RIO DE JANEIRO—As economists forecast Brazil’s worst recession since 1901, hoteliers have made preparations to accommodate international visitors for the upcoming 2016 Summer Olympics here, particularly the Barra da Tijuca neighborhood, with a number of new developments. However, the country’s current economic scenario remains a growing concern for the future of the market after the Games of the XXXI Olympiad conclude.
The heart of Barra da Tijuca will host the Rio 2016 Olympics in August and then the Paralympic Games in September. The area is located in the western portion of Rio de Janeiro along the Atlantic Ocean. Prior to the ceremonial opening of the Olympic Games, a number of new hotels will debut in the neighborhood and elsewhere in the metropolitan area of Rio de Janeiro, the second largest city in Brazil and sixth largest city in the Americas.
Before the start of the 2016 Summer Olympics, InterContinental Hotels Group (IHG) plans to open the Holiday Inn Rio de Janeiro Porto Maravilha and Holiday Inn Express Rio de Janeiro Porto Maravilha. Hyatt Hotels Corporation plans to open the Grand Hyatt Rio de Janeiro in early 2016. Currently operating 27 hotels and 5,180 rooms in Rio de Janeiro, AccorHotels is scheduled to add four more hotels in the city from the ibis, Novotel and ibis budget brands.
Specifically in Barra da Tijuca, Trump Hotel Rio de Janeiro, scheduled to open this year, will be located in the Jardim Oceanico subdistrict of the neighborhood. AC Hotels by Marriott Rio Barra de Tijuca, Brazil is also slated open in June. Hilton Worldwide already opened the Hilton Barra Rio de Janeiro last year. In Barra da Tijuca alone, AccorHotels has six hotels.
As of the third quarter of 2015, Rio de Janeiro’s overall pipeline consisted of 48 projects with 9,954 rooms, according to Lodging Econometrics. There are currently 37 projects with 8,205 rooms under construction, and two projects with 400 rooms starting within 2016. Additionally, there are nine projects with 1,349 rooms in the early planning stages.
The additional inventory of guestrooms in Rio de Janeiro has raised concern among hotel industry observers. “Most of the new supply is not in Rio de Janeiro like Copacabana or Ipanema but in Barra da Tijuca, which is located one hour outside of Rio,” said Arturo García Rosa, president and founder of the South American Hotel & Tourism Investment Conference (SAHIC). “Travelers generally prefer Copacabana and Ipanema.”
SAHIC examined the future challenges of Rio’s lodging landscape during a general session at its most recent conference in September 2015 held in Lima, Peru. Rosa indicated that Barra da Tijuca would need additional key drivers for business travel, specifically for convention and meeting business, in order to sustain occupancy once the Olympics end. He added that the hotel occupancy in Rio was already declining in 2015 compared to the same period last year.
Recent data from STR Global indicated a steady decline in Rio’s occupancy, ADR and RevPAR over the past year. Occupancy reached 64.5% in November YTD 2015, compared to 72.6% in 2014, 75.3% in 2013 and 77% in 2012. ADR went down from $230.23 in 2014 to $140.55 in November YTD 2015, and RevPAR declined from $167.13 in 2014 to $90.61 in November YTD 2015. (These figures were converted to U.S. dollars from Brazilian reais.)
During the 2015 Expedia Partner Conference in Las Vegas, the company’s CFO, Mark Okerstrom, addressed the current situation in Brazil, where the consumer confidence rating is 79—down 21.8%. He did, however, list a number of international destinations in which year-on-year growth rate of bookings for 2016 have increased, and Rio de Janeiro is up 230%.
The Rio Convention & Visitors Bureau anticipates the Olympic Games to serve as a catalyst for a tourism boom to the city. Accessibility from the U.S., Canada, Australia and Japan, as well as the privatization of Rio’s airports, represent key drivers fueling business and leisure travel to the city, according to Michael Nagy, director of the Rio Convention & Visitors Bureau.
Providing lodging accommodations in time for the Summer Olympic Games was critical but, for some global hotel chains, Rio 2016 also signified an opportunity to expand its global presence. According to Tom Potter, SVP, Latin America and the Caribbean, for Hilton Worldwide, the number of guestrooms will double in Rio de Janeiro vs. the period prior to the FIFA World Cup held in the summer of 2014.
“Hilton’s desire to have a presence in Rio de Janeiro extends beyond the Games, as we recognize it’s important to offer our loyal guests a home in one of the most visited cities in South America for both business and leisure,” said Potter. “The Olympic Games are certainly the largest existing event there is, and they opened doors for the construction of new hotels, refreshing the hospitality market in Rio.”
Despite the economic and political turmoil, Vert Hotéis, a hotel development company based in Brazil, remains optimistic toward the future. As Wyndham Hotel Group’s partner in Brazil, the company plans to open a new Ramada Encore hotel in Rio de Janeiro this year.
“We believe things will be better in 2016,” said Bruno Guimarães, director of marketing, Vert Hotéis. “I’m seeing a positive change in Rio. I believe the quality and quantity of hotels is better than it was before, and we can support large events such as the Olympics.” HB