HOLLYWOOD, Florida — There's room to grow in the Latin America hotel industry, but development and expansion must be accomplished in tandem with sustainability and special attention to environmental impact, hotel executives said.
During the first “View from the Boardroom” session of the 2022 Hotel Opportunities Latin America conference, hotel executives talked about the markets of interest and growth strategies for the region.
Grupo Posadas, which has been operating in Mexico for more than 50 years, is now looking at expanding into the Caribbean, specifically the non-Mexican Caribbean, CEO José Carlos Azcárraga said. The company previously had a presence in South America for about 15 years.
Grupo Posadas recently opened a Live Aqua in the Dominican Republic, and has a half dozen projects developing on different islands with plans for further expansion within the region.
Azcárraga said success in Mexico should translate to strong performance in other countries.
“I don’t want to be very simplistic, but if you’re successful at having hotels in Cancun, it’s not that far a reach to go to the Dominican Republic and do it also,” he said.
Sonesta International Hotels Corp. also plans to grow its portfolio in the region, partly through a master franchise agreement with Colombia-based GHL Hotels that currently includes 13 hotels in Peru, Ecuador and Colombia, President and CEO John Murray said. Sonesta also has a hotel in San Juan, Puerto Rico, and two resorts in St. Maarten.
The company is recruiting representatives to help with franchising in Latin America and the Caribbean.
“We think it’s a natural extension of what we already have and what we’ve created in the U.S.,” he said.
Following the 2020 acquisition of Miami-based Trust Hospitality, a hotel management company that operated primarily in the Caribbean and Latin America, Highgate recently announced a deal to manage a half dozen hotels in Peru.
Richard Russo, principal at Highgate, said the hotel management company recognized a need in the region for an owner-centric approach to expense management.
“As we've seen the brands contract some of their operational capabilities in some of these markets, we thought there is an opportunity to fill a void,” he said.
Accor’s acquisition of the Fairmont, Raffles and Swiss brands in 2017 signaled a significant shift in its portfolio in the Americas, according to Sara Glenn, Accor's chief operating officer of North and Central America.
While Accor has had a heavy luxury presence in Canada and the U.S., historically its economy and midscale brands have dominated the portfolio in Mexico, Central America and South America. That's changing, Glenn said.
The company opened a Sofitel in Mexico City, a Fairmont in Rio de Janeiro and an SLS in Cancun — with more on the way, including the Sofitel Legend in Panama.
“We’re definitely not forgetting about midscale and economy. It’s an important part of the business model, and definitely there’s room for growth in that area,” she said. “But we feel that with the luxury brands and lifestyle brands, there’s just an abundance of opportunities as we look from the Mexican border south.”
Environmental, Social and Governance
As sustainability continues to be emphasized in hotel development, particularly in the resort destinations of Latin America, Highgate has raised its standards for ESG, exceeding the requirements established by the hotel brands, Russo said.
More than 200 of Highgate's hotels are using clean, renewable energy, he said, and the company recently announced its first carbon-neutral hotel in Hawaii, the 'Alohilani Resort Waikiki Beach. As part of that deal, the company has also committed to plant more than 100,000 trees in Hawaii, and it’s already planted 7,000 in the first few months of this year.
“It’s something that we’re going to continue to very much focus on,” he said. “One, it’s something that is very near and dear to us.”
Several private equity funds and other sources of capital are focused now on investing only in companies that support ESG, he added.
Sonesta has taken similar steps by adding rooftop gardens and beehives to some properties for locally sourced food, Murray said. The company manages 160 extended-stay hotels, and is focused on buying the most energy-efficient appliances for the full kitchens in the suites, he said.
Accor pursued a sustainability-linked bond last year that is directly tied to its carbon-neutral targets, which are a 46% reduction by 2030 and neutral by 2050, Glenn said. There’s a strong business case for these targets because employees and meeting planners are asking about it, and owners have finances tied to it.
“There’s pressure from all sides, which I think given the fact that we are facing a catastrophe is an important component,” she said.
Every day, customers are showing that they are more interested in the ESG efforts companies are taking, Grupo Posadas' Azcárraga said. They want to know what hotel companies are doing for the planet, for society and for the people who work at the hotels. Financial institutions are pushing companies toward more sustainable practices as well.
“We should be leading inside the private sector in pushing, and all these changes need to be done, especially in places where we know that help is needed,” he said.
Diversity in the hotel workforce is also a priority for the companies as executives seek to fill positions vacated during the pandemic.
About 55% of Sonesta’s general managers are women, and initiatives in recruiting are focused on increasing the number of people of color in its senior leadership positions at hotels and the corporate office, Murray said.
“The buildings by themselves are nothing without the employees,” he said. “Having a diverse workforce is very critical.”
Glenn said hotel franchises will be stronger if there’s a depth of diversity in thought and representation. Accor's senior leadership team in North and Central America is 60% women, a significant shift over the past several years, she said.