MIAMI—The growing presence of third-party hotel management companies around the world is not lost in Latin America as the concept continues to gain a foothold throughout the region.
Speakers participating on a general session panel titled “The view from the boardroom—harvesting new ideas” during the recent Hotel Opportunities Latin America Conference said that the growth of third-party managers in the region is in its infancy.
When asked by moderator Clay Dickinson, managing director of advisory and asset management services for the Latin America region of JLL Hotels & Hospitality, what the hotel landscape will look like in Latin America in 10 years, each of the four speakers mentioned operators as the key:
- Joel Zorrilla, VP of corporate strategy for Fibra Inn, said there will be many more individual operators.
- Javier Rosenberg, COO, Americas for Carlson Rezidor Hotel Group, said institutional investors and real estate investment trusts will be common across the region, and there will be some segmentation of operators as well as many more segments represented.
- Francisco Levine, CEO of Atton Hotels, agreed there will be more segmentation and said consolidation of ownership and management companies will be occurring.
- Juan Carlos Galindo, founding partner, OxoHotel, said the consolidation of operators will be an important step for the hotel industry’s growth in the region.
Zorrilla said Fibra Inn is always looking for more institutional management companies to operate its properties as the hotel industry in Mexico continues to mature.
The maturation process for the hotel industry throughout Latin America will mean the launch of more management companies, speakers said.
Levine said Atton owns seven hotels and is offering third-party management services as it continues to be become entrenched in the industry.
“We believe our brand is ready for (third-party management),” he said. “Our goal is to develop a distinct Latin American brand for Latin Americans.
“We have strong distribution in Chile. It is an opportunity for us to grow faster … more lighter from a balance sheet,” he added. “We are now at that stage where we can start doing that.
We have a big opportunity to grow through management contracts.”
Zorrilla said Fibra is “more than willing” to allow independent management companies to manage properties in its portfolio, but Mexico needs more global brands involved to become more competitive around the world.
Galindo said OxoHotel is an independent operating company that operates several branded hotels and will take advantage of the emergence of the management side of the business throughout Latin America.
“We saw in Colombia the opportunity to develop this kind of modern business model,” Galindo said. “All of the development was by local brands with no presence by franchises or major international brands.”
The company started helping match developers with global brands with the plan of becoming the manager of the properties.
“We saw that we need the power of strong international brands to create differentiation in the market,” Galindo said.
The company’s first hotel was a Holiday Inn Express in Bogota. Its portfolio now includes brands such as Autograph by Marriott, Wyndham and others.
“We have the opportunity to take the best of each brand to improve our operational model,” Galindo said. “For our investors, that’s important.”
Knowing condo-hotel model is key
Rosenberg said it’s important to understand condominium association laws and regulations for any management company doing business in the region because that’s a prominent operating model for hotels.
Galindo said it can be difficult to manage those types of properties. “There are (owners) who don’t understand the business—they’re not always aware the hotel business is a long-term business. We can have problems with these types of ownerships.”
“It’s simpler to have a single owner, but of course you need to be flexible when you address different markets,” Levine said. “If we see an opportunity where we can structure an ownership-management situation that we think will work, we can move ahead.”
Life-safety issues in hotels is another big issue for management companies to consider, and that’s where the emergence of brands is beginning to be felt because strict standards help keep consistency and help bring development costs down, according to Zorrilla.
Rosenberg said abiding by local law is obviously the most important aspect of life-safety issues, but that does vary depending on the specific location and type of building.
“We take a very flexible approach and looking at what the asset is,” Rosenberg said, adding that requirements for a 60-floor skyscraper are different than for a three-story building.
Localization is the key to success
Localization is the big learning curve for global brands, Zorrilla said. Issues ranging from the size of guestrooms to overall décor to the type of breakfast foods offered are important for global brands to note.
“Brands don’t know very well the Latin American market,” Galindo said. “The brands are specifically made for Americans. They have to change different things … really make all the hotels for the Latin American market. Not all the brands are so open (to that concept).
“The breakfast we have in Latin America is very different; it’s very important for us to change that,” he added.
Embracing those differences will help global brands grow in a region that is on the verge of massive expansion, speakers said.
“Definitely I think the region is ready,” Rosenberg said. “The travel experience has changed so much. People are moving away from the beige experience. The market induced change that we welcome.”
He said the first Radisson Red-branded properties will be introduced in Latin America within the next six months.
Levine said Atton’s expansion plans include Chile, Peru and Miami—which he called the capital of Latin America. Doubling the number of hotels in the company’s portfolio will come through equity investment or management contracts.
“What we see today is we’re able to find competitive and available financing that allows us to have the most attractive path to grow,” Levine said.
Zorrilla said Fibra Inn likes hotels located in areas dominated by the automotive, electronics and oil-production industries. It also is looking to put hotels in high-end shopping areas.
Fibra Inn will eventually get into the resort space “in a big way,” Zorrilla said, adding that the different ownership structures of resorts come into play when considering acquiring those types of assets.
Fibra Inn by law is restricted to assets in Mexico, but it would eventually like to help create a Fibra-like structure in Chile, Zorrilla said.