CARTAGENA, Colombia — As hoteliers seek to bring more luxury and ultra-luxury hotels and resorts to Latin America, they are exploring the types of demand the region can expect, as well as factors that make development deals work.

Brand executives and hotel developers are capitalizing on the region’s established draw as a sun-and-sand getaway destination for travelers from the United States, Canada and Europe, but also are making the jump from standard all-inclusive resort offerings to higher-end luxury and ultra-luxury offerings.

Speakers on a luxury panel at the SAHIC Latin America & The Caribbean Hotel and Tourism Investment Forum said they’re making progress bringing luxury hotels to the region and say there is demand from high-paying customers, but it’s “always a matter of investors, brands and communities coming together” to get deals done, said Alejandro Acevedo, regional vice president of development in the Caribbean and Latin America for Marriott International.

“Central America and Latin America have the opportunities [for these types of hotels] but it can take time, and you have to consider airlift and safety,” he said. “But we have the fundamentals. We have the potential.”

The key underpinning defining this level of luxury in the region is experience, speakers said.

“Luxury has evolved into an experiential concept, not a physical concept. A good bed, good bathroom, beautifully designed hotel is a given,” said Carlos Hernandez, CEO of Pellas Development Group, which has developed resorts in Nicaragua, Costa Rica and Panama, including Mukul in Nicaragua, within the Guacalito de la Isla Resort. “Now we are into true experiences, which represent a tremendous opportunity because when luxury is experiential, it gives us tools to bring it to different places. The true luxury segment can afford to travel far, and that means we can bring a type of hospitality and tourism to locations where the impact is high in economic terms but low in environmental terms.”

Philippe Trapp, chief operating officer of luxury in the Americas for Accor, agreed that particularly since the worst of the COVID-19 lockdown period, experience has been the No. 1 priority.

Asked if luxury is defined by service, Trapp elaborated that “service is part of the component, but not all we’re looking for; it’s experience.”

“The experience is something that’s creating the service component,” he said. “It can be as a spa, a restaurant, a bar, a beach, a rooftop.”

Speakers said that while beaches will always be the region's top experience draw, other attractions can include traditional hospitality elements such as dining and spa, but increasingly include elements of ecotourism, experiencing local culture, arts and crafts.

Trapp added that another difference now is how luxury travelers are structuring their trips. Following pandemic lockdowns, he said, people are “traveling differently, staying longer, staying with family or friends and just organizing their lives differently.”

Last year, the Sofitel Casco Viejo Panama opened, and Trapp said suites have been the first room types sold every weekend, which also happens across the company’s other luxury hotels.

“Average daily rate is not a problem,” he said. “Travelers want to experience that difference and the suite segment is pulling ADR up.”

Ron Pohl, president of international operations and WorldHotels for BWH Hotel Group, agreed that today’s luxury customers are looking for experiences and are willing to pay for them.

But the key for hoteliers to remember is that pricey amenities or services can make it difficult to extend profitability. For that reason, branded residences often are the element that take luxury hotel projects across the finish line, since residence sales deliver development capital and “give the investor confidence that the project will get completed.”

BWH and Matterhorn Hotels & Resorts are developing Best Western Premier Sunshine Diamond River in Ho Chi Minh City, Vietnam, which will include a large segment of Best Western Premier-branded apartments.

“Without branded residences, the numbers don’t pencil,” Hernandez said, “because the buyer is a global buyer, a collector of assets.”

Trapp cited the Sofitel Barú Calablanca Beach Resort, a European-plan resort on Cartagena’s exclusive Barú island that includes branded residences.

“This project is not a hotel, it’s a destination,” he said. “When you come into a destination with residences, the hotel, experiences and services and bring it all together, the project for the operator is much more sustainable.”

Acevedo circled back to Trapp’s earlier comment about suites selling first at many luxury hotels, reminding the audience that the operating model of hotels with branded residences means that many residential units do end up in the hotel’s inventory.

“You have additional keys, but more bedrooms, bigger private pools, and that’s all important for the hotel and profitability,” he said, adding that even with branded residences, the hotel part of any project must bring ROI on its own and not use the residential component as a crutch.

While Mexico and the Caribbean may be the first destinations travelers think of associated with ultra-luxury hotel and resort products, speakers said other locations in Latin America have a lot of potential and their companies all are actively pursing development in those places.

Acevedo cited Costa Rica as a great example of a destination able to support high-end luxury. Marriott is opening a Ritz-Carlton Reserve on Costa Rica’s Papagayo Peninsula, developed by Gencom and Mohari Hospitality, which will have 107 guestrooms and suites, and 36 branded residences.

“We’re looking at projects all over the place,” he said.

Marriott earlier this month opened the St. Regis Kanai Resort in Mexico’s Riviera Maya, and Acevedo said the company also looks at the Virgin Islands and Belize as having “big potential in luxury.”

And while the cost of development for luxury and ultra-luxury is high both in time and money, Acevedo said the hotels do sell well.

“Since the hotels are so difficult to build and so expensive, the multiples people are willing to pay are higher, so cap rates are lower and it’s a very unique proposition,” he said.

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