CARTAGENA DE INDIAS, Colombia—Welcome to the hotel development spotlight, South America.
During last week’s South American Hotel & Tourism Investment Conference, hoteliers admitted South America historically hasn’t exactly been a development focus.
But there are signs that might be about to change.
Hilton Worldwide, for one, currently has 13 hotels comprising approximately 3,400 rooms on the continent, said Ted Middleton, senior VP of hotel development and finance for the Americas.
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| Ted Middleton of Hilton Worldwide takes part in the panel “A View from the Top—Hotel Leaders Hard Talk” at SAHIC last week. |
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The company has an additional seven hotels under development, representing 1,250 rooms, he said. Hilton is focusing on markets in Argentina, Brazil, Colombia, Chile, and Peru. Its goal is ambitious: 150 hotels within five years.
Hilton is not going to get to that goal by converting or building individual hotels, he said.
“We’ve got to develop strategic alliances,” Middleton said, “multiple properties with individual owners.”
Middleton cited largely strong gross-domestic-product increases, and growth in both the South American middle class and intra-country travel as reasons for the company’s interest.
Marriott’s perspective
Marriott International also is bullish on the region, said Laurent de Kousemaeker, chief development officer for the Caribbean and Latin American Region for Marriott and Ritz-Carlton.
The company has 15 hotel projects in the South American development pipeline.
“South America has been a recent focus,” he said during a break at SAHIC. As travel to Mexico and the Caribbean has softened during the past two years, South America has become more of a focus, he added.
One example of its South American focus: Marriott wants to roll out a limited-service brand in Brazil within five years, he said. As Brazil is essentially a continent itself, the market has caught hoteliers’ eyes.
Marriott’s closer look at South America stems in part from the improving economic outlook in the country.
“There are millions of Brazilians moving from one class to another,” he said. “When you think about 20 million people, that’s a huge market.”
Middleton shared similar sentiment on the economic assessment. Gross domestic product is largely on the upswing in the countries Hilton is targeting.
“Colombia has the lowest GDP growth, but the others have a 5-7% growth rate in GDP,” Middleton said. “The economy is strong and people like brands.”
Marriott has a dual-pronged strategy: Grow with existing owners and, like Hilton, strike multi-property deals with other owners.
Brand resistance
While brands appear to do well in the region, one potential challenge in developing South America is that U.S. brands are something of an unknown quantity there, development experts said during SAHIC.
“You can’t go in with the mindset: ‘I’m Marriott. Who wants to roll out hotels for me?’” de Kousemaeker said.
“In Brazil, all the U.S. brands want to penetrate the market and no one’s really been successful,” he added.
The key to overcoming that brand apprehension, he said, is to be aggressive in explaining the brand’s story and what the brand is all about.
Still, with the proper due diligence, de Kousemaeker believes U.S. brands can thrive in South America. “There’s a clear demand for branded hotels,” he said.
