The Latin America hotel construction pipeline has grown steadily for five years and is now at 846 projects and 141,433 guestrooms, nearly double the 2010 low point. Hotel development continues to be concentrated in the region’s two largest economies, Brazil and Mexico, which together now account for 71 percent of the total pipeline.
Brazil’s pipeline has 453 projects and 79,431 guestrooms and is up 11 percent and 15 percent year-over-year, respectively. The pipeline should continue to grow as the country prepares to host the 2016 Summer Olympics. The upcoming world-class event, expected to draw 1 million visitors, has helped spur development in key Brazilian markets and throughout the broader Latin America region.
Eight of the top 10 Latin America markets are in Brazil, including Rio de Janeiro with 56 projects and 11,712 guestrooms, Campinas with 35 projects and 6,622 guestrooms and Sao Paulo with 34 projects and 6,894 guestrooms. Rio de Janeiro, among the top 10 hotel construction markets in the world and the epicenter of the upcoming Olympics, added 11 projects YOY and now has 39 projects currently under construction, two projects scheduled to start in the next 12 months and 15 projects in early planning.
The pipeline for other South American countries has grown modestly and is at 137 projects and 19,026 guestrooms. Development in Colombia, 43 projects and 6,963 guestrooms, has continued to benefit from a resurgent economy and an improved business climate. It is now the third largest country for hotel construction in Latin America. The top markets in Colombia are Cartagena with 12 projects and 2,426 guestrooms and Bogota with eight projects and 1,840 guestrooms.
Mexico, Latin America’s No. 1 tourist destination, has the region’s second largest pipeline with 147 projects and 21,942 guestrooms. Projects in the early planning stage, 34 projects and 6,165 guestrooms, are up almost 50 percent YOY by number of projects and more than 100 percent by number of guestrooms, while projects under construction and scheduled to start in the next 12 months have shown only limited growth.
As a consequence, Mexico will see an increasing number of projects move through the pipeline, break ground and open later in the real estate cycle. The country’s pipeline is bolstered by a strong U.S. economy and currency that continues to fuel tourism to Mexico and by recent legislation that permits the formation of real estate investment trusts, effectively attracting more developers and investors to the country’s hotel industry.
Central America’s pipeline dropped by more than 25 percent, is now at 39 projects and 6,166 guestrooms, and appears to have peaked. The Central America pipeline consists of seven countries and is heavily influenced by Panama, which accounts for 18 of the 39 projects. As a result of the decline, Panama has dropped from the fifth largest pipeline in Latin America to the ninth.
Of the 846 pipeline projects in Latin America, 230 projects, or 27 percent, have yet to select a brand. Many of these projects have entered the pipeline in the early planning stage, which is up more than 25 percent YOY. The pipeline is skewing toward bigger, more upscale projects, which typically have longer timelines for planning and permitting. Increasing project counts in early planning suggest that the current real estate cycle will probably peak within the next two to three years.
Of the 846 projects in the Latin America pipeline, 73 percent or 616 projects have already selected a brand. The top five franchise companies account for more than half of those brand selections. Accor with 112 projects is the leading franchise company in Latin America and has more than double the number of projects of any other franchise company. Choice Hotels International follows with 53 projects, Marriott International has 51 projects, Hilton Worldwide has 51 projects, and InterContinental Hotels Group has 48 projects.
Accor has 98 (88 percent) of its projects in Brazil, 75 of which are Ibis branded. Hilton’s pipeline in Latin America has grown by 24 percent in the last year, the biggest increase of any franchise company. It is the leader in Mexico with 26 projects, 17 of which are Hampton Inn & Suites.