2016 Rio Olympics, 2014 FIFA World Cup drove hotel development in Brazil

The attention Rio de Janeiro—and Brazil as a nation—has received over the past few years since winning bids to host both the 2016 Summer Olympic Games and the 2014 FIFA World Cup, respectively, has driven both significant travel and significant hotel development. 

“Brazil has been fortunate to be the stage for two great events within the last twenty-four months: first the 2014 FIFA World Cup and now the 2016 Olympic Summer Games,” said JP Ford, SVP and director of business development at Lodging Econometrics. “To have two events back-to-back like that is unprecedented. This has helped contribute to the country’s healthy development pipeline over the last few years.”

But the Olympics will soon be over and the crowds will soon be heading home. So while the back-to-back events have been a boon to the country's hospitality industry, the good times may well be over.

Rio

From June 2013 to June 2014, the year leading up to the World Cup, Rio’s hotel room supply grew 5.9 percent to 21,383 rooms, according to STR. Since then, the city’s supply growth has increased 32.4 percent.

And once soccer fever died down, Rio de Janeiro began preparing for the Olympics. When the city was named as host for the games in October 2009, it had 18,760 rooms in 133 hotels. Preliminary figures for July 2016 found 28,314 rooms in 171 hotels—an increase of 38 hotels and more than 9,500 hotel rooms. 

In the days before the games began, Brazilian officials estimated that 350,000 to 500,000 tourists will visit Rio for the Olympics, driving a major—if temporary—boost for the city’s hotels.  

The Future

But now that both sporting events are (mostly) in the past, Brazil’s hospitality future seems a little less bright, and there may not be much of a market for all of those rooms. In the first half of 2016, Rio hotels reported a 9.7-percent decline in occupancy compared with the first half of 2015. In addition, the market’s 47-percent absolute occupancy level during the second quarter of 2016 was the lowest second-quarter occupancy level in the market since 2002.

STR credited concerns over the Zika virus and ongoing political issues in Brazil that have affected overall tourism numbers. Analysts at the firm suggested that substantial supply growth has significantly altered the city’s hotel landscape. 

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With those concerns in mind—and awareness that the games will soon be over—it is no surprise that the hotel buzz is dying down. “The pipeline has begun to taper off,” Ford said. “If you are not open now, you have missed. The residual tourist business in Rio post Olympics is not likely to be as strong as London’s in 2012.” 

According to Lodging Econometrics, Brazil’s hotel pipeline, as of early August, had 407 properties with nearly 71,000 rooms in various stages of development. A full 194 hotels with 35,513 rooms were under construction, with another 59 properties (with 10,460 rooms) slated to begin construction in the next year. A further 154 hotels with 24,860 rooms are in the early planning stages.

The pipeline in Rio, as of press time, reached 41 projects with 8,235 rooms. Thirty of these (with 6,515 rooms) were already under construction while another two (with 400 rooms between them) were expected to begin in the next year. Another nine (with 1,320 rooms) were in the early planning stage.