The Latin America hotel construction pipeline is at an all-time high with 783 projects/127,425 rooms. The project count has risen 73 percent from the cyclical low established in 2009.
Brazil continues to build for the upcoming Olympic Games and accounts for 49 percent of the Latin America pipeline with 380 projects/65,923 rooms. It experienced a slight year-over-year (YOY) decline due to a rush of new hotel openings exiting the pipeline in the first half of 2014 in preparation for the World Cup this past summer.
Mexico, with 152 projects/21,402 rooms, represents 19 percent of the pipeline and has posted sizable gains, up 30 percent by projects and 25 percent by rooms YOY, as the investment climate in Mexico continues to improve. Construction in Mexico is spread throughout the country with generally smaller, mid-market projects accounting for more than 60 percent of the country’s hotel construction.
Together, Brazil and Mexico represent a whopping 68 percent of Latin America pipeline projects. Major destinations in other South American countries expect to experience a ripple effect in tourism from the Olympic Games. Development in those countries is also on the rise, showing a 21-percent YOY pipeline increase.
Projects under construction are especially high with 396 projects/68,124 rooms in the ground, currently 51 percent of the total pipeline, and are up 20 percent YOY. Projects scheduled to start in the next 12 months, 179 projects/28,083 rooms, are up 10 percent YOY and early planning, 208 projects/31,218 rooms, is up 7 percent.
Brazilian Markets Dominate Hotel Construction in Latin America
Brazil is the world’s seventh-largest economy and has the third-largest construction pipeline. In Latin America, Brazil boasts 10 of the top-15 largest construction pipeline markets as well as the top-four markets. Rio de Janeiro leads with 43 projects/9,804 rooms followed by Sao Paulo with 31 projects/6,301 rooms, Campinas 28 projects/5,219 rooms and Belo Horizonte 16 projects/3,082 rooms.
Brazil spent many years ramping up development in advance of two world-class events: the 2014 World Cup this past summer and the Summer Olympics scheduled for Rio de Janeiro in 2016. Both events have provided a powerful stimulus for development growth throughout Brazil. Although most of the Olympic events will take place at venues in greater Rio de Janeiro, the popular soccer matches will also be played in several other Brazilian cities, including São Paulo and Belo Horizonte, which also hosted matches for the phenomenally successful World Cup.
Colombia is also moving ahead. Economic growth in Colombia is predicted to be strong in the next few years, north of 4 percent GDP. Importantly, the investment environment has recently become much more hospitable and, as a consequence, Colombia, having 50 projects/7,919 rooms, has moved ahead of Argentina and now has the third-largest pipeline in Latin America. Development is kindling in the city of Cartagena with 15 projects/3,138 rooms. Projects are large, averaging more than 200 rooms, and are concentrated at seaside resort locations.
Global Brands Lead Latin America Hotel Construction
The leading franchise companies for hotel construction in Latin America are Accor with 105 projects/16,807 rooms, InterContinental Hotels Group (IHG) with 58 projects/8,400 rooms and Marriott International with 47 projects/8,463 rooms. Of the 783 projects in the Latin America pipeline two-thirds have already chosen a global brand, while another 10 percent have selected a Latin America regional brand.
Accor has the two leading brands in the Latin America pipeline. Its midscale Hotel Ibis, with 43 projects/6,123 rooms, and Ibis Budget, with 27 projects/4,207 rooms, lead the way. Accor’s largest pipeline project is a 343-room upscale Novotel planned for São Paulo. IHG’s development thrust is in the upper-midscale category. Holiday Inn Express, with 24 projects/3,255 rooms, and Holiday Inn, with 18 projects/2,664 rooms, lead IHG’s pipeline. Marriott International’s upscale brand, Courtyard, with 15 projects/2,327 rooms, and its upper-midscale Fairfield Inn, 11 projects/1,922 rooms, are also developer favorites.
Upscale brands constitute 28 percent of hotels in Latin America that have already chosen a brand with 166 projects/27,893 rooms. Next are upper-midscale projects, with 25 percent of the pipeline at 152 projects/22,473 rooms, followed by midscale projects, with 131 projects/16,649 rooms, and 22 percent of the pipeline.
Other important upscale brands include the Hilton Garden Inn, with 15 projects/2,107 rooms, and Hyatt Place, with 13 projects/1,896 rooms. Leading upper-midscale brands include Hilton Worldwide’s Hampton Inn & Suites, with 22 projects/2,525 rooms, and Choice Hotel’s Comfort Inn & Suites, 18 projects/2,643 rooms. Other popular midscale brands are Blackstone Group’s La Quinta Inn & Suites, with 19 projects/1,910 rooms, and Best Western, with 18 projects/1,807 rooms.
New Hotel Openings Expected to Soar Through 2016
New hotel openings in Latin America struck a cyclical high in 2008, fell to a low point in 2010 and bounced along a bottoming formation before moving forward again in 2014. New openings will accelerate through 2016 in anticipation of the Summer Olympics. LE forecasts 145 hotels/20,564 rooms to open throughout Latin America in 2014. Brazil has already opened 52 hotels/8,199 rooms in the first three quarters of 2014, accounting for 51 percent of all new openings during that period. LE further predicts that 161 hotels/22,653 rooms will open in Latin America next year and 167 hotels/31,754 rooms in 2016.