HOLLYWOOD, Florida — An injection of pent-up American tourism has sustained hotels in some Latin American countries through the pandemic, but a lack of corporate demand and other concerns are holding hotel performance, and in some cases development, back.
Hoteliers and experts in Mexico and the South America and Central America regions discussed challenges and opportunities during three panels at the Hotel Opportunities Latin America conference.
Hugo Desenzani, CEO of Peru-based hotel owner and operator Intursa, which includes Libertador Hotels, said that when air travel essentially ceased at the height of the COVID-19 pandemic, his company's hotels had to reassess.
"When you don't get the planes landing in your country, you need to find business elsewhere," he said, adding the company's priorities were the safety and security of employees and guests, cash preservation and adaptability.
To drive some revenue, Intursa's hotel managers started to offer food delivery from their restaurants, and to look at other "different uses of the assets."
The thinking was: "Let's try to make the most with what we have in terms of our reduced top line ... and don't let a good crisis go to waste," he said. "Basically take this crisis and think of ways that you can be better afterward. This was a prolonged low system. We used our time wisely, and I think we're a better company now than we were before the pandemic."
A lack of debt in the region, where financing can be difficult to obtain, also has benefited hotels during the pandemic.
"What we're doing internally is also trying to see this as an opportunity — in the sense of ... while everybody else is trying to maintain debt service and everybody else is trying to survive, how can we as operators, take market share in these difficult times so that when we come out of this, we can have a larger percentage of the market?" said Fernando Poma Kriete, executive director of hotel operator Real Hotels & Resorts.
"If we can gain that market share and we can sort of retain that market share, we may come out of this stronger," he added.
Uriel Burak, senior director of development for the Caribbean and Latin America at Marriott International, said leisure demand has led the recovery for the company's hotels in the region, with flights to some destinations exceeding pre-pandemic levels, in addition to strong domestic demand.
Marriott and the other big hotel brands have taken notice of the strength of leisure travel, and the all-inclusive resort segment, and are looking to expand their portfolios in the region.
Bojan Kumer, Marriott's vice president of hotel development in the Caribbean and Latin America, said much of that growth is targeted at converting existing hotels.
"We have actually received the direction from our corporate headquarters that we should definitely be focusing on the conversions, because we know that in general, the financing is quite challenging in South America, but even more so with COVID, and directive was, you know, to look at not only independent hotels as conversions but also look to perhaps hotel companies and create certain affiliations," he said.
Kumer said an example was an agreement with Blue Diamond Resorts, which added about 7,000 rooms in the all-inclusive segment to Marriott's Autograph Collection portfolio.
Mario Carbone, managing director for development in Mexico and Central America at Hilton, said that his company is also "doubling down on the resort segment."
"It's kind of shameful that six years ago, Hilton had zero hotels in Riviera Maya — a prime world destination, and Hilton has nothing to show for how big we were," he said. "But fast forward six years now, we currently have five hotels open in Riviera Maya ... and on the way we're going to be opening in the next six months the Hilton Cancun, the Hilton Tulum, a Waldorf Cancun and Conrad Tulum — four big hotels coming in very soon and that'll add 2,000 rooms."
However, leisure demand and resorts represent only half of the story for hotels — and a return of corporate business will be important for the industry everywhere, including in key Latin American countries, Burak said. Some of that loss of corporate demand can be attributed to COVID-19-related restrictions and requirements for travel, which often are a product of politics.
"Our biggest enemy, even though it's COVID, but it's also related, are the traveling restrictions," Desenzani said. "When you close the boundaries, tourism drops. That was the biggest surprise. ... Every time [governments] play with a new restriction, it does little to contain the virus and enough to discourage travel."
Poma Kriete said a lack in clarity and uniformity regarding COVID-19 testing requirements is a travel deterrent.
"In Central America, it has been very, very difficult. Until recently, a lot of these countries required PCR exams to come in. And the problem is, some countries require PCR exams and other exams to come out. For example, in Costa Rica, we're suffering in part because even though exams are not required to go in, the exam when you are going back to the U.S. is a requirement," he said.
Overcoming politics, and instability, are second nature to hoteliers in Latin America, said Cristiano Gonçalves, regional vice president of development in Latin America at IHG Hotels & Resorts.
"When was the last time a country in Latin America was stable? Right, we've never been stable. I’m from Brazil. Instability is our last name. We know how to deal with it. We go from socialist governments to military dictatorships in 40 years. It is what it is; you have to deal with it. And of course there are uncertainties; of course there are. On top of that, there's a pandemic," he said.
Politics can also be a plus for tourism, when government initiatives support it, speakers said.
Mexico, for example, is making strides in tourism, but generally despite its government, said Alfredo Reynoso, director of development in Mexico for Hyatt Hotels Corp.
"It's amazing how Mexico is still running a great tourism industry with that government," he said. "The countries that understand tourism, what it can bring in terms of jobs, income, innovation … those countries are really doing fantastic. A great example of what's happening in Mexico: We're doing really well because of the natural resources, but mainly because of the effort of companies to make the most of it. ... We all know we need a new way. We all know the infrastructure, the consequences of infrastructure, but not the outcome. Things are happening, perhaps not the way you like. We're working on it and making the most of it."
The hoteliers speaking on the Mexico panel did not express much confidence in big plans by the Mexican government to build a new airport to serve Mexico City.
Companies "need to be sustainable" based on the realities of today, Carbone said.
"You can't bet on that kind of thing taking place in order to make your [return on investment] make sense," he said.