What CEOs think of the hotel industry in Latin America
 
What CEOs think of the hotel industry in Latin America
25 MAY 2018 7:04 AM

Speaking during the Hotel Opportunities Latin America conference, chief executives with various major hotel companies shared their insights on how the industry is faring in the region.

MIAMI—Latin America represents a wide geography with immense diversity in people and destinations. Likewise, the hotel industry in the region has a similarly diverse set of opportunities and challenges facing it.

During two “View from the boardroom” sessions at the recent Hotel Opportunities Latin America conference, top executives from hotel companies shared their insights on where there are possibilities for growth and where there are particularly high hurdles in the region.

Consolidation expected to continue
One of the most talked about news items during the conference was AccorHotels’ purchase of Chilean hotel company Atton Hoteles.

Patrick Mendes, CEO of South America for AccorHotels, said he expects his company to continue to pursue and acquire regional players, including management companies and brands with between 20 and 200 properties.

Bruce Wardinski, CEO of Playa Hotels & Resorts, said he expects deals to continue to be done, but especially in Latin American countries, those deals require a lot of legwork and patience to win the trust of family businesses that might be willing to sell. He cited a 2013 deal he did in Mexico as evidence of that approach.

“That was a relationship built over 10 years,” he said. “I understand the challenges you’d have with private family companies, but there are also tremendous opportunities.”

Cuba still represents an opportunity
A shift in U.S. policy has made possible development in Cuba less of a focus than in years prior, but executives speaking at HOLA said there is still considerable upside to developing in the country.

Companies like France-based AccorHotels or Mexico-based Grupo Posadas don’t face the same restrictions working in Cuba as their U.S.-based counterparts, and they could be poised to reap the benefits of having established footprints in the country if and when travel opens up between Cuba and the U.S.

Richard Weissmann, partner with KSL Capital Partners, said the Trump administration’s stance on Cuba has hurt U.S. companies’ incentives to establish a presence in Cuba. But he believes the country ultimately will be opened to U.S. travelers and could flourish—especially when the market is able to cater to affluent travelers.

“When they finally figure that out and get to that four-star level, I think Cuba is going to crush vast parts of the Caribbean,” he said. “It’s a short flight and has a lot to offer.”

Partnerships are key
Due to the various environments and regulations from country to country, executives stressed that working with strong local partners is vitally important to succeed in Latin America.

Ken Greene, president of the Americas for Radisson Hotel Group, pointed to his company’s relationship with Atlantica Hotels as vital for growth in Brazil.

“We’re focused on where it’s easier to do deals,” he said. “And Brazil is growing quickly (in part due to) our partner in Atlantica Hotels.”

Scale is an important driver to find domestic and regional travelers
Asked if international brands have a play in smaller Latin American markets, La Quinta Holdings President and CEO Keith Cline said it’s important for brands to reach critical mass as quickly as possible to grow brand recognition. He said lack of scale will always be a challenge, and that was one motivator for the sale of the brand’s franchise and management business to Wyndham Worldwide.

“Now it’s plugging into a network of 9,000 hotels as opposed to 900,” he said, noting the brand’s development team in Mexico was previously just one person and now will grow considerably as part of the Wyndham family.

Important to follow inbound guests
Executives said it’s important to follow where international travelers want to go when determining where to focus efforts, and that’s true not just geographically but in terms of segmentation.

“We want to be invested where our core demographic goes, and that’s the mass-affluent U.S. and European consumer or even affluent Mexican, Venezuelan or Chilean consumers,” KSL’s Weissmann said. “And they like to go to places that are established luxury destinations.”

NAFTA looms large
Grupo Posadas CEO José Carlos Azcárraga said he’s keeping an eye on what happens as Mexico, the U.S. and Canada renegotiate the North American Free Trade Agreement. All in all, he remains optimistic.

“I truly believe this deal is going to be done,” he said. “I don’t see another way for the three countries.”

He said he’s hopeful the end result will allow for more direct investment in Mexico, ultimately feeding into demand growth in places like Central Mexico, which is reliant on automotive manufacturing.

Latin America is poised to benefit from experiential travel boom
Azcárraga noted that, while platforms like Airbnb have built their brand around the idea of truly experiencing the culture around you while traveling, the hotel industry should be able to do exactly that as more international travelers head to a wider variety of Latin American destinations.

“We want you to experience not only our country or city but the specific neighborhood,” he said. “It’s about being local and understanding how locals live.”

He said this could be huge in countries like Mexico that have “a lot of cultural and gastronomic experiences.”

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