SAO PAULO—Brazil’s lodging fundamentals remain positive as the country experienced a double-digit rise in average daily rates (ADR) and record revenue per available room (RevPAR) growth in 2011. Steady performance levels coupled with efficiencies in hotel operations led to record profits with a historic high of 36.5 percent gross operating performance for hotels, according to Jones Lang LaSalle Hotels’ annual, bi-lingual research study, Lodging Industry in Numbers – Brazil 2012.
Market fundamentals hit record highs
Brazil’s occupancy rate rose by 2.2 percent year-over-year in 2011, which is comparable to the real GDP growth rate for the year. The Brazilian hotel average occupancy ended the year near 70 percent. Additionally in 2011, Brazilian hotel owners and operators experienced accelerated growth of ADR by more than 17.2 percent in 2011 over 2010 levels, resulting in city hotels reporting record RevPAR growth of 20.5 percent.
For the first five months of 2012, occupancy rates are slightly lower than the same period 2011; however, ADR reported a high growth rate of 17.5 percent.
Investors eye Brazil
Global events, such as the FIFA Soccer World Cup in 2014 and the 2016 Summer Olympic Games in Rio de Janeiro, keep opportunistic investors eyeing the market. Both domestic and international buyers are taking note of the market’s progression as the foremost investment target in Latin America. Stellar performance and profit has made Brazilian hotels an attractive investment option featuring solid returns.
“Companies have already started jumping into the game, snatching up prime opportunities to acquire or develop in the region due to the consistent and on-going demand. Host Hotels & Resorts recently announced it plans to develop a 150-room Novotel hotel and a 255-room Ibis hotel in Rio de Janeiro one mile from where the Olympic Games will be hosted. Accor also acquired the South American portfolio of Grupo Posadas which comprises 11 hotels in Brazil,” said Ricardo Mader, Executive Vice President of Jones Lang LaSalle in Brazil.
Surge in demand, restricted supply pipeline
The Brazilian lodging industry’s healthy hotel performance remains underpinned by the imbalance between supply and demand. Brazil’s, nearly 10,000 hotels, represented by nearly 500,000 rooms, hosted more than 5.4 million international tourists in 2011, representing a rise of 5.8 percent year-over-year. Hotel supply growth is estimated at only 238 hotel projects in the next three years encompassing 38,854 rooms. Additionally, economic decentralization led to new development opportunities for hotels in cities where large infrastructure projects, such as mining, oil refineries and gas, are underway. These regions are target areas for investment, as they are underserved with adequate quality hotel stock.
“There is still great room for growth in Brazil’s hotel supply, especially outside of the major cities. Unlike past World Cup and Olympics host cities, we expect Sao Paulo and Rio de Janeiro to absorb supply additions more easily and maintain demand well past the games, given the cities’ deficiency in supply from the get-go,” added Manuela Gorni, Senior Vice President of Jones Lang LaSalle Hotels in Sao Paolo.
Brazil‘s stabilizing economy backs hotel market progress
Brazil was one of the first emerging markets to stage an economic recovery, and continued stabilization of the country’s economy bodes well for the lodging market. As the country’s per capita income continued growing, leisure travel increased and represented 21.3 percent of the market mix, second only to corporate travel. The resort segment recorded the strongest recovery in 2011, reaching 50 percent occupancy and total revenue per occupied room of R$683.
“Overall, the Brazil lodging industry fundamentals remain extremely positive for the future. The next five years, with an influx of visitors to the international games, are expected to boost the still under-developed transaction market, and push operating profits margins even further,” concluded Clay Dickinson, Executive Vice President for Jones Lang LaSalle Hotels and leader of the firm’s Strategic Advisory and Asset Management division in Latin America.
Jones Lang LaSalle Hotels in partnership with Brazil Forum of Hotel Operators launched its annual, bi-lingual research study, Lodging Industry in Numbers in 2010. The Brazilian hospitality market data compilation is the largest surveyed sample available in the region and includes more than 400 hotels, condo hotels and resorts and serves as a benchmarking tool for both domestic and foreign hotel investors and owners for use in feasibility studies for investments in Brazil and during the budgeting process for existing properties.
To request a copy of the report, visit www.joneslanglasallehotels.com or www.jllhss.com.