)               148,193                -                       -                      -
       Dividends paid to non-controlling interest                 -                        -                        -                     -                         -                       -                         -                       -                            (8,000)               (8,000)




F-9
       Acquisition of non-controlling interest and
        stock purchase surplus                                    -                        -                        -                     -                         -                       -                            3,627                -                            (5,128)             (1,501)
       Consolidated comprehensive income                          -                        -                        -                     -                         -                       -                          716,817                     1,262                    1,424             719,503

      Balance as of December 31, 2014                              495,937                     12,516                   16,800            -                          157,429                 535,556                 2,645,031                    27,244               218,697              4,109,210

       Repurchase of shares                                              (56)              -                               56             -                         -                       -                              (2,044)            -                       -                          (2,044)
       Partial payment of convertible debt                        -                            (7,688)              -                     -                         -                       -                         -                       -                       -                          (7,688)
       Change in the value of non-controlling
        interest                                                  -                        -                        -                     -                         -                       -                         -                       -                           (21,750)            (21,750)
       Consolidated comprehensive loss                            -                        -                        -                     -                         -                       -                         (470,208)                   20,180                     (197)           (450,225)

      Balance as of December 31, 2015                  $           495,881      $               4,828      $            16,856   $        -             $            157,429     $           535,556       $         2,172,779       $            47,424    $          196,750       $      3,627,503



      See accompanying notes to consolidated financial statements.
Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Consolidated Statements of Cash Flows
For the years ended December 31, 2015, 2014 and 2013
(In thousands of Mexican pesos)



                                                            2015                  2014              2013

Cash flows from operating activities:
 Consolidated (loss) income for the year             $           (470,405)    $     718,241     $   (1,757,814)
 Adjustments for:
   Income tax expense (benefit)                                  131,334          (1,061,257)       1,161,883
   Depreciation, amortization and asset
     impairment                                                   414,677           409,265         1,314,888
   Equity in losses of associated                                      750            12,595            4,863
   Loss (income) on sale of fixed assets                            88,134         -                 (565,170)
   Interest income                                                 (34,457)          (22,509)        (110,875)
   Unrealized foreign exchange loss                               984,461           586,751            23,789
   Discontinued operations                                       -                 -                  181,206
   Interest expense                                               508,840           417,669           393,659
   Change in the value of non-controlling interest                 (21,750)        -                 -
                                                                1,601,584         1,060,755           646,429

 Transactions in working capital:
  Accounts and notes receivable - Net                            (442,161)         (192,610)         (326,828)
  Inventories                                                         318             1,735             8,572
  Prepaid expenses                                                (25,486)          (11,445)          (44,496)
  Vacation Club inventory                                          88,483          (180,972)          (35,601)
  Other assets                                                   (184,766)          (81,940)          (98,034)
  Trade accounts payable                                           38,331            51,774           (33,028)
  Other liabilities and accrued expenses                          484,463           176,246          (203,615)
  Deferred income of Vacation Club                                382,497           119,607           154,001
  Income taxes paid                                              (466,581)         (595,188)         (268,946)
         Net cash generated by (used in)
           operating activities                                 1,476,682           347,962          (201,546)

Cash flows from investing activities:
 Purchases of property and equipment                             (612,400)         (437,373)        (1,154,237)
 Investments in securities                                         69,073             6,278           (477,241)
 Interests collected                                               33,066            22,509             76,672
 Sale of property and equipment                                     5,664          -                  -
 Cash flow from sales of non-strategic properties                -                   26,197          2,326,298
           Net cash (used in) generated by
            investing activities                                 (504,597)         (382,389)          771,492




                                                         F-10
                                                            2015                2014              2013

Cash flows from financing activities:
 Cash received from debt issuance                            1,219,441             740,159            88,134
 Debt payment                                               (1,542,844)          -                 -
 Interest paid                                                (573,282)          (427,114)         (375,654)
 Debt issuance costs                                          (339,538)          -                 -
 Repayment of convertible debts                               -                  -                 (900,000)
 Partial payment of convertible debt                            (7,688)          -                    (7,177)
 Repurchase of shares                                           (2,044)          -                 -
 Derivative financial instruments                             -                  -                   (22,007)
 Capital increase by issuing shares in trust                  -                     10,991          138,488
 Non-controlling interest dividends paid                      -                     (8,000)          (43,608)
 Dividends paid                                               -                  -                   (73,520)
 Acquisition of non-controlling interest                      -                     (1,501)        (101,893)
           Net cash (used in) generated by
            financing activities                            (1,245,955)           314,535         (1,297,237)

Net (decrease) increase in cash and cash
 equivalents                                                    (273,870)         280,108          (727,291)

Cash and cash equivalents at the beginning of the
 year                                                           997,792           706,365         1,431,867

Effects of exchange rate changes on the balance of
 cash held in foreign currencies                                 39,888            11,319                1,789

Cash and cash equivalents at the end of the year     $          763,810     $     997,792     $     706,365



See accompanying notes to consolidated financial statements.




                                                         F-11
Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(In thousands of Mexican pesos)



1.    Activities

      Grupo Posadas, S. A. B. de C. V. (Posadas) and Subsidiaries (the Entity) are primarily engaged in the
      operation and management of hotels as well as to the purchase and sale of real estate within the tourism
      industry. The Entity mainly operates hotels under its Fiesta Americana, Fiesta Inn, One Hotels and Gamma
      brands.

      The Entity enters into long-term management contracts with all the hotels that it operates, which for purposes
      of these consolidated financial statements, these hotels are referred to owned, leased and managed hotels. The
      number of hotels and rooms operated by the Entity at December, 31 are:

                         Hotels                             2015                   2014                   2013

       Owned                                                        17                     17                     17
       Leased                                                       14                     14                     15
       Managed                                                     110                     96                     78

           Total hotels operated                                   141                    127                    110

           Total rooms operated                                23,259                 21,094                  18,795

      Posadas receives fees pursuant to the long-term management contracts it has with all of the hotels it operates.
      Certain fees, including management, brand use fee, reservation services and technology usage, among others,
      are based on hotel revenues. Posadas also receives an incentive fee based on the hotels’ operating income.

      Additionally, the Entity operates a Vacation Club business called Fiesta Americana Vacation Club (FAVC),
      as well as its new product “Front Door” focused on the high-income sector, through which members purchase
      a “40-year-right-to-use” evidenced by an annual allocation of FAVC points. FAVC points can be redeemed to
      stay at the Entity’s seven FAVC resorts in Los Cabos (villas and resort), Acapulco, Cancun, Cozumel,
      Chetumal and Puerto Vallarta, as well as any of the hotels in its portfolio. In addition, members of FAVC can
      also redeem their FAVC points to stay at any Resorts Condominium International (RCI), affiliated resort or
      Hilton Grand Vacation Club resorts throughout the world. At the same time, the Entity marketing a product
      called “Kívac” consisting in sales of points, with a maturity of up to 5 years that can be redeemed for stays at
      any of the hotels in the Entity’s portfolio, as well in some properties operated by third parties.

      Since 2012, the Entity began restructuring its business with a focus towards ownership of strategic assets and
      the growth of its hotel management business and FAVC. As part of this strategy, the Entity has sold several
      hotels and other non-strategic assets (see Notes 2f and 2h), and the date of the consolidated financial
      statements, the Entity continues with the organizational restructuring to significantly reduce the number of
      legal entities that compose it.

