Fundamentals of industry ‘interrupted not broken’
Fundamentals of industry ‘interrupted not broken’
08 OCTOBER 2020 7:36 AM

Though the travel industry has been interrupted, there are still several opportunities for growth in the Caribbean and Latin America region, according to hotel leaders, and the long-term outlook can be bright if stability and investment in infrastructure and public health align.

GLOBAL REPORT—From natural disasters to social and political unrest to the coronavirus pandemic, the Caribbean and Latin America region has had its share of challenges, but hoteliers say the region is full of opportunities in the long term.

Elie Maalouf, CEO, Americas, at InterContinental Hotels Group, speaking during a keynote session at the online 2020 South American Hotel Investment Conference, said he is hopeful despite 2020 being a difficult year.

“We’ve climbed back during the first stage of recovery after the depths of March and April and we built our business back throughout the summer,” Maalouf said.

Now, Maalouf said IHG is in the second stage of recovery, mostly bolstered by an extended leisure season and even some business travel, albeit still subdued. He said over 97% of its hotels in the Americas are open. About 30 of the company’s hotels in Latin America are still closed but are expected to reopen in the coming weeks, he added.

Maalouf said IHG’s recently opened Avid Hotel Fresnillo in Mexico is running at 65% occupancy, and the brand has 12 more Avid hotels signed and under various stages of development in Mexico.

“That to me is a testament that, one, of the spirit of the industry (and) two, to the trust of the relationships that we have with owners in Latin America,” he said.

Maalouf said growth continues despite the pandemic and people are looking beyond it. He anticipates new hotel openings to hit around 2022 and 2023 when things are expected to pick back up.

He said the fundamentals of the travel industry “have been interrupted this year but not broken.” Those fundamentals are the growth of GDP as well as the middle class around the world.

“Those fundamentals have not changed; they are what powered the growth of travel around the world for 50 years, and it’s going to continue post-COVID,” he said. “Within the Latin America region, we have some of the greatest destinations in the world by any dimension—ecological, historic, urban, cultural, artistic, dining—so it will always be a highly desired region.”

Maalouf said business and travel will prosper when there’s a combination of stability and investment in infrastructure and public health.

“We’re hopeful that those factors can come together in each country in Latin America and we can continue our trajectory,” Maalouf said. “Travel and tourism represents about 1 in 10 jobs globally. I think in Latin America it’s almost 2 in 10 jobs … so it’s fundamental, whether the recovery in Latin America or the continued prosperity in Latin America.”

Frances Gonzalez, VP of operations, Latin America, Radisson Hotel Group, said during the “Hotel leaders II: The moment of truth in the hospitality industry” session that her company has continued to sign deals during the pandemic.

Gonzalez said Radisson traditionally is corporate-centric, but they now see more of an opportunity for leisure through its Radisson Blu brand. Radisson Blu will welcome two new hotels in the Caribbean in the near future, she said.

“We have to look for more opportunities and there are a lot of them throughout the whole region to do more resorts and more leisure destinations than we have in the past,” she said.

She said having good partnerships, like the one Radisson has with Atlantica Hotels in Brazil, is key. Another key component to chasing opportunities is teaching and helping Radisson’s hotels find ways to attract more local demand.

“Normally they don’t need to (attract local demand) because they have all the international travelers to rely on,” Gonzalez said.

Ted Middleton, SVP of development, Latin America and the Caribbean, at Hilton, said he sees three areas of opportunities for his company over the next few years. Those areas include conversions, expanding in the all-inclusive space and rolling out its Tru brand next year.

“Tru will be a competitor with Ibis and Citi Express. It’s a product with a lower development cost than Hampton Inn and we think we will get a lot of traction with that brand,” he said.

David Tarr, SVP of real estate and development, Americas, at Hyatt Hotels Corporation, said his company is smaller than Hilton and Radisson, and Hyatt’s strategy has always been to be judicious with growth. Hyatt has about 40 hotels in the region, he said.

“We’re not pivoting our strategy at all. We’re continuing to focus on predominately leisure destinations for our resorts,” Tarr said. “With respect to commercial, urban destinations, we’re focused predominantly on the most stable and economically diverse markets in Mexico, particularly, and the Pacific Alliance countries.”

Family-owner perspective
Federico Stubbe Jr., president of Prisa Group, a family-owned developer of residential, resort, hospitality, gaming and entertainment projects in Puerto Rico and Florida, said his company has developed 10 hotels over the past eight years, opening one right before the pandemic hit.

During a keynote session, Stubbe said despite the challenges from an earthquake in January, hurricanes and a critical upcoming election, he feels Puerto Rico has a unique opportunity to use federal funds to reposition the destination.

He said about $40 billion to $50 billon in federal funds have already been committed to the island, with $20 billion of that being disaster relief.

“Part of what we’re spending a lot of our time with the government these days and the candidates for government is (proposing) we need to spend about $4.5 billion of that $20 billion in repositioning our economy (with) what we call the ‘Florida model,’” he said. “Bring people first as visitors, then sell them a home or second home, and they’ll eventually move and invest (here).”

He said this $4.5-billion investment proposal will require $500 million spent on demand generation for the destination, not just through its destination marketing organization, but also through Invest Puerto Rico and airlines. Another chunk of money would go toward improving infrastructure and financing mechanisms to facilitate private development, he said.

“We’ve gotten a lot of great feedback from the candidates and if we can get that done, if this government knows how to utilize and invest some of these funds—not 100%, 25%—into what we believe is a long-term sustainable development model, Puerto Rico is going to have a lot of opportunities coming together,” Stubbe said.

Stubbe added he sees opportunity investing in beach resorts and Green Communities.

“People are realizing that these open-space, nature-oriented, 50%-Green Communities is where you want to spend your time when you have these types of pandemics. It’s really brought a lot of value to the forefront of what it is to be surrounded by nature,” he said.

In the next five years, Stubbe feels if funds are well-invested, Puerto Rico will come out very strong from the series of crises over the past few years.

“I’m very optimistic about that,” he said. “Right now, we have so much hope for the island that I’m putting on pause expansion plans in the mainland (U.S.).”

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