Cost-cutting and staffing limitations, in response to lower demand and lost revenue during the COVID-19 pandemic, has led to some full-service luxury hotels offering less than what their guests are accustomed to.
That has presented an opportunity for midscale brands, such as IHG Hotels & Resorts' Holiday Inn brand. In the Latin America region, guests seeking a resort experience are discovering they might get as much service at a lower cost, said Salo Smaletz, vice president of development in Latin America for IHG.
"It came to a situation where even luxury hotels and more upscale hotels had to reduce their services to limited service," he said. "Why would you pay to be in a luxury hotel if you're not getting all the services? That happened a lot. With that, I think that people will learn that limited-service or upscale [hotels] are also an option."
Based on that, and the strength of the segment during this and every crisis, IHG sees "great potential" for developing its midscale brands in the region, he said.
"But that doesn't mean that people will not go back to luxury travel. They will," he said.
Major hotel brand companies including Hyatt Hotels Corp., Hilton and Marriott International are going all-in on all-inclusive luxury resorts in the region, and Smaletz said IHG is also exploring options in that space.
"We do have different brands actually within our portfolio that already operate as all-inclusive, but we don't have an 'all-inclusive brand,' per se. We're looking into that, and I think it's going to happen," he said.
IHG brands that could fit into the all-inclusive space include Crowne Plaza, Hotel Indigo, Kimpton, InterContinental and Six Senses, he said.
"All these brands have their different niches and different markets, and different expectations as well. Six Senses has this culture of more secluded properties, more silence, but that doesn't mean that it cannot be all-inclusive. You can develop the concept of all-inclusive for luxury or for ultra luxury," he said. "And you can do that with more popular brands like Holiday Inn, as we have already. We have a resort in Jamaica and a resort in Aruba where you have basically all-inclusive plans [guests] can opt into, and it works very well."
Other options for IHG to enter the all-inclusive space would be to create a new brand or acquire a brand, but Smaletz said the company is not specifically looking to buy a brand.
"We are open to possibilities, and we understand that all-inclusive is a market that's going to grow," he said.
The pandemic, like any crisis, has also opened opportunities for brands to grow through conversions, particularly of independent hotels, he said.
"In every crisis, it becomes clear and more evident the importance of having a brand. Yes, it's an investment, and we will call it cost, but I think it's always an investment," he said.
"So many independent hotels are still closed or were not able to reopen or just went bankrupt because of the situation. Now when you see this, you also see an opportunity because there are owners of independent hotels that realize that comeback, with a brand, is much more possible."
Smaletz said that relative to other crises, so far there have not been as many distressed assets to hit the transactions market, but he expects more to come.
"I can tell you that some of our owners have suffered with the pandemic even with a brand. It's OK; it's natural that some markets close. But I don't think it's fair to say that there won't be distressed assets. I think it's still in the process; people are still deciding," he said, adding that conversations with independent owners about conversions have become "more engrossed" than even pre-pandemic.
IHG also sees opportunities in new development, he said, but that depends on several factors, including the pace of recovery in specific markets in Latin America, availability of financing and political stability.
"We continue to trust in markets like Brazil, pockets like Argentina, Colombia, even with the recent elections. We're still looking into opportunities here," he said. "We think it's eventually [going to] stabilize. When one country stabilizes, the other one might not, or might go a different direction, but overall, every country in Latin America has opportunity. I've recently been to Paraguay, and I was extremely pleased. It is a small country, but it's a country that is booming. In terms of economy and infrastructure, I was impressed."
Another factor in determining where to develop is hotel supply, which Smaletz said is a big question mark currently.
"In development, we talk a lot about pipeline and what is under construction. The truth is that today, I don't think that we know what is the real pipeline," he said. "We don't know, of what has been signed, what is going to happen, to materialize; what is being stalled; what is going to [be] back or is going to resume; and what, if closed, is going to even reopen. Today's uncertainty is about, what is the real size of the pipeline? And obviously when you want to develop, you want to look at the pipeline because you don't want to overdevelop, and you want to identify those markets that are underdeveloped and see there's an opportunity, probably short term, to be the first to be there. Today, this picture is a little bit cloudy."
IHG's development team will also be paying close attention to what the airlines do in specific markets, he said.
"I know that there [was] at least one point in 2018 when there were six direct flights from Miami to São Paulo. Today there are only two. It goes hand in hand," he said. "You can build a lot of infrastructure, you can build hotels, but if there isn't a way to bring tourists, not only domestic tourists but foreign tourists, then there is no hope that the business will thrive. It's a group of things that needs to happen concurrently for new development to come back."