|Arturo Garcia Rosa, president of HVS Argentina, discusses South America’s hot markets for hotel investment.
LIMA, Peru—Take an emerging group of middle-class domestic travelers, toss in increased global traffic and pile on favorable government regulations, and you’ve got several markets across South America ripe for hotel investment.
Experts at the South American Hotel and Tourism Investment Conference at the Westin Hotel and Convention Center in Lima, Peru, spent two days identifying the best markets and inviting deep-pocketed investors to capitalize on the opportunities.
Two coastal cities in Brazil—Sao Paulo and Rio de Janeiro—continue to dominate conversation. Both cities can be viewed as business hubs for the entire region, with automotive-industry business creating high business-traveler demand.
While occupancy growth has stabilized recently, hoteliers in each city continue to successfully grow rate. Average daily rates in Sao Paulo are approaching $300, said Arturo Garcia Rosa, president of HVS Argentina.
While luxury developers have avoided most of South America, experts said many upscale hotels in Sao Paulo can be considered luxury because of the rates they garner.
“Sao Paulo is already a luxury market with the upper-upscale product because they’re charging more than $300 ADR,” said Francesco Cefalu, development director for Hilton Worldwide.
Performance metrics in Rio de Janeiro continue to impress, according to HVS. Rates have increased during the past six months, recently setting records at more than $350.
Political change in Chile—led by the election of Sebastián Piñera in March 2010—has paved the way for outside investment into the country. Chile is classified by the World Bank as an upper-middle-income developing country, and Piñera has implemented trade agreements with nearly 60 countries, including a free trade agreement with the United States.
Santiago remains the safest place for investment in Chile, and hotel rates in Santiago have risen to more than $200 for the first time ever, HVS’ Rosa said.
Colombia has grown from 600,000 annual visitors 10 years ago to more than 10 million today, according to Juliana Gomez Pelaez, executive director of foreign investment for Proexport Colombia. She said the country has eight cities with more than 500,000 inhabitants.
“When you think of Colombia, you don’t have to go to Bogota to find room for full-service hotels or niche hotels,” Pelaez said. “Other coastal cities, such as Santa Marta, have room for resorts and corporate hotels.”
Room supply in Bogota continues to grow, with standout projects such as the W Bogota, the Wyndham Bogota and the Grand Hyatt Bogota.
“In Bogota and Buenos Aires, luxury will work,” Hilton’s Cefalu said. “There are other markets that justify investment with their rates, and it’s coming in the next years. I’m not sure it’s here yet.”
Cartagena, Colombia, is also a popular coastal destination, but many experts predicted an oversupply problem as there is a vast number of hotels under construction in the city.
The flow of tourism to Peru is increasing dramatically, experts from the region said. The government is allocating more resources to capitalize on inbound tourists, said Claudia Cornejo Mohme, vice minister of tourism for Peru’s Ministry of Foreign Trade and Tourism.
“The government is working to promote tourism because we know it’s an activity that creates job enormously and also brings investment into the region,” she said.
Hotels in Lima, Peru’s capital city, continue to report steady occupancy with increasing rates, Rosa said. ADR, he said, has eclipsed $200.
“We believe this will continue increasing over last year,” Rosa said. “Peru’s economy is one of the strongest economies around the region and growing significantly.”
There is a long list of hotels under development in Lima, highlighted by a Hilton Hotels & Resorts property in the Miraflores district, according to HVS.
Cusco, at the base of the mountains where tourists depart for Machu Picchu, is growing significantly in terms of hotel supply and demand. Luxury and upper-upscale occupancy in Cusco has surpassed 50% and rates are above $200, Rosa said.
Orient-Express was one of the first brands to have a presence in Peru, partnering in 1999 with a local developer to build a hotel in Cusco. Since then, demand at Orient-Express hotels in Peru has grown 10% per year, said Regional Managing Director Laurent Carrasset.
Today, Orient-Express Hotels Limited has five hotels in the country.
“We want to keep growing around Peru and South America, but particularly in Peru,” Carrasset said. “There are so many places we can offer luxury tourism and so many places people want to get to know.”