      The hotel industry is seasonal and particularly sensitive to macroeconomic and social changes, leading to
      volatility in revenues and the related costs during periods of twelve months. The Entity seeks to reduce the
      impact of seasonality on its results through marketing strategies such as agreements with institutions,
      competitive prices and intensive promotion.

      The corporate offices of the Entity are located in Prolongación Paseo de la Reforma 1015 Piso 9, Torre A,
      Col. Santa Fe, Mexico City.



                                                       F-12
2.   Significant events

     a.    Issue of “Senior Notes 2022 “

           On June 30, 2015 the Entity completed a debt issue for US$350 million in notes known as “Senior
           Notes 2022” through the Luxembourg Stock Exchange. The initial intention was to substitute the issue
           of US$310 million known as “Senior Notes 2017” which the Entity held as of December 31, 2014 and
           for which US$1,060 was offered for each US$1,000 of the previous issue.

           As a result of the offering it was possible to buy back US$271.7 million of “Senior Notes 2017”,
           equivalent to 87.63% of principal, and the remaining balance of this program decreased to US$38.3
           million, while the notes representing the remaining balance were held outstanding; also, the funds that
           were not used for such buyback were applied by the Entity mainly for the payment of the commercial
           euro paper at maturity. The “Senior Notes 2022” generate interest of 7.875% a year with maturity of
           principal on June 30, 2022. The interest is payable semiannually in the months of June and December,
           beginning as of December 30, 2015.

           The amount of the issue expenses was $339,538, which is being amortized based on the life of the new
           issue using the effective interest rate method, which includes US$16.1 million of premium for
           prepayment of the previous issue.

     b.    Additional issue of “Senior Notes 2017” and payment of “Senior Notes 2015”

           On February 20, 2014 the Entity completed an additional issue of US$35 million of the “Senior Notes
           2017” program at a rate of 7.875% a year, maturing in 2017. The “Senior Notes 2017” were issued
           based on a private swap for US$31.6 million of the principal amount of certain notes denominated
           “Senior Notes 2015”. With the additional issue, the “Senior Notes 2017” reached a total amount of
           US$310 million. As previously discussed, a significant portion of the “Senior Notes 2017” were
           repurchased during 2015.

           As a result of the cancellation of the “Senior Notes 2015” which were swapped, the remaining
           principal amount of “Senior Notes 2015” was US$51.7 million, which was paid at maturity on January
           15, 2015 with the resources obtained from the commercial euro paper as discussed in the following
           subsection.

     c.    Issuance of Euro-Commercial Paper

           On November 28, 2014, the Entity obtained US$47.2 million through a program known as “Euro-
           Commercial Paper”, which bear interest at a rate of 6% annually and matured on November 18, 2015.
           On November 17, 2015, the Entity made the payment of the commercial euro paper for the amount of
           US$50 million, which includes principal and interest accrued as of that date.

     d.     “Gamma” brand

           During May 2014, the Entity launched its new “Gamma” brand, geared to owners of independent
           hotels with less than 100 rooms, operating under the franchise model through two options: i) an
           operating and licensing scheme, in which Posadas absorbs the operation of the hotels, or ii) the pure
           franchise scheme, in which Posadas offers the know-how of its Fiesta Americana and Fiesta Inn
           brands.

     e.    Hurricane Odile

           Due to the land fall of hurricane “Odile” on the Baja California peninsula during September 2014, the
           facilities of the hotels owned by the Entity suffered significant damage. These hotels have insurance
           policies which cover damages to real estate and consequential damages. The hotels were reopened on
           November 15, 2014, after having been totally repaired and remodeled for operations.




                                                     F-13
     On December 17, 2015, the Entity received the payment for the claims submitted with the insurance
     company for an amount, net of the deductible, of US$10.6 million, of which US$8.6 million refers to
     damages to real estate property and US$2 million to consequential losses.

f.   Assets available for sale

     On December 9, 2014, the Entity signed an agreement with I Ram Moneytree, Ltd., to sell the hotel
     “Holiday Inn Laredo” located in Laredo, Texas, U.S.A., for a maximum amount of US$8.6 million.
     The sale transaction was subject to certain conditions established in the agreement, which were not
     totally fulfilled by October 2015; consequently, the sale of the real property was not completed. At the
     date of the consolidated financial statements, the Entity remains in negotiations with different investors
     to carry out such transaction.

     As all the accounting criteria required for assets available for sale have been fulfilled as of December
     31, 2014, the real estate and equipment of the hotel subject to sale have been presented as “assets held
     for sale” in the consolidated statements of financial position as of December 31, 2015 and 2014, which
     amount $59,184 and $50,910, respectively. Also, the liabilities and the effects of deferred taxes related
     to these assets have been presented as “liabilities directly associated with assets held for sale”, because
     they are directly related to the assets that will be transferred, which amount to $6,384 and $6,423,
     respectively.

     Furthermore, given that the hotel available for sale does not represent an important line of business, as
     established in International Financial Reporting Standards, the transaction has not been considered as a
     discontinued operation in the consolidated statements of comprehensive (loss) income.

g.   Acquisition of minority interest

     During 2014, based on a share purchase-sale contract, the Entity acquired the non-controlling interest
     in the capital stock of Hotelera Inmobiliaria de Monclova, S.A. de C.V. and DA Expansión HLD, S.A.
     de C.V., for the amounts of $2,023 and $189, respectively. This transaction generated a difference
     between the book value of the shares and the purchase price of $3,627, which was recorded in the
     consolidated statement of changes in stockholders’ equity, because these investments have always
     been consolidated.

h.   Sale of non-strategic assets

     On December 20, 2013, through the sale of shares of some subsidiaries, the Entity sold a series of non-
     priority assets, including a plot of land in Chemuyil, Quintana Roo, whose book value was $1,299,744
     as of December 31, 2012. The selling price of the transaction was set at $677,000 for the sale of shares
     and $3,000 for a real property located in Cancun, Quintana Roo. Of the first amount, $390,000 was
     paid on December 30, 2013, $185,000, on January 10, 2014 and the remaining $102,000 was received
     between January 15 and December 15, 2015, accruing interest at TIIE plus 5%.

     Because of the sale, the Entity recorded an impairment in the value of the Chemuyil land of
     approximately $763,869, in the 2013 consolidated statement of comprehensive (loss) income.




                                                F-14
     This transaction resulted in a loss which was recorded in the 2013 consolidated statement of
     comprehensive (loss) income as follows:

          Selling price                                                  $         677,000
          Less -
           Net book value of the plot of land in Chemuyil                         (535,875)
           Working capital to repay (i)                                           (143,395)
           Other                                                                      (281)

          Loss                                                           $           (2,551)

     (i) The working capital was paid to the buyer on January 7, 2014.

     The Chemuyil land was acquired in 1998 through the execution of an Irrevocable Trust contract with
     Instituto del Patrimonio Inmobiliario de la Administración Pública del Estado de Quintana Roo
     (IPAE), whereby ownership of the land was transferred to the Entity in exchange for a payment of
     US$10.4 million, subject to certain obligations, including the construction of 250 hotel rooms and their
     respective shared facilities, at an estimated cost of US$97.4 million. Subsequently, several amendment
     agreements were executed to extend the original compliance term until June 30, 2013. The new
     extension included a clause whereby the Entity was obligated to pay the IPAE a contractual penalty of
     US$10 million in the event of default. It also established a guarantee trust in favor of the IPAE, to
     which as of December 31, 2012 the Entity had contributed 8,799,000 Series “A” to cover the
     contractual penalty amount.

