PANAMA CITY — It's more expensive than ever to build a new hotel, but that hasn't curbed the appetite for new development in Latin America, according to speakers at the SAHIC Latin America & The Caribbean conference.
Speaking during the "Driving and Sustaining Growth during Challenging Times in Latin America" panel, Salo Smaletz, vice president of development in Latin America for IHG Hotels & Resorts, said he expects costs to normalize and investor appetite to remain strong.
"It's becoming more expensive to develop because of rising costs and the supply-chain factor," he said. "That in turn means delays, which means empty rooms for longer periods of time. But I don't think that will last forever."
Bojan Kumer, regional vice president of hotel development in the Caribbean and South America for Marriott International, said that combination of factors is driving more hotel investors to conversions or even renovating their existing properties to better compete in the marketplace.
"Over the past 12 months, we've done approximately 40 property-improvement plans, and we have converted 27 hotels," he said. "Of all the hotels we have signed in 2021, about 59% were conversions. And we've been focused much more on the leisure market and all-inclusives. About 49% were in the all-inclusive segment."
Diana Sierra, new business development manager for Accor, said that to ensure strong development pipelines brands have had to streamline operations to counteract the higher capital costs needed to start a project.
"One of the biggest changes is the mindset we see on the profitability of hotels," she said. "We used to think just about rooms. Now we think in square meters. We had empty spaces for so many months that we started thinking of new ideas on how to increase the revenue and decrease the loss for new owners."
A focus on profitability should be a boon for hotel investment in Latin America as the region benefits from low base costs and high rates, Kumer said. He added high-rate resorts on the northern coast of Colombia are particularly well-poised to benefit from that trend.
It's still unclear just how the trajectory of the broader economy will impact the hotel recovery, though.
"We know inflation is going up, and interest rates are going to go up, so financing is going to be more costly," Kumer said.
Smaletz said the biggest growth opportunity for his company in the region is growing a presence in the all-inclusive resort segment.
Kumer also counted Marriott among the major international brands looking to expand its presence in all-inclusive resorts across Latin America and The Caribbean. To that end, Marriott bought Elegant Hotels Group's portfolio of all-inclusive resorts in Barbados in 2019, which he said kick-started its growth in that space.
"We have organically grown in a few other markets in Mexico and The Caribbean," he said. "And today, two-and-a-half years later, we have 30 open [all-inclusive] hotels, then another 17 or 18 in the pipeline."
Similarly, Sierra said Acccor is focused on high-end luxury, lifestyle properties.
"That's where you can integrate leisure [demand with] growing markets and you can provide local experiences to the people living in the cities," she said. "We used to forget about these people."