Hoteliers identify prospects, hurdles in South America
 
Hoteliers identify prospects, hurdles in South America
21 MAY 2018 8:16 AM

Speaking at the recent Hotel Opportunities Latin America conference, experts shared insights into South American markets like Chile, Argentina, Peru and Colombia.

MIAMI—Investors looking to sink money into hotels in South America need to be aware of the various, differing market conditions in the continent, according to a panel of experts speaking during the recent Hotel Opportunities Latin America conference.

During the “Opportunities in South America” panel, hoteliers shared insights into four of the most key countries for hoteliers in the region: Chile, Argentina, Peru and Colombia.

Chile
While the country’s economy is considerably smaller than larger regional counterparts like Argentina and Brazil, Chile continues to draw praise for its relative stability and seems to be viewed as an investment safe haven.

Victor Vazquez, regional VP for Marriott International, said the country is bolstered by a business-friendly culture and government.

“With the new presidency (of Sebastián Piñera), they’re establishing a way forward,” he said. “Chile is a small market, but a very steady one.”

Vazquez said he views Chile as a place to debut and establish a foothold for Marriott’s various brands. He said Marriott now has 10 brands operating in the Chilean capital of Santiago following the recent debut of Fairfield Inn, and he believes the city provides “a good showcase for the brands.”

Juan Corvinos, VP of development for Latin America and the Caribbean at Hilton, said his company sees a growth opportunity within the extended-stay segment throughout the region, with Chile being a particular focus.

“Going down to Santiago is expensive for anyone in the U.S., so people going there are staying four or five nights,” he said.

He noted for that reason guests have been using existing hotels “in a way they’re not intended to be used,” which is an indicator the market is hungry for extended-stay supply.

Overall, Corvinos described Chile as “the most stable economy in South America, and it will continue to be in the coming years.”

Andrés Sánchez, director of development for GHL Hoteles, said his company is focused on growing in Chile, including a new property in Santiago.

“We are also looking to grow in the north (of the country),” he said.

Argentina
While Argentina still represents considerable upside, panelists said there is more of a sense of concern around the country than in the past.

Vazquez described Argentina as a “complicated environment for hotel projects” but noted he is still excited about its long-term prospects.

In general, panelists complained about the difficult regulatory environment in the country, with Vazquez noting that operating in the country “requires an extra level of partnership” to clear government hurdles.

But it can’t be overlooked, he said, because it’s “a country of promise with a big population and good infrastructure.”

He said the country needs to act fast in enacting business-friendly rules to lure foreign investors. The changes required include having more freedom to move currency in and out of the country.

Peru
Growth in secondary markets seems to be the current opportunity in Peru, according to panelists.

Corvinos said there are a wealth of local investors in Peru, and he sees it as a prime area to grow a brand like Hampton or soft-brand collections that can capture more unique properties.

“If we start covering markets from the bottom and start grooming (guests), there’s a return with very interesting dynamics,” he said, noting the potential for growth in the company’s loyalty program in the region.

He said in Peru the “intracountry” traveler is more important than the foreign inbound travel.

Colombia
Supply growth seems to be dominating the conversation around Colombia, but Sánchez said the country must address its need for infrastructure to unlock its true potential.

“I feel Colombia will be a great place in the hotel (business) in the future after all these changes are done and infrastructure is finished,” he said. “Those are the two difficult factors.”

Corvinos noted the country has a history of “funding hotels without debt,” leading to what he called “nonsensical projects.”

He said the end of those types of projects are a positive for the country as there are still “investors looking to develop in places that still make sense with strong fundamentals.”

He also noted the upside of Peru includes a relatively high level of sophistication in the world of management companies. He said a downturn in the country could drive more hotels to join international brands to drive business.

Vazquez agreed international brands could be appealing in the country, as major U.S. markets like Miami remain top feeder markets.

He said that forces Colombian hotels to “become more interested in having distribution that suits the U.S. traveler.”

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