     On June 30, 2013, the IPAE considered that the commitments had not been fulfilled by the Entity, and
     the guarantee trust sold 5,803,976 shares for $138,488 of which $6,510 is recorded as common stock
     and $131,978 as additional paid in capital. The trust paid the IPAE $127,321 as a contractual penalty.
     Consequently, the Entity recorded in 2013 an expense of $144,225, which includes related costs under
     “other expenses” in the consolidated statement of comprehensive (loss) income.

i.   Tax effects of 2013

     i.          Up to December 31, 2012, there were several tax lawsuits originated from 2004 to 2008, in
                 which Posadas and its subsidiaries acted as plaintiffs or defendants, whose outcomes could not
                 be assured as of that date. The tax authorities alleged the non-payment of federal taxes, mainly
                 income tax, value-added tax, and asset tax. The amount claimed added up to $1,120,965,
                 including restatement, penalties, and surcharges as of the date of the tax liability assessment. In
                 addition to the proceedings for annulment filed, sureties had been granted through joint
                 obligations and foreclosures of real property, for the equivalent of the amount claimed plus the
                 applicable restatement and surcharges. The lawsuits were in different stages and the Entity had
                 filed several administrative procedures and annulment proceedings against the tax authority’s
                 claims.

                 During the first half of 2013, the Entity applied for the forgiveness benefits established in
                 various rules and criteria published in the Federal Income Law, better known as “tax amnesty”.
                 Consequently, there were several rulings in favor of the Entity forgiving all of the amounts
                 claimed in exchange for a sole payment of $142,908, of which $125,585 is recorded in the
                 consolidated statement of comprehensive (loss) income under “income taxes” and refers to
                 income tax and $17,323 is recorded under “other expenses”, and is associated to local and
                 value-added taxes. The above actions concluded the aforementioned lawsuits.

     ii.         Under the new Income Tax Law (LISR) in effect in 2014, the tax consolidation scheme was
                 eliminated and, therefore, Posadas became obligated to pay the deferred tax up to December 31,
                 2013, during the following five years beginning in 2014. This tax on deconsolidation was
                 determined by the Entity’s management and recognized in the consolidated statement of
                 comprehensive (loss) income as of December 31, 2013, under the heading of income tax
                 expense, for the amount of $882,262; also, the short and long-term liability as of December 31,
                 2015 is $219,650 and $310,240, respectively. The determination of such tax is subject to review
                 by the tax authorities.



                                                     F-15
     iii.   Similarly, the 2014 LISR eliminates the incentive that allowed for the contribution of real
            property to Real Estate Companies (SIBRAS) and the accrual of the gain on sale of these
            properties at the time the shares of such companies were sold. Consequently, if the above
            assumptions for accrual of the gain have not been fulfilled as of December 31, 2016, it must be
            accrued on that date. The liability for this gain was not fully recorded previously because the
            Entity had no plans to sell the shares or the assets. Consequently, due to the change in
            circumstances, the Entity recorded a deferred tax in the consolidated statement of financial
            position of $1,297,422 as of December 31, 2013. Due to a series of additional analyses and
            considering the tax attributes of the Entity, during 2014 tax losses of $304,090 were carried
            forward. As of December 31, 2015, the liability derived from this gain is $1,006,396 (see Note
            18c.)

j.   Assets available for sale - FibraHotel

     During the third quarter of 2012, a trust called FibraHotel was established mainly to acquire, own, and
     develop hotels of various categories in Mexico. In late November 2012, FibraHotel acquired 12 hotels
     of the Entity of which, 10 were owned by Fondo Inmobiliario Posadas, S.A. de C.V., Sociedad de
     Inversión de Capitales (SINCA).

     The execution of the sale was subject to the fulfillment of certain conditions, that were subsequently
     fulfilled on January 21, 2013 and 11 of the Entity’s hotels were sold for $1,486,594; generating a profit
     of approximately $331,103, which was recorded in January 2013.

     Three more hotels were sold during February, April, and June 2013, as part of secondary offers of
     FibraHotel, at a selling price of $406,696, generating profit of $115,632 recorded in 2013, practically
     with the same sale conditions used for the first 12 hotels.

     Prior to the sale of the three hotels the Entity acquired, through a share purchase and sale contract, the
     percentage relative to the non-controlling interest in the equity of those entities, for the amount of
     $101,893. This transaction generated a spread between the book value of the shares and the purchase
     price of $6,137, which was recorded in the consolidated statement of changes in stockholders’ equity,
     because these investments were already being consolidated.

k.   Corporate office sale and leaseback

     The Entity executed a purchase-sale agreement for its corporate property located in Mexico City with
     Fibra Uno on June 27, 2013 at a selling price of US$14.9 million and a book value of $86,226 at the
     selling date, resulting in a favorable difference of $108,169.

l.   Discontinued operations - South America’s segment

     On July 16, 2012, the Entity announced that it had reached an agreement with Accor, S.A. (Accor), to
     sell its operations in South America.

     On October 10, 2012, the sale was completed, upon fulfillment the conditions. A portion of the sale
     price remained subject to adjustment for certain variables referred to in the sale contract, and on that
     date the Entity received proceeds in the amount of US$238.7 million. In order to ensure possible
     damages as a result of the sale, the remaining amount of the sale a balance of US$32 million remained
     in an escrow account in which Accor was the primary beneficiary. These funds would be released to
     the Entity on various dates from 2014 through 2019, only when certain precedent conditions,
     established in the sale contract, had been met. On December 31, 2013, the Entity estimated that it
     would recover approximately US$22.6 million, equivalent to $294,679, which was presented under the
     heading of “long-term account receivables” in the consolidated statement of financial position.

     On August 29, 2014, the Entity reached agreement with Accor on the final selling price, which
     generated additional revenue of $8,718 due to different adjustments to the price and funds previously
     released. Such revenue was recorded as income from discontinued operations in the consolidated
     statement of comprehensive (loss) income. Of the US$32 million in the guaranteed deposit account,
     the Entity recovered approximately US$22 million, and the difference was released to Accor.


                                                F-16
3.   Application of new and revised International Financial Reporting Standards

     a.    Application of new and revised International Financing Reporting Standards (IFRS or IAS) and
           interpretations that are mandatorily effective for the current year

           In the current year, the Entity has applied a number of amendments to IFRS and new Interpretation
           issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an
           accounting period that begins on or after January 1, 2015.

           Amendments to IAS 19 Defined Benefit Plans: Employee Contributions

           The Entity has applied the amendments for the first time in the current year. Prior to the amendments,
           the Entity accounted for discretionary employee contributions to defined benefit plans as a reduction of
           the service cost when contributions were paid to the plans, and accounted for employee contributions
           specified in the defined benefit plans as a reduction of the service cost when services are rendered. The
           amendments require the Entity to account for employee contributions as follows:

           x      Discretionary employee contributions are accounted for as reduction of the service cost upon
                  payments to the plans.

           x      Employee contributions specified in the defined benefit plans are accounted for as reduction of
                  the service cost, only if such contributions are linked to services. Specifically, when the amount
                  of such contribution depends on the number of years of service, the reduction to service cost is
                  made by attributing the contributions to periods of service in the same manner as the benefit
                  attribution. On the other hand, when such contributions are determined based on a fixed
                  percentage of salary (i.e. independent of the number of years of service), the Entity recognizes
                  the reduction in the service cost in the period in which the related services are rendered.

