QUITO, ECUADOR—For the hotel real estate and investment community seeking to capitalize in the region, this year’s South American Hotel & Tourism Investment Conference (SAHIC) represented new opportunities and markets to explore for potential developments. More than 300 delegates from about 30 countries attended the conference, which was held at JW Marriott Quito in Ecuador’s capital city from Sept. 15 to 16.
Observing the changing demographics throughout the continent, Arturo García Rosa, president and founder of SAHIC, noted that the new generation of Latin American travelers are following U.S. and European travel trends. Traveling for shorter periods of time throughout the year for business, leisure or a combination of both; utilizing the Internet for booking; and taking part in more interregional travel within Latin America define today’s South American traveler.
Additionally, the rising middle class in South America has signaled a demand for midscale hotel products. According to Rosa, 44% of the new projects underway in South America are focused on the mid-market segment, offering more opportunities than the luxury or upper-upscale segments. Select-service brands such as Hilton Garden Inn, Holiday Inn, Hyatt Place and Courtyard by Marriott present opportunities to fill a gap in gateway and secondary cities.
“I’ve been in the industry for the last 35 years,” said Rosa. “The big change that I’ve seen in the last several years is there were three brands—Accor, Starwood and IHG—that had a big presence in South America. Now, all the brands have a strong presence. More and more, they understood the opportunities of the markets, and the brands hired bilingual [representatives]in Latin America.”
Rosa shared his observations regarding increased interest for new developments in secondary and tertiary cities throughout the region, as well as more transactions reflecting the maturity process. In particular, he foresees opportunities, especially for select-service brands, in Colombia, Peru and Chile due to these countries’ healthy economies. In Colombia, new properties are arriving in Cartagena and Bogota. W Bogota will open at the end of this year. IHG plans to introduce a 287-room InterContinental hotel in Cartagena during the first quarter of 2015.
Several executives from the top global chains gave their insight into the growing middle class in South America, presenting opportunities for their midscale brands. In particular, Joel Eisemann, chief development officer of the Americas, IHG, emphasized the importance of building relationships with local partners who better understand the needs of the market. IHG’s key strategy for development in Latin America is centered on location and matching the right product with the consumer.
IHG has 213 hotels and more than 37,166 rooms in Mexico, Central and South America and the Caribbean. The company’s roots began in Latin America, when the first InterContinental hotel opened in Belem, Brazil, in 1946. IHG continues to capitalize on the region and is currently exploring opportunities in Mexico, Colombia and Brazil.
“We are very committed to the Latin American region,” said Eisemann. “Our roots in Latin America are very deep and over an extended period of time. We view Latin America as an important part of our strategy. We work with local development teams that understand the markets.”
Paulo Pena, SVP and managing director of Latin America, Wyndham Hotel Group, credits his company’s aggressive expansion to aligning with the partners based in various South American markets. With more than 120 hotels in the pipeline throughout the region, Wyndham has partnerships with companies such as Ecuadorian-based Pronobis, Colombian-based Oxo Hotels and Brazilian-based Latin Hotels. “Working with local partners is the right approach for us in Latin America,” Pena added.
As an example of forming a successful partnership, Wyndham announced during SAHIC the signing of a franchise agreement for the Wyndham Quito Airport Grand Condor—the first Wyndham Hotels and Resorts property in the city. The full-service, 146-room property, which is owned by Pronobis, is the only hotel on the new international airport grounds. It is part of an existing deal to develop and franchise eight hotels in the country under Wyndham Hotel Group brands over 10 years.
According to Carlson, the brand has found success in Brazil as a result of its partnerships to develop master licensing agreements, said COO David Berg. The company is planning to duplicate this model with a pending agreement in Chile for a multi-unit partnership with the midscale Park Inn by Radisson, and in other countries as well, Berg added.
From a geographic perspective, Carlson is paying close attention to the midscale market because of the growth of the middle class in South America, and initiatives are geared with plans for Chile, Colombia, Brazil, Mexico and Peru. Berg stated the new Radisson Red, a lifestyle select brand catering to the Millennial guest, would also be a focus for the region.
Accor, which operates 3,600 hotels and 470,000 rooms around the world, maintains a strong foothold in South America. While the company is present in more than 92 countries, Brazil is Accor’s third-highest market. Joining the existing 230 hotels, Accor plans to operate 170 additional new hotels, secured in the pipeline, for South America by the end of 2018, noted Roland de Bonadona, COO, Accor Americas. By the end of this year, the company will open 35 hotels, with 5,000 rooms in South America alone. “This number is going up year after year,” said de Bonadona. “Last year, we opened 13 properties, and next year will be more.”
Compared to developing new projects in the rest of the world, financing remains a challenge in South America. “In North America, Europe, Asia or Mexico, you can obtain financing from commercial banks with good rates,” said de Bonadona. “But this is hard to find in South America. In countries such as Brazil, it’s almost impossible to find financing from a commercial bank at a reasonable rate. We have to work with all forms of development, and many times the hotels are financed with 100% equity.”
Jorge Giannattasio, SVP and chief of Latin America operations, Starwood Hotels & Resorts Worldwide, also noted the challenges to develop new product in the Brazilian market due to land costs and interest rates. Aside from Brazil, Mexico continues to lead the Latin American region in terms of expansion.
Starwood operates 80 hotels in Latin America, with 17 additional properties under development. The company continues its aggressive growth strategy in Latin America with significant gains across its specialty select brands, which include Four Points by Sheraton and Aloft. This category is slated to expand by 60% in the next three years. “Four Points is riding a swell of growth in the region, thanks to its ‘best for business approach,’” said Osvaldo Librizzi, co-president, Starwood Hotels & Resorts Worldwide, Inc., Americas.
Further capitalizing on the market, Hilton Worldwide plans to open nearly 40 hotels and resorts in Latin America by the end of 2016, increasing its portfolio in the region by approximately 60% within the next two years. As of the second quarter of 2014, Hilton Worldwide had nearly 12,000 rooms at 62 hotels and resorts throughout Latin America.
Ted Middleton, SVP of development of The Americas, Hilton Worldwide, stated that 75% of this new development is with the Hilton Garden Inn and Hampton by Hilton brands. The company, which has a number of management and franchise agreements in the works, recently signed a new strategic development agreement in Chile to bring a number of Hampton hotels to the country. “We expect to see ongoing, continued growth in Latin America,” Middleton added.
Delivering the conference’s keynote address, Eric Danziger, president and CEO of Hampshire Hotels Management LLC, discussed his humble beginnings in the industry and his strategy for building successful global hotel chains: “My recipe for creating a great hotel company is very simple. A great company should create a great strategy, hire great people and execute that strategy.”
Immediately following his address, Danziger was awarded the SAHIC Inspirational Hospitality Icon Award 2014.
Quito, SAHIC’s host city, has seen a significant increase in tourism. Mayor Mauricio Rodas Espinel underscored the city’s potential as a top tourism destination in the world and advocated for increased hotel investments. Founded in the 16th century on the ruins of an Inca city, Quito first gained global recognition in 1978 when the United Nations Educational, Scientific and Cultural Organization (UNESCO) declared the city as a Prime World Heritage Site for its diverse architecture, culture, nature and the richness of its historic center.
Further spurring growth in the region, the opening of Quito’s Mariscal Sucre International Airport in 2013 is already helping the city reach its goal of one million visitors by 2018. In 2013, Quito had over 628,958 international visitors—representing a growth of 14% compared to 2012—spending approximately $332 million, noted Luz Elena Coloma, general manager of Quito Turismo.