Insights on South America's Hotel Development Boom

In the past year, several U.S. hotel chains, including Best Western, Hilton Worldwide, InterContinental Hotels Group and Starwood Hotels & Resorts Worldwide, have announced major expansion plans for Latin America, and in particular, South America. So it was no surprise when Portsmouth, N.H.-based Lodging Econometrics released its Spring 2014 Latin America Lodging Real Estate Trends Executive Summary and found that the region's construction pipeline was at an all-time high with 788 projects, representing 127,550 rooms -- a 14 percent increase over 2013, and a 74 percent increase over the same quarter in 2010.

This September, the seventh annual South American Hotel & Tourism Investment Conference is expected to draw a record number of delegates to the host city of Quito, Ecuador. For an inside perspective on how the Latin American hotel landscape is changing and which homegrown brands are expanding their footprint​​​​, I spoke with Arturo Garcia Rosa, president of SAHIC; we chatted just days after he returned from last month's New York University International Hospitality Industry Investment Conference held at the New York Marriott Marquis in Times Square.

Which Latin American markets have seen the most growth in the last three years?
Chile is one of the fastest growing markets -- tourist arrivals have doubled from 1,785,024 in 2004 to 3,576,204 in 2013. Colombia, too, has doubled its tourist arrivals. And Peru has shown significant growth. Remarkably, all these countries were able to maintain positive growth even in 2008 and 2009, when the region suffered the impact of the international financial crisis and the H1N1 flu.

There was much talk in hotel circles that Brazil did not get as much new product as expected in 2014. What is your perception of the country's hotel pipeline, especially as we look ahead to the 2016 Olympics?
Brazil has the strongest pipeline in South America, with nearly 401 hotels -- 68,000 rooms -- currently under development. Rio and Sao Paulo remain very desirable locations for developers, but limited land is available. A considerable number of projects in the pipeline cater to the midscale segment and are being developed in secondary and tertiary cities. While the FIFA World Cup and the Olympic Games have influenced the development of some hotels, additions to the pipeline also are taking into consideration what the market will look like after those events, which are short in comparison to a hotel's life.

Which Latin American hotel chains are poised for expansion?
Intursa is a Peruvian hotel chain that has grown in recent years, operating hotels under the Libertador and Westin brands and Strarwood's Luxury Collection. Los Portales, Casa Andina and Costa del Sol are other Peruvian brands with significant presence and expansion plans within that country. The Atton chain has grown strongly in recent years, starting in Chile and Peru and expanding to Miami. In Argentina, Fen Hotels, which has properties in Buenos Aires and surrounding provinces, as well as in Paraguay and Peru, has had the greatest growth rate.

What emerging destinations in South America are drawing investment interest?
Lima, Peru; Santiago, Chile; and Bogota, Colombia, are receiving the greatest interest for potential investments. In recent years there has been a growing interest in Bolivia, particularly Santa Cruz de la Sierra, as well as Ecuador and Paraguay.

Are the tourism bureaus of this region working to market their countries as a destination, and if so, how closely are they working with their hotel partners to do this?
Indeed. This began a few years ago and has gradually become stronger. There is a strong interest from the public and private sectors to attract tourist and groups, and hoteliers work closely with the various bureaus and organizations within their country to promote tourism. However, there is still a long way to go.

What new facilities have been developed specifically to attract group business to the area?
There have been several recent hotel openings with major meeting facilities. For instance, the W Santiago in Chile, the Westin Lima in Peru and the JW Marriott Hotel Bogota in Colombia. Cartagena, Colombia, is definitely the South American city that has more major projects with convention facilities; several international hotel brands are planning developments in the city's Bocagrande area, as well as farther north. These will help to consolidate the city as a destination for conferences and conventions.