           The application of these improvement has had no material impact on the disclosures or the amounts
           recognized in the Entity’s consolidated financial statements.

           Annual Improvements to IFRS 2010 - 2012 Cycle and 2011 - 2013 Cycle

           The Entity has applied the amendments to IFRS included in the Annual Improvements to IFRS 2010-
           2012 Cycle and 2011 - 2013 Cycle for the first time in the current year. One of the annual
           improvements requires entities to disclose judgements made by management in applying the
           aggregation criteria set out in paragraph 12 of IFRS 8 Operating Segments.

           The application of these improvement has had no impact on the disclosures or amounts recognized in
           the Entity’s consolidated financial statements.

     b.    New and revised IFRS in issue but not yet effective

           The Entity has not applied the following new and revised IFRS that have been issued but are not yet
           effective:

           IFRS 9                                     Financial Instruments2
           IFRS 15                                    Revenue from Contracts with Customers2
           IFRS 16                                    Leases3
           Amendments to IAS 1                        Disclosure Initiative1
           Amendments to IFRS                         Annual Improvements to IFRS 2012-2014 Cycle1
           1
             Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.
           2
             Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.
           3
             Effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.

           The Entity will begin in 2016 assessing the effects on its consolidated financial statements the adoption
           of these will and revised IFRS.



                                                     F-17
     c.    Presentation of the consolidated statement of comprehensive (loss) income

           The consolidated statements of comprehensive (loss) income for the years ended December 31, 2014
           and 2013, have been modified to conform to the 2015 presentation based on their function, according
           IAS 1 Presentation of financial statements.


4.   Significant accounting policies

     a.    Statement of compliance

           The consolidated financial statements have been prepared in accordance with IFRS released by IASB.

     b.    Basis of preparation

           The consolidated financial statements have been prepared on the historical cost basis except for certain
           hotel properties that were recognized at fair value at the date of transition to IFRS.

           i.     Historical cost

                  Historical cost is generally based on the fair value of the consideration given in exchange for
                  goods and services.

           ii.    Fair value

                  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
                  orderly transaction between market participants at the measurement date, regardless of whether
                  that price is directly observable or estimated using another valuation technique. In estimating
                  the fair value of an asset or a liability, the Entity takes into account the characteristics of the
                  asset or liability if market participants would take those characteristics into account when
                  pricing the asset or liability at the measurement date.

           In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or
           3 based on the degree to which the inputs to the fair value measurements are observable and the
           significance of the inputs to the fair value measurement in its entirety, which are described as follows:

           x      Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
                  that the entity can access at the measurement date;
           x      Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
                  for the asset or liability, either directly or indirectly; and
           x      Level 3 inputs are unobservable inputs for the asset or liability.

     c.    Basis of consolidation

           The consolidated financial statements incorporate the financial statements of Posadas and of the
           entities which controls. Control is achieved when Posadas:

           x      Has power over the investee;
           x      Is exposed, or has rights, to variable returns from its involvement with the investee; and
           x      Has the ability to use its power to affect its returns.

           The Entity reassesses whether or not it controls an investee if facts and circumstances indicate that
           there are changes to one or more of the three elements of control listed above.




                                                       F-18
When Posadas has less than a majority of the voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. Posadas considers all relevant facts and circumstances in
assessing whether or not the Posadas’ voting rights in an investee are sufficient to give it power,
including:

x        The size of Posadas’ holding of voting rights relative to the size and dispersion of holdings of
         the other vote holders;
x        Potential voting rights held by Posadas, other vote holders or other parties;
x        Rights arising from other contractual arrangements; and
x        Any additional facts and circumstances that indicate that Posadas has, or does not have, the
         current ability to direct the relevant activities at the time that decisions need to be made,
         including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Entity obtains control over the subsidiary and ceases
when Posadas loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of comprehensive
(loss) income from the date Posadas gains control until the date when it ceases to control the
subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the
Entity and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to
the owners of the Entity and to the non-controlling interests even if this results in the non-controlling
interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with Posadas’ accounting policies.

The percentage in the share capital of the subsidiaries is as follows:

                             Entity                                 2015 and 2014                2013

    Promotora Inmobiliaria Hotelera, S. A. de C. V. and
      Subsidiaries                                                       100                     100
    Controladora de Acciones Posadas, S. A. de C. V. and
      Subsidiaries                                                       100                       -
    Administración Digital Conectum, S. A. de C. V. and
      Subsidiaries                                                       100                     100
    Posadas USA, Inc. and Subsidiaries                                   100                     100
    Hoteles y Villas Posadas, S. A. de C. V.                             100                     100
    Inversora Inmobiliaria Club, S. A. de C. V.                          100                     100
    Gran Inmobiliaria Posadas, S. A. de C. V.                            100                     100
    Soluciones de Lealtad, S. A. de C. V.                                100                     100
    Konexo Centro de Soluciones, S. A. de C. V.                          100                     100
    Inmobiliaria del Sudeste, S. A. de C. V.                              51                      51

All intragroup amounts and transactions between members of the Entity are eliminated in full on
consolidation.

Changes in the Entity’s ownership interests in existing subsidiaries

Changes in the Entity’s ownership interests in subsidiaries that do not result in the Entity losing control
over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Entity’s
interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in
the subsidiaries. Any difference between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received is recognized directly in equity and
attributed to owners of the Entity.



                                            F-19
     When the Entity loses control of a subsidiary, a gain or loss is recognized in profit or loss and is
     calculated as the difference between (i) the aggregate of the fair value of the consideration received
     and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including
     goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously
     recognized in other comprehensive income in relation to that subsidiary are accounted for as if the
     Entity had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to
     profit or loss or transferred to another category of equity as specified/permitted by applicable IFRS).
     The fair value of any investment retained in the former subsidiary at the date when control is lost is
     regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when
     applicable, the cost on initial recognition of an investment in an associate or a joint venture.

d.   Financial instruments

     Financial assets and financial liabilities are recognized when the Entity becomes a party to the
     contractual provisions of the instruments.

     Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
     directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
     financial assets and financial liabilities at fair value through profit or loss) are added to or deducted
     from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
     Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
     value through profit or loss are recognized immediately in profit or loss.

e.   Financial assets

     Financial assets are classified into the following specified categories: financial assets “at fair value
     through profit or loss” (FVTPL), “held-to-maturity” investments, “available-for-sale” (AFS) financial
     assets and “loans and receivables”. The classification depends on the nature and purpose of the
     financial assets and is determined at the time of initial recognition. All regular way purchases or sales
     of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or
     sales are purchases or sales of financial assets that require delivery of assets within the time frame
     established by regulation or convention in the marketplace.

     1.     Effective interest method

            The effective interest method is a method of calculating the amortized cost of a debt instrument
            and of allocating interest income over the relevant period. The effective interest rate is the rate
            that exactly discounts estimated future cash receipts (including all fees and points paid or
            received that form an integral part of the effective interest rate, transaction costs and other
            premiums or discounts) through the expected life of the debt instrument, or, where appropriate,
            a shorter period, to the net carrying amount on initial recognition.

            Income is recognized on an effective interest basis for debt instruments other than those
            financial assets classified at FVTPL.

