The mindset, but not the appetite, has changed for hotel development in Latin America

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PANAMA CITY – It’s more expensive than ever to build a new hotel, but that hasn’t dampened the appetite for new developments in Latin America, according to speakers at the SAHIC Latin America and Caribbean conference.

Speaking at the “Driving and Sustaining Growth during Challenging Times in Latin America” ​​panel, Salo Smaletz, vice president of Latin America development for IHG Hotels & Resorts, said he expects costs to normalize and investor appetite remains strong.

“It’s getting more expensive to expand because of the rising costs and the supply chain factor,” he said. “That in turn means delays, which means empty halls for longer periods of time. But I don’t think that will last forever.”

Bojan Kumer, regional vice president of hotel development in the Caribbean and South America for Marriott International, said the combination of factors is driving more hotel investors to convert or even renovate their existing properties to better compete in the market. .

“Over the past 12 months, we have completed approximately 40 property improvement plans and have converted 27 hotels,” he said. “Of all the hotels we signed in 2021, around 59% were conversions. And we focused much more on the leisure and all-inclusive market. Around 49% were in the all-inclusive segment.”

Diana Sierra, new head of business development for Accor, said that to ensure strong development pipelines, brands have had to streamline their operations to counter the higher capital costs needed to start a project.

“One of the biggest changes is the mindset we’re seeing on hotel profitability,” she said. “Before, we only thought of rooms. Now we think of square meters. We had empty spaces for so many months that we started to think of new ideas to increase income and reduce losses for new owners.”

The focus on profitability should be a boon for hotel investments in Latin America, as the region benefits from low base costs and high rates, Kumer said. He added that upscale resorts on Colombia’s northern coast are uniquely positioned to benefit from this trend.

However, it remains unclear exactly how the trajectory of the broader economy will impact the hotel recovery.

“We know inflation is going up and interest rates are going to go up, so financing is going to be more expensive,” Kumer said.

Smaletz said the biggest growth opportunity for his business in the region is to develop a presence in the all-inclusive resort segment.

Kumer also counted Marriott among major international brands looking to expand its presence at all-inclusive resorts in Latin America and the Caribbean. To that end, Marriott purchased Elegant Hotels Group‘s portfolio of all-inclusive resorts in Barbados in 2019, which it says kickstarted its growth in the space.

“We have grown organically in a few other markets in Mexico and the Caribbean,” he said. “And today, two and a half years later, we have 30 open doors [all-inclusive] hotels, then 17 or 18 others in preparation.”

Similarly, Sierra said Acccor is focused on high-end luxury and lifestyle properties.

“This is where you can incorporate leisure [demand with] growing markets and you can provide local experiences for people living in cities,” she said. “We used to forget these people.

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