Spurring local demand key to LatAm recovery
Spurring local demand key to LatAm recovery
06 OCTOBER 2020 8:35 AM

Hotel industry leaders speaking during the online South American Hotel Investment Conference said several factors will underpin the region’s early stages of recovery including promoting domestic travel and brands having owners’ backs.

GLOBAL REPORT—Though the ramp-up period in the Caribbean and Latin America region might not be an overnight process, speakers on the online 2020 South American Hotel Investment Conference said the worst is behind them. Now the focus is on attracting local demand.

Arturo Garcia Rosa, president and founder of SAHIC, began the first day of the online conference by welcoming attendees from across the globe and setting the tone that Latin America is on the road to recovery.

Patrick Mendes, CEO of Latin America, Accor, speaking during the “Hotel leaders chapter 1: Weathering the storm” session, said driving domestic travel is his company’s main focus for the region, especially to people from countries such as Brazil who can’t travel outbound right now.

“We need to promote all local destinations,” Mendes said, adding that includes regional tourism to offset the absence of international travel. “It’s going to be better for us and much more efficient to adapt our products to local destinations.”

Mendes said Accor is working with airlines to promote bundles and packages as well as work on protocols to communicate together. He said it’s a common action that needs to be done.

Olivier Ponti, VP of insights at airline data forecaster Forward Keys, shared data during the “Aviation industry outlook and the impact on tourism in Latin America and the Caribbean region” session on international arrivals into Latin America during the third quarter.

“Latin America has performed better than the rest of the world” in some ways, he said.

While he acknowledged that year-over-year international arrivals data of course is extraordinarily low, some areas are doing less-poorly than others.

Within Latin America, Puerto Rico’s arrivals are down 68.9% year over year and Mexico’s are down 80.7%, according to Forward Keys data. On the other side of the spectrum, Brazil’s arrivals are down 96%, and South America’s in general are down 97% year over year.
Laurent de Kousemaeker, chief development officer at Marriott International, said his company is also focusing on regional and domestic travel. In terms of performance, he said urban locations such as Mexico City; Santiago, Chile; Bogota, Columbia; and Panama City are the ones that have suffered most without international travel.

“We are seeing some good trends on the resort side,” he said. “We did a survey in August … which shows that 76% of the customers or clients are dreaming for a beach destination in the fall, 59% are willing to take an international flight if travel restrictions are lifted. I think that’s the immediate need.”

However, business travel will be the critical component. De Kousemaeker noted the speed of recovery for corporate travel is uncertain as companies are largely working remote.

Ultimately, he feels it will be hard for businesses to maintain productivity with just video conferencing and there will be that need for face-to-face interaction.

Joel Eisemann, chief development officer, the Americas, at InterContinental Hotels Group, said there needs to be a willingness from people to travel but noted comfort levels will vary. He added that certain countries, regions and cities still have restrictions on the size of groups that can meet.

Cost control, support to owners
De Kousemaeker said Marriott did not have a one-size-fits-all financial model it followed at the onset of the pandemic. It depended on government regulations, the ability to right size the operation and each individual owners’ financial situations.

Marriott did not impose the decision on whether owners were to open or close its hotels but advised them based on its short-term projections.

“The financial situation of each owner is very different,” he said. “There’s also a difference in types of properties. Select-service hotels or economy-tier hotels have a leaner operation.”

Marriott has a pipeline of about 135 hotels, 83 of which are under construction “and we’ve not seen meaningful requests for cancellations. Many owners are asking for extensions but no cancellations yet,” he said.

It’s crucial to be partners with owners and franchisees, he said. Marriott worked aggressively to reduce system costs for its managed and franchise hotels to an extent it has never done before. It’s important not only to reduce them in the short term but keep those costs down for a continued period, he said.

“(Marriott) is reducing the cost burden to a level that is consistent with the level of reduced revenues, ultimately to align ourselves as best as possible with our owners,” he said.

Examples of what Marriott has done include reducing shared services costs, waiving FF&E reserves and deferring renovations, he said.

Brian King, president of Marriott’s Caribbean and Latin America region, said during a keynote session that Marriott is always looking for efficiencies in operations and is examining, especially now, which programs are driving real, meaningful value to assets.

“Currently, today, everything shifted. It was the tectonic change of the plates of earth basically. We had to look at every single program that we had … and say are there ways that we can take the cost down, but simultaneously are we doing everything humanly possible to capture the little bit of demand that’s out there,” he said.

King said Marriott operates and franchises more than 272 hotels in the Caribbean and Latin America, or about 56,000 rooms, and sees a big opportunity for growth there in the future.

Marriott operates 20 out of its 30 brands in the region, and there are 132 hotels in the current pipeline, he said.

In terms of projects that were in mid-development when the pandemic hit, King said progress depended deal by deal and Marriott is working closely with its owners who may be in a different situation now than when they began construction.

“Many have continued down the path that they have,” he said, adding that Marriott has already opened nine hotels in the region this year during the pandemic, including an AC-branded hotel in Santiago, Chile.

King said that indicates people are looking to the future and want to keep deals moving forward.

Performance overview
Data presented by Patricia Boo, area director, Central & South America at STR, and Rico Louw, senior client account manager, North America, at STR, showed a glimpse into how the region is faring.

(STR is the parent company of Hotel News Now.)

STR looked at the percentage of rooms that were closed due to the pandemic across the region (data as of 1 October). Boo said Chile was one country that was hit the hardest, with up to 80% of rooms closed. On average, most countries had 50% to 60% of rooms closed, she said.

“The key takeaway here is that it’s not just that a large number of rooms closed but for a longer period of time … we’re looking at many months, three to four months closures for the majority of the countries, some of them went in to the fifth and the sixth month and we still have some hotels that are due to open as we speak here in October,” Boo said.

Louw said of the hotels in the U.S. that have opened, they have gradually opened to full capacity and are “fighting for that current demand,” scraping 50% occupancy.

Weekly data ending 26 September and representing open hotels in the region show Peru and Chile recorded much higher occupancy than in the rest of the region, she said. This is due to demand from government initiatives.

Boo said Brazil and Mexico, two of the biggest economies in Latin America, are trending the same.

Louw said Mexico is being cautious as it reopens and has understood now that leisure demand is the “forefront of the recovery … but as the big cities, as the try to open up, there is really no business demand.”

Within the Caribbean, he said there’s a been a wide mix in terms of how each country has handled the pandemic.

Boo said some of the lowest occupancies seen in South America were in Colombia, Argentina and Costa Rica, as they held much longer periods of lockdowns. Occupancies were even below the 10% mark. In September, there was a slight spike in occupancy when restrictions eased and that trend is expected to follow in October.

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