     2.     Financial assets at FVTPL

            Financial assets are classified as of FVTPL when the financial asset is (i) contingent
            consideration that may be paid by an acquirer as part of a business combination to which IFRS
            3 applies, (ii) held for trading, or (iii) it is designated at FVTPL.

            A financial asset is classified as held for trading if:

            x       It has been acquired principally for the purpose of selling it in the near term; or
            x       On initial recognition it is part of a portfolio of identified financial instruments that the
                    Entity manages together and has a recent actual pattern of short-term profit-taking; or
            x       It is a derivative that is not designated and effective as a hedging instrument.




                                                  F-20
     A financial asset other than a financial asset held for trading or contingent consideration that
     may be paid by an acquirer as part of a business combination may be designated at FVTPL
     upon initial recognition if:

     x      Such designation eliminates or significantly reduces a measurement or recognition
            inconsistency that would otherwise arise; or
     x      The financial asset forms part of a group of financial assets or financial liabilities or
            both, which is managed and its performance is evaluated on a fair value basis, in
            accordance with the Entity’s documented risk management or investment strategy, and
            information about the grouping is provided internally on that basis; or
     x      It forms part of a contract containing one or more embedded derivatives, and IAS 39
            permits the entire combined contract to be designated at FVTPL.

     Financial assets at FVTPL are stated at fair value, with any gains or losses arising on
     remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss
     incorporates any dividend or interest earned on the financial asset and is included in the “other
     income (expenses) - net” line item in the consolidated statement of comprehensive (loss)
     income.

3.   Held-to-maturity investments

     Held-to-maturity investments are non-derivative financial assets with fixed or determinable
     payments and fixed maturity dates that the Entity has the positive intent and ability to hold to
     maturity. Subsequent to initial recognition, held-to maturity investments are measured at
     amortized cost using the effective interest method less any impairment.

4.   Financial assets classified as available-for-sale (AFS financial assets)

     AFS financial assets are non-derivatives that are either designated as AFS or are not classified
     as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value
     through profit or loss.

     Listed redeemable notes held by the Entity that are traded in an active market are classified as
     AFS and are stated at fair value at the end of each reporting period. The Entity also has
     investments in unlisted shares that are not traded in an active market but that are also classified
     as AFS financial assets and stated at fair value at the end of each reporting period (because the
     Entity’s management consider that fair value can be reliably measured). Changes in the
     carrying amount of AFS monetary financial assets relating to changes in foreign currency rates
     (see below), interest income calculated using the effective interest method and dividends on
     AFS equity investments are recognized in profit or loss. Other changes in the carrying amount
     of assets classified as held for sale are recognized in other comprehensive income and
     accumulated under the heading of investments revaluation reserve. When the investment is
     disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated
     in the investments revaluation reserve is reclassified to profit or loss.

     Dividends on AFS equity instruments are recognized in profit or loss when the Entity’s right to
     receive the dividends is established.

     The fair value of AFS monetary financial assets denominated in a foreign currency is
     determined in that foreign currency and translated at the spot rate prevailing at the end of the
     reporting period. The foreign exchange gains and losses that are recognized in profit or loss are
     determined based on the amortized cost of the monetary asset. Other foreign exchange gains
     and losses are recognized in other comprehensive income.

     AFS equity investments that do not have a quoted market price in an active market and whose
     fair value cannot be reliably measured and derivatives that are linked to and must be settled by
     delivery of such unquoted equity investments are measured at cost less any identified
     impairment losses at the end of each reporting period.



                                         F-21
5.   Loans and receivables

     Loans and receivables are non-derivative financial assets with fixed or determinable payments
     that are not quoted in an active market. Loans and receivables (including accounts and notes
     receivables, and cash and cash equivalents) are measured at amortized cost using the effective
     interest method, less any impairment.

     Interest income is recognized by applying the effective interest rate, except for short-term
     receivables when the effect of discounting is immaterial.

6.   Impairment of financial assets

     Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end
     of each reporting period. Financial assets are considered to be impaired when there is objective
     evidence that, as a result of one or more events that occurred after the initial recognition of the
     financial asset, the estimated future cash flows of the investment have been affected.

     For AFS equity investments, a significant or prolonged decline in the fair value of the security
     below its cost is considered to be objective evidence of impairment.

     For all other financial assets, objective evidence of impairment could include:

     x      Significant financial difficulty of the issuer or counterparty; or
     x      Breach of contract, such as a default or delinquency in interest or principal payments; or
     x      It becoming probable that the borrower will enter bankruptcy or financial re-
            organization; or
     x      The disappearance of an active market for that financial asset because of financial
            difficulties.

     For certain categories of financial assets, such as trade receivables, assets are assessed for
     impairment on a collective basis even if they were assessed not to be impaired individually.
     Objective evidence of impairment for a portfolio of receivables could include the Entity’s past
     experience of collecting payments in the portfolio exceed the maximum credit period of 11
     months, as well as observable changes in national or local economic conditions that correlate
     with default on receivables.

     For financial assets carried at amortized cost, the amount of the impairment loss recognized is
     the difference between the asset’s carrying amount and the present value of estimated future
     cash flows, discounted at the financial asset’s original effective interest rate.

     For financial assets that are carried at cost, the amount of the impairment loss is measured as
     the difference between the asset’s carrying amount and the present value of the estimated future
     cash flows discounted at the current market rate of return for a similar financial asset. Such
     impairment loss will not be reversed in subsequent periods.

     The carrying amount of the financial asset is reduced by the impairment loss directly for all
     financial assets with the exception of trade receivables, where the carrying amount is reduced
     through the use of an allowance account. When a trade receivable is considered uncollectible, it
     is written off against the allowance account. Subsequent recoveries of amounts previously
     written off are credited against the allowance account. Changes in the carrying amount of the
     allowance account are recognized in profit or loss.

     When an AFS financial asset is considered to be impaired, cumulative gains or losses
     previously recognized in other comprehensive income are reclassified to profit or loss in the
     period.




                                        F-22
            For financial assets measured at amortized cost, if, in a subsequent period, the amount of the
            impairment loss decreases and the decrease can be related objectively to an event occurring
            after the impairment was recognized, the previously recognized impairment loss is reversed
            through profit or loss to the extent that the carrying amount of the investment at the date the
            impairment is reversed does not exceed what the amortized cost would have been had the
            impairment not been recognized.

            In respect of AFS equity securities, impairment losses previously recognized in profit or loss
            are not reversed through profit or loss. Any increase in fair value subsequent to an impairment
            loss is recognized in other comprehensive income and accumulated under the heading of
            investments revaluation reserve. In respect of AFS debt securities, impairment losses are
            subsequently reversed through profit or loss if an increase in the fair value of the investment
            can be objectively related to an event occurring after the recognition of the impairment loss.

     7.     Derecognition of financial assets

            The Entity derecognizes a financial asset when the contractual rights to the cash flows from the
            asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
            ownership of the asset to another party. If the Entity neither transfers nor retains substantially
            all the risks and rewards of ownership and continues to control the transferred asset, the Entity
            recognizes its retained interest in the asset and an associated liability for amounts it may have to
            pay. If the Entity retains substantially all the risks and rewards of ownership of a transferred
            financial asset, the Entity continues to recognize the financial asset and also recognizes a
            collateralize borrowing for the proceeds received.

