CORAL GABLES, Florida — Hotel executives and industry leaders in Latin America weigh discovery and caution in buying, operating or developing hotels in untapped markets or demand segments.
Ricardo Mader Rodrigues, managing director for Latin America at JLL, said during the first day of the 13th annual Hotel Opportunities Latin America conference that caution is needed due to recent government elections in South America. High interest rates are also problematic.
"There's no rush to invest in real estate right now," he said. "I think in the second semester, we're going to see things changing, specifically because the political scenario is getting more clear."
Raul Calvet, managing partner at Colliers Market Intelligence and Advisory and co-chairman of HOLA, Central America, said the COVID-19 pandemic revealed many strengths and weaknesses in different market segments.
"We realized that there was a strong domestic market ready to fill hotel rooms in some destinations," he said. "An important thing we discovered is we need to work together — owners, hotel operators, authorities — to solve problems. And, above all, I think that we discovered that life and business goes in cycles, and we have to get ready for the bad times when we are happy during the good times."
John McCarthy, executive chairman and partner at Leisure Partners and co-chairman of HOLA, Mexico, said there's still great potential for hotel industry growth across markets in Mexico.
"Everybody thinks of Cancún, Puerto Vallarta, Los Cabos, Mexico City; but there's so many other places [that] are frankly spectacular like Loreto, which is north Los Cabos [and] totally untapped," he said.
Hotel executives speaking during the "Views From the Boardroom — Round One" session agreed that opportunities in the region await.
In January, Sonesta International Hotels Corp. reintroduced its James brand as part of the Sonesta franchise portfolio in the U.S. and Latin America in the high-end, lifestyle segment.
"We wanted to expand in the lifestyle space because it's a quickly growing area, and we had the intellectual property rights to the James brand," Sonesta President and CEO John Murray said. "We have a fair amount of interest in the Caribbean, the Dominican Republic and one location in Mexico. It's an opportunity to take advantage of the brand but at the same time be more independent, lifestyle at the [higher-end] level."
Brian King, president for the Caribbean and Latin America at Marriott International, said the brand grew its footprint in the region by more than 48% with the acquisition of the City Express brand portfolio from Hoteles City Express.
Jose Carlos Azcarraga, CEO of Mexico Grupo Posadas, said his company is following three strategies for growth: expanding in the luxury and upscale segments, creating new brands and exploring new segments such as branded residences.
"There's a huge amount of independent hotels in Mexico and throughout the region that are independently managed, and many times they don't have the capacity of distribution that we do have, so connecting those hotels to our technology, our systems, usually brings them a huge benefit," he said. "We're also growing through a lot of different types of conversions."
Los Cabos, Cancún and the Riviera Maya have many mixed-use developments which can benefit from a branded residence, he added.
King agreed that deals for luxury branded residences have "just exploded."
"We've always had a strong residential component at Marriott prior to the pandemic, but every deal that comes to the table is coming with a new hotel investor who's done residential and they're doing a hotel now with the residential. That branded hotel experience is super important to drive that real estate value for the residential side," he said.
"That really gives us access to the traveler corridors, the driving corridors through Mexico and Colombia," he added.
King said Brazil is also among markets with opportunities for growth. Marriott recently signed a deal with Brazil's sustainable tourist-residential enterprise Maraey to build three hotels in Maricá, Rio de Janeiro.
"That gives me great confidence, making sure that we're attacking what has been our core source markets, but at the same time supplementing the source markets with new markets, and that being domestic," he said.
Brent Reynolds, CEO and managing partner of investment, development and management firm Nolan Reynolds International, said his team is focusing on niche markets and communities to create hubs through its smaller boutique resort brand and residential product.
This includes the surfer community in Central America, he said.
"There's 35 million surfers in the world — 80% of them travel more than twice a year and about half of them travel probably a dozen times a year. It's an affluent community, and it's a community that also lives paycheck to paycheck, but the majority of that community is looking for that [lodging] opportunity. It's why we got into Costa Rica originally, and we have multiple locations there. We're looking at El Salvador and other locations through Central America," he said.
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"The truth is, having been in politics for a while myself, everybody campaigns and says they will support tourism ... but when they get into government, they forget about it because they assume that tourism will take care of itself. The truth is, we have a very strong private sector [in Mexico] within the tourism industry, and we do need the help of the government; we need Mexico's tourism promotion board to be put back in place. If a crisis hits Mexico and we are getting a lot of warnings in the U.S., we need a very strong arm and a lot of funds to keep the good numbers up. ... We haven't been getting much of that lately."
—John McCarthy, executive chairman, partner, Leisure Partners, and co-chair of HOLA, Mexico.