Trends in the Latin American Hospitality Industry You Need to Know

Trends in the Latin American Hospitality Industry You Need to Know

Recent years have seen Latin America encounter a number of challenges. Factors such as government corruption, a decrease in the value of commodities, and high inflation have gripped parts of the region, resulting in slow economic growth. In response, the Latin American people have begun to elect more business-friendly political leaders. This news, combined with the region becoming an increasingly popular tourist destination, has led some observers to express bullishness about the direction of the hospital industry.

Concerns remain, however, regarding issues including insufficient financing options, market instability, and potential interest rate hikes. For the region’s hospitality professionals, understanding these ever-changing developments is vital in order to achieve success. With these individuals in mind, here are some recent industry trends:

 

2017 Year-End Results for Hotels Mostly Positive, with Some Caveats

According to a 2017 Global Performance Review conducted on behalf of hotelnewsresource.com by STR, across Central and South America, hotels saw modest year-over-year increases in the key performance metrics of occupancy, average daily rate (ADR), and revenue per available room (RevPAR). Argentina experienced the greatest improvements of any single country, with occupancy growing by 9.7 percent, ADR expanding by 18.9 percent, and RevPAR rising by 30.4 percent.

Elsewhere, Colombia recorded flat performance for the year, as occupancy increased slightly while ADR fell at the same rate. Following the 2016 Summer Olympics, Brazil experienced a more than 12 percent drop in both ADR and RevPAR. Brazil did enjoy small gains in occupancy, however, and areas of the country outside of Rio de Janeiro began to show signs of economic recovery.

To the north in Mexico, while occupancy improved at a rate less than a quarter of that seen in Central and South America, ADR and RevPAR came in significantly higher. Owing in part to US demand stemming from a weakened peso, ADR rose by 6 percent and RevPAR increased by 6.4 percent. Within the country, the Yucatan Peninsula enjoyed the greatest expansion in occupancy, while Central Mexico recorded double-digit growth in RevPAR.

 

hotel
Image by World Bank | Flickr

 

Construction Rates Fall, but Hospitality Brands Continue to Invest

The total number of hotels in the construction pipeline and the total numbers of hotels currently under construction experienced year-over-year declines. Also down are the total number of hotels on which construction is scheduled to begin over the next year. These numbers, which come via Lodging Econometrics, were reported in February of 2018.

Despite the slowed pace of construction, hospitality brands are still showing interest in the Latin American market. From June of 2016 to June of 2017, Hilton signed around 30 new deals, pushing its portfolio in the region to more than 100 hotels. Currently, the hospitably brand has over 70 projects in its Latin American construction pipeline.

Other brands active in the region include SBE, which in October of 2017 announced the signing of licensing and management agreements for properties in Mexico, Uruguay, and Argentina. In addition, Dream Hotel Group revealed at the beginning of 2018 that it plans to open a trio of hotels in Mexico and Belize.

 

Meeting Industry Eyes Midscale Hotels, New Markets

According to one meeting industry publication, event organizers are not necessarily looking to schedule meetings at luxury hotels. Instead, they are interested in venues that can offer enhanced Wi-Fi, higher-quality food and beverage options, and greater flexibility in other services. This trend, which comes as a result of rising hotel and airfare costs, presents an opportunity for midscale venues. In fact, these hotels have already been experiencing increased demand from the meeting industry.

Hotels outside of certain major markets may also begin to find themselves with additional opportunities for attracting events. This news comes as Rio de Janeiro, which ranked as the second-most popular regional meeting destination in 2017, experiences security concerns that experts predict will limit its attraction to event organizers. Meanwhile, Sao Paulo, which ranked first, could be affected by Brazil’s overall weakened economy.

Better news is to be had in Colombia, where major hotel developments and refurbishments have raised the country’s profile as a meeting destination, particularly among Americans. Bogota finished third on the list of most-popular meeting destinations in 2017, while Medellin and the coffee region have improved their prospects as event hosts.

Other rising Latin American meeting destinations include lesser-known locations like Iguazu Falls (on the border of Argentina and Brazil) and the Atacama Desert in Chile. While major cities will still attract many events, these off-the-beaten path locales have become more prominent on the radar of meeting organizers.

 

hotel room
Image by Wally Gobetz | Flickr

 

The Effect, or Lack Thereof, of Airbnb

Airbnb’s fastest-growing market, Latin America, is home to approximately 250,000 of the company’s properties. One might think that, given this expansion, most hotel owners across Latin America would view Airbnb as an existential threat to their businesses. A May 2017 survey suggests otherwise.

Administered by Ernst & Young (EY) at the company’s Mexico City Hospitality Roundtable, the survey found that 27 percent of hospitality professionals consider Airbnb and the sharing economy as a whole as being “not a threat” to their properties. Meanwhile, 55 percent of hospitality professionals consider the sharing economy as only a “somewhat significant” threat. None of those surveyed believe the threat of the sharing economy to be “significant,” while only 9 percent view it as “very significant.”

Hotel owners acknowledge that today’s tourists desire unique experiences when traveling. To accommodate these modern travelers, hotels should work to provide interesting options for guests. One example of this is social activities. In the EY survey, nearly a third of respondents believe this particular type of offering is key in attracting millennial travelers, specifically.