            On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
            amount and the sum of the consideration received and receivable and the cumulative gain or
            loss that had been recognized in other comprehensive income and accumulated in equity is
            recognized in profit or loss.

            On derecognition of a financial asset other than in its entirety (e.g. when the Entity retains an
            option to repurchase part of a transferred asset), the Entity allocates the previous carrying
            amount of the financial asset between the part it continues to recognize under continuing
            involvement, and the part it no longer recognizes on the basis of the relative fair values of those
            parts on the date of the transfer. The difference between the carrying amount allocated to the
            part that is no longer recognized and the sum of the consideration received for the part no
            longer recognized and any cumulative gain or loss allocated to it that had been recognized in
            other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had
            been recognized in other comprehensive income is allocated between the part that continues to
            be recognized and the part that is no longer recognized on the basis of the relative fair values of
            those parts.

f.   Cash, cash equivalents and investments in securities

     Cash consists of cash on hand and demand deposits. Cash equivalents are maintained to meet cash
     commitments rather than short term for investment or other purposes. For an investment to qualify as a
     cash equivalent it must be readily convertible to a known amount of cash and subject to insignificant
     risk of changes in value.

     Therefore, an investment normally qualifies as a cash equivalent when it has a short maturity of
     generally three months or less from the date of acquisition. Investments in securities are not included
     in cash equivalents unless they are, in substance, cash equivalents. Otherwise, they are presented as
     investments in securities. Cash is stated at nominal value and cash equivalents are measured at fair
     value, the changes in value are recognized in profit or loss.




                                                F-23
g.   Inventories

     Inventories are stated at average cost, which does not exceed their net realizable value.

h.   Vacation Club inventory

     Vacation Club inventories are recorded at cost of construction. Cost of sales is recorded at the time of
     sales.

     The long-term Vacation Club inventories correspond to the cost of reconstruction of hotel buildings,
     which are remodeled to provide Vacation Club services. Short-term Vacation Club units represent
     hotel buildings approved for sale by management that are expected to be sold within one year,
     therefore, they are classified as current assets even though their business cycle could be longer.

i.   Property and equipment

     Certain assets (land and buildings) related to hotels were revalued at fair value at January 1, 2011 (date
     of transition to IFRS). The remaining assets and subsequent acquisitions are carried at acquisition cost.

     Furniture and equipment are stated at cost less accumulated depreciation and accumulated impairment
     losses.

     The cost of improvements, renovations and replacements to hotel rooms are capitalized within the
     property and equipment caption and are amortized over a period of 3 to 5 years. The costs of minor
     repairs and maintenance are expensed as they are incurred.

     Properties in the course of construction for exploitation, supply or administrative purposes are carried
     at cost, less any recognized impairment loss. Cost includes professional fees and, for qualifying assets,
     borrowing costs capitalized in accordance with the Entity’s accounting policy. Such properties are
     classified to the appropriate categories of property and equipment when completed and ready for
     intended use. Depreciation of these assets, on the same basis as other property assets, commences
     when the assets are ready for their intended use.

     The average percentage rate of depreciation of the components of property and equipment are:

                                                                             (%)


      Buildings - Construction                                             1 to 5
      Buildings - Installation, finishing and improvements                 5 to 10
      Furniture and equipment                                                 10
      Vehicles                                                                25
      Computer                                                               30
      Operating equipment                                                     33

     Land is not depreciated.

     Depreciation is recognized so as to write off the cost or valuation of assets (other than land and
     properties under construction) less their residual values over their useful lives, which is 24% for
     buildings, as determined by the independent valuation agents, using the straight-line method. The
     estimated useful lives, residual values and depreciation method are reviewed at the end of each
     reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

     The assets held under capital lease are depreciated based on their estimated useful life, in the same way
     as owned assets. However, when there is no reasonable certainty that ownership will be obtained at the
     end of the lease, the assets are amortized in the shorter of the effective lease term and their useful life.




                                                F-24
     An item of property and equipment is derecognized upon disposal or when no future economic benefits
     are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or
     retirement of an item of property and equipment is determined as the difference between the sales
     proceeds and the carrying amount of the asset and is recognized in profit or loss.

j.   Other assets

     This item includes all direct costs, primarily commissions on Kívac sales, which are reflected in other
     assets and recognized in the consolidated statement of comprehensive (loss) income, once the service
     is rendered and accordingly revenue is recognized. An estimate of short-term operations is presented as
     other current assets; related with the part that is expected to be used during the next 12 months.

     1.     Internally-generated intangible assets - research and development expenditure

            Expenditure on research activities is recognized as an expense in the period in which it is
            incurred.

            An internally-generated intangible asset arising from development (or from the development
            phase of an internal project) is recognized if, and only if, all of the following have been
            demonstrated:

            x       The technical feasibility of completing the intangible asset so that it will be available for
                    use or sale.
            x       The intention to complete the intangible asset and use or sell it.
            x       The ability to use or sell the intangible asset.
            x       How the intangible asset will generate probable future economic benefits.
            x       The availability of adequate technical, financial and other resources to complete the
                    development and to use or sell the intangible asset.
            x       The ability to measure reliably the expenditure attributable to the intangible asset during
                    its development.

            The amount initially recognized for internally-generated intangible assets is the sum of the
            expenditure incurred from the date when the intangible asset first meets the recognition criteria
            listed above. Where no internally-generated intangible asset can be recognized, development
            expenditure is recognized in profit or loss in the period in which it is incurred.

            Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
            accumulated amortization and accumulated impairment losses, on the same basis as intangible
            assets that are acquired separately.

            Derecognition of intangible assets

            An intangible asset is derecognized on disposal, or when no future economic benefits are
            expected from use or disposal. Gains or losses arising from derecognition of an intangible asset,
            measured as the difference between the net disposal proceeds and the carrying amount of the
            asset, are recognized in profit or loss when the asset is derecognized.

k.   Impairment of tangible and intangible assets

     At the end of each reporting period, the Entity reviews the carrying amounts of its tangible and
     intangible assets to determine whether there is any indication that those assets have suffered an
     impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
     to determine the extent of the impairment loss (if any). When it is not possible to estimate the
     recoverable amount of an individual asset, the Entity estimates the recoverable amount of the cash-
     generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be
     identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are
     allocated to the smallest group of cash-generating units for which a reasonable and consistent
     allocation basis can be identified.



                                                 F-25
     Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
     for impairment at least annually, and whenever there is an indication that the asset may be impaired.

     Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
     use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
     that reflects current market assessments of the time value of money and the risks specific to the asset
     for which the estimates of future cash flows have not been adjusted.

     If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
     amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
     amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is
     carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

     When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
     unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
     amount does not exceed the carrying amount that would have been determined had no impairment loss
     been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss
     is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
     which case the reversal of the impairment loss is treated as a revaluation increase.

l.   Assets classified as held for sale

     Non-current assets and groups of assets for disposal are classified as held for sale if their carrying
     amount will be recovered principally through a sale transaction rather than through continuing use.
     This condition is regarded as met only when the asset (or disposal group) is available for immediate
     sale in its present condition subject only to terms that are usual and customary for sales of such asset
     (or disposal group) and its sale is highly probable. Management must be committed to the sale, which
     should be expected to qualify for recognition as a completed sale within one year from the date of
     classification, or a longer period as it keeps the selling effort.

