STR: Why Latin America is facing a hotel pipeline decline

(Rio de Janeiro)

The latest Pipeline Report from STR indicates a problematic future for the hotel industry in Central and South America. 

The report shows 63,321 rooms in 404 hotel projects under contract in the Central/South America region—a 14.9-percent decrease in rooms in that category compared with January 2016. 

The region reported 28,626 rooms in 175 hotels under construction for the month. Based on number of rooms, that is an 11.7-percent decrease in year-over-year comparisons.

Post-Olympic Decline?

There could be several reasons for this: In the lead-up to the 2014 FIFA World Cup and the 2016 Olympic Games, Brazil saw a rush of hotel development. In October 2009, Rio de Janeiro alone had 18,760 rooms in 133 properties. From June 2013 to June 2014, the year leading up to the World Cup, Rio’s hotel room supply increased 5.9 percent to 21,383 rooms. 

Now that the major events are over, it makes sense that developers would slow down their rush to build and take a longer look at Brazil's appeal for new properties. 

But that doesn't mean that Brazil's hotel growth has stopped completely: When the games ended in August, Lodging Econometrics reported that Brazil’s hotel pipeline had 407 properties with nearly 71,000 guestrooms in various stages of development. A full 194 hotels with 35,513 guestrooms were under construction at the time, while another 154 hotels with 24,860 rooms were in the early planning stages.

In Construction

Three of the region’s key markets reported more than 1,000 rooms in construction:

Bogotá, Colombia: (1,441 rooms in five projects)
São Paulo, Brazil: (1,205 rooms in six projects)
Lima, Peru: (1,203 rooms in seven projects)

Under Contract data includes projects in the in construction, final planning and planning stages but does not include projects in the unconfirmed stage.