In its research report FocusOn: Strategic Spots for South American Hotel Investment, Jones Lang LaSalle Hotels has listed Bogota, Buenos Aires, Lima, and Santiago as strong emerging markets based on strong demand fundamentals and potential for investment-grade branded supply. Here’s an overview of each market:
Bogota, the main gateway to Colombia and the distribution hub for tourism within the country, is experiencing growing demand for hotels. In year-to-date July 2010, over the same prior-year period, RevPAR at Bogota hotels rose by 4 percent. Unlike Sao Paulo and Santiago, Bogota did not experience a significant amount of hotel construction during the past 15 years due to the country’s previous political instability. “This has now turned around with the addition of several new hotels,” says Clay Dickinson, executive vice president for Jones Lang LaSalle Hotels. “In addition, the stock of institutional-grade, 4- and 5-Star hotels is expected to grow by 37 percent between now and 2012, which creates a myriad of investment opportunities, including potential conversions and management contracts.”
Buenos Aires is the second largest metropolitan area in South America after Sao Paulo. “Though the hotel market experienced significant declines in performance in 2009, visitation trends and economic fundamentals are rebounding and investors continue to seek investments in Buenos Aires on a selective basis,” says Dickinson. “The city’s stock of institutional-grade, 4- and 5-Star hotels spans 14 hotels, encompassing approximately 3,200 rooms. This hotel segment is expected to grow to 3,800 rooms by 2014 with the opening of approximately five new hotels.” The small initial base of rooms will help keep this development pipeline from creating an oversupply.
Lima has seen a lesser degree of international hotel development and the market still lacks the depth of international hotel brands seen in Buenos Aires and Santiago. “Over the next three years, the city of close to 9 million is expected to see the addition of just three institutional-grade 4- and 5-Star hotels. Growth in operating fundamentals is expected to be sustained over the medium term as the city is not facing a boom in new supply,” says Liliana Ribeiro, vice president for Jones Lang LaSalle Hotels in Sao Paulo. As Lima continues to experience rising economic growth, there are still market opportunities for the development of new hotels across all categories. “Lima has virtually no representation of upscale branded select service hotels and this remains an investment opportunity,” Ribeiro adds.
Santiago has become a preferred destination for hotel investment due to the Chile’s relatively sophisticated capital markets. Santiago has often been the test market for the introduction of an international brand to South America. As such, the city comprises the highest number of international-grade, 4-and 5-Star hotel rooms of the four cities in the report. Due to the country’s stability and growth prospects, Santiago’s market will continue to support opportunities for the development of new hotels over the longer term.