     When the Entity is committed to a sale plan involving loss of control of a subsidiary, all of the assets
     and liabilities of that subsidiary are classified as held for sale when the criteria described above are
     met, regardless of whether the Entity will retain a non-controlling interest in its former subsidiary after
     the sale.

     After the disposal takes place, the Entity accounts for any retained interest in the associate or joint
     venture in accordance with IAS 39 unless the retained interest continues to be an associate or a joint
     venture, in which case the Entity uses the equity method (see the accounting policy regarding
     investments in associates).

     Non-current assets (and groups of assets for disposal) classified as held for sale are measured at the
     lower of their previous carrying amount and fair value less costs to sell.

m.   Investments in associates

     An associate is an entity over which the Entity has significant influence. Significant influence is the
     power to participate in the financial and operating policy decisions of the investee but is not control or
     joint control over those policies. Usually these entities are those in which a shareholding between 20%
     and 50% of the voting rights are held. The results and assets and liabilities of associates are
     incorporated in these consolidated financial statements using the equity method of accounting.

n.   Leasing

     Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
     risks and rewards of ownership to the lessee. All other leases are classified as operating leases.




                                                 F-26
     -        The Entity as lessee

              Operating lease payments are recognized as an expense on a straight-line basis over the lease
              term, except where another systematic basis is more representative of the time pattern in which
              economic benefits from the leased asset are consumed. Contingent rentals arising under
              operating leases are recognized as an expense in the period in which they are incurred.

              In the event that lease incentives are received to enter into operating leases, such incentives are
              recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of
              rental expense on a straight-line basis, except where another systematic basis is more
              representative of the time pattern in which economic benefits from the leased asset are
              consumed.

o.   Foreign currencies transactions

     In preparing the financial statements of each entity, transactions in currencies other than the Entity’s
     functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates
     of the transactions. At the end of each reporting period, monetary items denominated in foreign
     currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value
     that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the
     fair value was determined. Non-monetary items that are measured in terms of historical cost in a
     foreign currency are not retranslated.

     Exchange differences on monetary items are recognized in profit or loss in the period in which they
     arise except for:

     -        Exchange differences on foreign currency borrowings relating to assets under construction for
              future productive use, which are included in the cost of those assets when they are regarded as
              an adjustment to interest costs on those foreign currency borrowings.

     -        Exchange differences on transactions entered into in order to hedge certain foreign currency
              risks.

     The recording and functional currencies of the foreign operation are as follows:

                                  Country                                 Recording and
                                                                       functional currencies

         United States of America                                       American dollar

     For the purposes of presenting these consolidated financial statements, the assets and liabilities of the
     Entity’s foreign operations are translated into currency units using exchange rates prevailing at the end
     of each reporting period. Income and expense items are translated at the average exchange rates for the
     period, unless exchange rates fluctuate significantly during that period, in which case the exchange
     rates at the dates of the transactions are used.

p.   Employee benefits

     Retirement benefits costs from termination benefits

     Payments to defined contribution retirement benefit plans are recognized as an expense when
     employees have rendered service entitling them to the contributions.




                                                  F-27
     For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
     projected unit credit method, with actuarial valuations being carried out at the end of each annual
     reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to
     the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected
     immediately in the statement of financial position with a charge or credit recognized in other
     comprehensive income in the period in which they occur. Remeasurement recognized in other
     comprehensive income is reflected immediately in retained earnings and will not be reclassified to
     profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net
     interest is calculated by applying the discount rate at the beginning of the period to the net defined
     benefit liability or asset. Defined benefit costs are categorized as follows:

     x      Service cost (including current service cost, past service cost, as well as gains and losses on
            curtailments and settlements).
     x      Net interest expense or income.
     x      Remeasurement.

     The retirement benefit obligation recognized in the consolidated statement of financial position
     represents the actual deficit or surplus in the Entity’s defined benefit plans. Any surplus resulting from
     this calculation is limited to the present value of any economic benefits available in the form of refunds
     from the plans or reductions in future contributions to the plans.

     A liability for a termination benefit is recognized at the earlier of when the Entity can no longer
     withdraw the offer of the termination benefit and when the entity recognizes any related restructuring
     costs.

     Short-term and other long-term employee benefits

     A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual
     leave and sick leave in the period the related service is rendered at the undiscounted amount of the
     benefits expected to be paid in exchange for that service.

     Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
     amount of the benefits expected to be paid in exchange for the related service.

     Liabilities recognized in respect of other long-term employee benefits are measured at the present
     value of the estimated future cash outflows expected to be made by the Entity in respect of services
     provided by employees up to the reporting date.

     Statutory employee profit sharing (PTU)

     As result of the tax reform, as of December 31, 2015 and 2014, PTU is recorded in the results of the
     year in which it is incurred and is presented in administration expenses line item in the consolidated
     statement of comprehensive (loss) income.

     As result of the 2014 Income Tax Law, as of December 31, 2015 and 2014, PTU is determined based
     on taxable income, according to Section I of Article 10 of such Law.

q.   Income taxes

     Income tax expense represents the sum of the tax currently payable and deferred tax.

     1.     Current tax

            Current income tax (ISR) is recognized in the results of the year in which is incurred.




                                                F-28
     2.     Deferred income tax

            Deferred tax is recognized on temporary differences between the carrying amounts of assets and
            liabilities in the consolidated financial statements and the corresponding tax bases used in the
            computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable
            temporary differences. Deferred tax assets are generally recognized for all deductible temporary
            differences to the extent that it is probable that taxable profits will be available against which
            those deductible temporary differences can be utilized. Such deferred tax assets and liabilities
            are not recognized if the temporary difference arises from the initial recognition (other than in a
            business combination) of assets and liabilities in a transaction that affects neither the taxable
            profit nor the accounting profit.

            The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
            reduced to the extent that it is no longer probable that sufficient taxable profits will be available
            to allow all or part of the asset to be recovered.

            Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the
            period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that
            have been enacted or substantively enacted by the end of the reporting period.

            The measurement of deferred tax liabilities and assets reflects the tax consequences that would
            follow from the manner in which the Entity expects, at the end of the reporting period, to
            recover or settle the carrying amount of its assets and liabilities.

     3.     Current and deferred tax for the year

            Current and deferred tax are recognized in profit or loss, except when they relate to items that
            are recognized in other comprehensive income or directly in equity, in which case, the current
            and deferred tax are also recognized in other comprehensive income or directly in equity
            respectively. Where current tax or deferred tax arises from the initial accounting for a business
            combination, the tax effect is included in the accounting for the business combination.

     4.     Effect of income tax due to the tax reform of 2010

            On December 7, 2009, amendments were published to the Income Tax Law (LISR) applicable
            from 2010 in which it was established that: a) the payment of income tax related to tax
            consolidation benefits obtained in the years 1999 to 2004 should be paid in installments from
            2010 to 2014, and b) the tax related to tax benefits in fiscal consolidation in 2005 and following
            years will be paid from the sixth to the tenth year following that in which the benefit was
            obtained.

     5.     ISR effect as a result of the 2014 Tax Reform

            Given that the LISR in effect up to December 13, 2013 was repealed, the tax consolidation
            regime was eliminated, so Posadas is required to pay the deferred tax determined as of that date
            during the five subsequent years beginning in 2014.

