Speakers at the SAHIC conference in Colombia painted a picture of opportunity and optimism in South America, and brand executives from Marriott, Hyatt, IHG and Hilton shared their development strategies in the region.
MEDELLÍN, Colombia—Hotel development and brand expansion in South America always is a tale of individual countries, regions and cities rather than a collective story, and this year’s South American Hotel Investment Conference underscores that reality.
On the first day of the two-day conference here, speakers set the stage by sharing hotel performance and pipeline trends across the region, and brand executives shared their focus areas, projecting overall optimism for South America, despite the differences in economic, financial and political stability across the region.
South America by the numbers
By and large, speakers agreed that South America is growing in terms of its popularity as a tourist destination. According to World Tourism Organization data, international tourist arrivals to South America were up 7% in 2017, the largest percentage gain for tourist arrivals in the Americas region.
Demand was another positive for South America, according to STR’s Area Director for Central & South America Patricia Boo, who said via a translator that 2017 was the turning point when demand outpaced supply in the region. This trend continues in 2018, she said, and will lead to positive results in performance. (STR is the parent company of Hotel News Now.)
Revenue-per-available-room growth is another bright spot across South America, according to Boo. STR data shows that through July, 2018 year-to-date RevPAR percent change was up in most major cities, led by 49% YTD growth in Buenos Aires and 27% YTD growth in Rosario, Argentina.
Among South America’s major cities, Peru’s hubs of Lima and Cusco led the way as of July 2018 year to date in both absolute average daily rate and RevPAR, both notching ADR around $140 and RevPAR around $90.
At the same time, currency devaluation and inflation issues are having measurable impact across the South American region. Venezuela’s government has devalued its currency to fight inflation and inflation is an issue in Argentina as well.
In terms of pipeline, South America has 45,000 rooms in the active pipeline, according to STR. Brazil leads the pack with 11% of the pipeline, followed by Colombia and Peru. Peru shows the largest pipeline growth, at 20%. Lima, Peru, alone has 1,000 rooms under construction, according to Boo.
In the SAHIC host country of Colombia, STR data shows that while the pipeline is strong in the main cities of Medellín, Bogotá and Cartagena, its regional locations have 2,900 hotel rooms in the pipeline, and 46% are in the upscale and upper-midscale chain scales.
Also on day one of SAHIC, executives from the leading international brands with presences in South America shared quick snapshots of their company’s highlights in the region.
Victor Vazquez, regional VP for Marriott International, said Marriott’s select-service brands make up 37% of the company’s portfolio in the Caribbean and Latin American region (CALA), and for that reason he said he sees the company’s “growth in select-service gaining more momentum.”
“We’ll open 22 new select-service properties in the CALA region in the coming five years, and we’ll have a great presence across all regions,” he said.
Marriott announced Monday it has approved four Moxy projects in the Caribbean, Central America and South America. The company signed an agreement at SAHIC for the 165-room Moxy in Medellín.
On the full-service side, Vazquez said Sheraton “was and still is a brand we want in all gateway cities.”
Hyatt Hotels Corporation
Camilo Bolanos, VP of development and real estate at Hyatt Hotels Corporation, said the company has experienced “exponential growth in the last decade with Hyatt in Latin America.”
“Just a decade ago, we had a base of less than 10 hotels in Latin America and the Caribbean, and we’re up to 40 currently with a pipeline that will grow that by a third over the next few years,” he said.
This year, Hyatt opened its fourth hotel in Brazil; two Hyatt Centrics, in Lima, Peru, and Santiago, Chile; and the company’s second Hyatt Place in Honduras. Most recently, Hyatt opened the Grand Hyatt in Bogotá, Colombia, which Bolanos said “will be a game-changer for hospitality in Colombia.”
Despite any current issues in Brazil and Argentina, Bolanos said Hyatt “believes in both destinations for the long term.”
“We’ve put our own capital into both countries, and we can look at the now and the future. It’s tough to put deals together there now for a lot of different reasons, but we see an uptick in the economy,” he said.
InterContinental Hotels Group
Craig Mueller, VP of development in the Americas for IHG, said Colombia has been the company’s “largest growth country in the region for some time,” with 14 hotels open in the country and two more in the pipeline.
In general, Mueller said IHG looks at “countries that have good economic and political stability; countries that are putting infrastructure in.” Moving forward, he said IHG is shifting growth plans to Peru, which the company considers to be “a solid growth vehicle,” with six more hotels in the active pipeline.
On the brand side, Mueller said Holiday Inn and Holiday Inn Express are the major growth brands for the company in the region. Beyond that, he said the company has had success in signing its other brands in destinations across the region. He pointed to the recent launch of IHG’s Avid Hotels brand in Mexico, as well as success with the Crowne Plaza, Hotel Indigo and Kimpton brands in Mexico.
Partnerships are key to IHG’s expansion in Latin America, Mueller said, citing the company’s partnerships in Mexico with Grupo Presidente and Fibra Inn, and similar ownership relationships in South America.
Ted Middleton, SVP of development for Latin America at Hilton, said the company’s “focus has never been stronger in the region.” The company’s two largest markets in its Caribbean and Latin American region are Mexico, with 60 hotels open and 30 in the pipeline, followed by Colombia, which has nearly 20 hotels open and 10 in the pipeline, Middleton said. Overall, the company has approximately 140 hotels open in the region, with 90 in the pipeline.
“Focused-service hotels are about 50% of our expansion plans; we’re seeking additional focused-service hotels in key markets and industrial zones,” he said.
In addition, Hilton is seeing “a growing trend in luxury” in the region, he said, citing recent openings like the Conrad Cartagena in Colombia, and two Waldorf-Astoria-branded hotels under construction in Mexico.
Soft brands like Curio Collection by Hilton and Tapestry by Hilton also are “driving significant interest for owners” in the region, he said. The company signed its first Curio in Latin America, the Anselmo Buenos Aires, and recently signed two Tapestry properties in Peru.
Middleton also added more details to the company’s recent announcement of a strategic alliance with Playa Hotels & Resorts to add two new all-inclusive resorts in the Caribbean and Latin America—branded under the Hilton name but managed by Playa. The alliance’s goals include opening eight addition properties by 2025.
“This will help us expand the Hilton presence in the all-inclusive space,” he said. “We’re going to be moving quickly in all-inclusive.”