     6.     Tax on assets

            The tax on assets (IMPAC) expected to be recoverable is recorded as a tax credit and is
            presented in the consolidated statement of financial position in the deferred taxes line item.

r.   Provisions

     Provisions are recognized when the Entity has a present obligation (legal or constructive) as a result of
     a past event, it is probable that the Entity will be required to settle the obligation, and a reliable
     estimate can be made of the amount of the obligation.



                                                 F-29
     The amount recognized as a provision is the best estimate of the consideration required to settle the
     present obligation at the end of the reporting period, taking into account the risks and uncertainties
     surrounding the obligation. When a provision is measured using the cash flows estimated to settle the
     present obligation, its carrying amount is the present value of those cash flows (when the effect of the
     time value of money is material).

     When some or all of the economic benefits required to settle a provision are expected to be recovered
     from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement
     will be received and the amount of the receivable can be measured reliably.

     1.     Restructurings

            A restructuring provision is recognized when the Entity has developed a detailed formal plan
            for the restructuring and has raised a valid expectation in those affected that it will carry out the
            restructuring by starting to implement the plan or announcing its main features to those affected
            by it. The measurement of a restructuring provision includes only the direct expenditures
            arising from the restructuring, which are those amounts that are both necessarily entailed by the
            restructuring and not associated with the ongoing activities of the entity.

     2.     Reserve for returns related to the Vacation Club

            The Entity performs an analysis of sales of Vacation Club memberships to identify sales whose
            collectability is uncertain. Under IAS 18, Revenue, a reserve for returns is recognized based on
            the historical experience of the Entity, calculated based on the estimated future cash flows
            expected to be received from the sale.

s.   Financial liabilities and equity instruments

     1.     Classification as debt or equity

            Debt and equity instruments issued by the Entity are classified as either financial liabilities or as
            equity in accordance with the substance of the contractual arrangements and the definitions of a
            financial liability and an equity instrument.

     2.     Equity instruments

            An equity instrument is any contract that evidences a residual interest in the assets of the Entity
            after deducting all of its liabilities. Equity instruments issued by the Entity are recognized at the
            proceeds received, net of direct issue costs.

            Repurchase of the Entity’s own equity instruments is recognized and deducted directly in
            equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation
            of the Entity’s own equity instruments.

     3.     Financial liabilities

            Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial
            liabilities”.

     4.     Other financial liabilities

            Other financial liabilities (including borrowings and trade and other payables) are subsequently
            measured at amortized cost using the effective interest method.




                                                 F-30
            The effective interest method is a method of calculating the amortized cost of a financial
            liability and of allocating interest expense over the relevant period. The effective interest rate is
            the rate that exactly discounts estimated future cash payments (including all fees and points
            paid or received that form an integral part of the effective interest rate, transaction costs and
            other premiums or discounts) through the expected life of the financial liability, or (where
            appropriate) a shorter period, to the net carrying amount on initial recognition.

     5.     Derecognition of financial liabilities

            The Entity derecognizes financial liabilities when, and only when, the Entity’s obligations are
            discharged, cancelled or they expire. The difference between the carrying amount of the
            financial liability derecognized and the consideration paid and payable is recognized in profit or
            loss.

t.   Derivative financial instruments

     The Entity enters into a variety of derivative financial instruments to manage its exposure to foreign
     exchange rate risks, including foreign exchange forward contracts. Further details of derivative
     financial instruments are disclosed in Note 21c.

     Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and
     are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain
     or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a
     hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature
     of the hedge relationship.

u.   Revenue recognition

     The Entity recognizes its revenues as follows:

     i.     From the hotel operation, which includes the operation of proprietary hotels and leased hotels,
            are recognized as the hotel services are rendered to the guests, which include the rental of
            guestrooms and rooms for events, sale of food and beverages, etc.;

     ii.    From the operation of the Vacation Club, are recognized as leasing revenue, where the rental
            which refers to the land is recognized as a deferred liability, and the part allocated to the
            construction is recognized as revenue from capital leasing;

     iii.   From the sale of Kívac points, are recognized once the hospitality service is rendered, plus an
            estimate of those points which will not be used by the program members at their expiration
            date. The amount of the unused services contracted is presented under the heading “Deferred
            income of Vacation Club”, as short-term and long-term in the consolidated statement of
            financial position;

     iv.    From management and brand fees, are recognized as they are accrued based on a percentage of
            the revenues and the profit from hotel operation, as established in the respective contracts; and

     v.     Revenues derived from loyalty programs with third parties, are recognized when the
            management service of the programs is rendered or due to the redemption of prizes in
            conformity with the contracts signed.

v.   Classification of costs and expenses

     Costs and expenses presented in the consolidated statements of comprehensive (loss) income were
     classified according to their function.




                                                 F-31
     w.      Statements of cash flows

             The Entity reports cash flows from operating activities using the indirect method, whereby profit or
             loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or
             future operating cash receipts or payments, and items of income or expense associated with investing
             or financing cash flows.

             Interest paid is usually classified as financing activities and interest and dividends received are usually
             classified as investing activities.

     x.      Loyalty programs

             The fair value of the awards is recognized as a reduction to revenues and recognized as deferred
             income until the benefits are delivered to the client, and the liability is presented under the heading of
             “Other liabilities and accrued expenses” in the consolidated statement of financial position.

     y.      (Loss) earnings per share of the controlling interest

             Basic (loss) earnings per share are calculated by dividing the net (loss) attributable to the controlling
             interest by the weighted average shares outstanding during the period. The diluted (loss) earnings per
             share is determined by adding 1) to the net (loss) earnings utilized in the numerator of the basic
             earnings per common share computation, interest and exchange rate fluctuation recorded in earnings
             attributable to voluntarily convertible loans and 2) to the weighted average shares outstanding in the
             denominator of the computation, the weighted average of outstanding obligations converted to shares
             based on the conversion factor established in the convertible loan agreements. As of December 31,
             2015, 2014 and 2013, the Entity does not have ordinary shares with potential dilution effects.

5.   Critical accounting judgments and key sources of estimation uncertainty

     In the application of the Entity’s accounting policies, which are described in Note 4, the Entity’s management
     is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities
     that are not readily apparent from other sources. The estimates and associated assumptions are based on
     historical experience and other factors that are considered to be relevant. Actual results may differ from these
     estimates.

     The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
     estimates are recognized in the period in which the estimate is revised if the revision affects only that period,
     or in the period of the revision and future periods if the revision affects both current and future periods.

     The following are the critical judgments and important sources of uncertainty which the Entity’s management
     has determined an estimate at the date of the consolidated financial statements that could have a significant
     impact on the carrying amounts of assets and liabilities during the subsequent financial periods:

     i.      The reserve for doubtful accounts and returns related to the Vacation Club
     ii.     Revenue recognition of Vacation Club
     iii.    The presentation of deferred revenues and other Kívac assets, short and long-terms
     iv.     Financial projections for asset impairment
     v.      The use of tax losses
     vi.     The effects of the contingencies faced by the Entity
     vii.    Labor obligations
     viii.   Redemption of loyalty program points
     ix.     The useful life and residual value of properties
     x.      Classification criteria of the operating segments of the Entity
     xi.     The estimated amount of investments in securities other than cash equivalents



                                                         F-32
6.   Cash and cash equivalents

                                                                 2015                    2014                   2013

          Cash                                            $          109,345     $           85,792      $         137,917
          Cash equivalents:
           Overnight investments                                      654,465              912,000                 150,000
           Dual structure notes investments                          -                    -                        418,448

          Total                                           $