Hotels in the Luxury and Upscale categories of Sao Paulo, Rio de Janeiro and Lima had the best performances in South America in 2014, according to the study by HVS/Hotelinvest in partnership with STR-Global. Trends and Opportunities South America, released on Monday May 11, shows that the RevPAR (Revenue per available room) of the hotels in the above categories grew by 10.9% in Rio de Janeiro, 10.3% in Sao Paulo and 8.0% in Lima, in respect of 2013.
"Despite the unfavorable economic climate, sophisticated hotels in the major markets of the respective countries are showing excellent performance, which indicates pressure on the demand in the segment," said Cristiano Vasques, Managing Director of HVS South America and Managing Director of HotelInvest.
Hotels in other categories in these three capitals (except Lima) and overall performance of the hotels in the other three markets analyzed by HVS/HotelInvest had modest results last year. Trends and Opportunities indicators show a negative result in the occupancy and/or the average rate, and consequently in RevPAR.
The main reasons for the decline in occupancy are the economic slowdown and increased hotel supply. Regarding rates, the decrease was due to a more competitive market due to increased supply, the slowdown in growth and the impact of the devaluation of the currencies of the region.
"Despite the impact of the slowing economy of the region on the hotel performance in South America, the result of the sector in most of the analyzed cities remains at healthy levels, with occupancy rates close to 70%” analyzes Fernanda L’Hopital, Associate Director of HVS South America.
Argentina – Buenos Aires
Argentina experienced a decline in the rhythm of growth of their GDP in 2014, realizing an increase of only 0.5%, the same rate expected for 2015. One can expect that inflation will intensify and that there will be heavy pressure on the exchange rate. However, there are positive expectations regarding a new government by the end of the year and the creation of more favorable conditions for the hotel industry in the city of Buenos Aires resume its growth.
The hotel market of Buenos Aires recorded a 2% increase in occupancy rates and a contraction of 4% in the average daily rate in 2014, compared with the previous year.
Last year, the Luxury y Upper Upscale category demonstrated reductions in overall occupancy (-3.1%) and in the average daily rate (-2.2%), caused primarily by the decline in business travel to the country and by a change in the visitor profile that opted to stay in hotels in cheaper categories. The overall result was a drop in RevPAR of 5.2% in relation to 2013.
The rest of the hospitality category in the hotel market enjoyed a combined growth in occupancy of 4.2%, but accompanied by an overall average daily rate decline of 3.9%. This benefited the hotels in this category by providing them with a small gain in RevPAR (+0.2%). The hotels in this group were able to capture a part of the demand that in the past has frequented the Luxury and Upper Upscale category.
Brasil – Rio de Janeiro and São Paulo
The Brazilian economy decelerated in 2014 with a fall of 0.1 % in GDP, real devaluation and rising inflation. Despite the unfavorable scenario, Luxury and Upscale categories in Rio de Janeiro and Sao Paulo showed a very positive performance mainly influenced by the realization of the FIFA World Cup.
Last year, the Rio de Janeiro’s Luxury category suffered a 1.8% drop in rooms’ demand, which resulted in an overall drop in average occupancy (-1.8). On the other hand, during the World Cup, luxury hotels benefited most from the increase in demand, leading to significant readjustments to room rates. During the year, the average daily rate grew 12.9%, carrying RevPAR with it (+10.9%).
The Luxury and Upper Upscale category of São Paulo exhibited in 2014 a growth in demand of 2.7%, which boosted average occupancy 2.5% vis- a-vis the previous year. During the period of the World Cup, this elevated demand allowed operators to increase their rates an average of 7.6%, which greatly contributed to an increase in RevPAR of 10.3%.
The Midscale and Economy category of Rio de Janeiro exhibited a drop in occupancy (-1.8%), mainly effected by the openings of new hospitality properties. While rooms supply increased by 15.4% during the year, demand only rose 8.6%. As a result, on average, hotel operators could only apply small rate increases (+1.6%), which resulted in a decrease in RevPAR (-4.3%).
The Upper Midscale and Midscale segment of São Paulo displayed a slight increase in both rooms inventory and rooms demand of 1.3% for the year. Consequently, average occupancy registered similar levels as those from the preceding year. The average rate experienced a slight decrease of 0.3 %, resulting in the same decrease in RevPAR (-0.3 %).
For 2015 the outlook for Rio de Janeiro and Sao Paulo has different scenarios. The hotel industry in Rio de Janeiro is being negatively affected by the crisis in the oil and gas that reduced corporate and events demand. Also the market will be pressed by the opening of new hotels. In 2015 the opening of 16 new hotels is planned with about 4,000 rooms. 70% of the rooms will be located in Barra da Tijuca. The supply growth coupled with an unfavorable economic time should cause a drop in occupancy and leave little room for a rate increase.
São Paulo must have a stable performance in 2015. Unlike Rio de Janeiro, the city will not suffer the impact of the opening of new hotels and the demand is expected to remain similar to 2014. That should keep good occupancy rates levels.
Chile - Santiago
Chile's GDP exhibited an increase of 1.8% in 2014, the lowest growth rate since 2009. The inflation was 4.4% for the year – the highest value in six years - a result of the devaluation of the local currency.
The Luxury and Upper Upscale category experienced an increase in supply and demand in 2014. The demand reversed the drop in 2013 and presented an increase over the previous year. At the same time, rooms supply grew at a rate superior to that of demand, which explains the decrease in occupancy. This lacuna, accompanied by currency devaluation, impacted on the average daily rates that fell 2.0% and caused the drop in RevPAR of 3.8%.
Upscale and Upper Midscale category exhibited a decline in occupancy of 3.0% in 2014. Rooms demand diminished (compared to 2013), while rooms supply remained relatively constant, which led to the drop in occupancy. Average daily rates suffered a retraction of 3.6% that weighed on the negative variation of RevPAR (-7.2%).
In 2015, occupancies and average daily rates should demonstrate tendencies that parallel the previous year. In that the sector has already exhibited favorable occupancies, as the economy improves average daily rates should increase.
Colombia - Bogota
In 2014 Colombia had the highest economic growth among the countries of the region (4.6%). In spite of the uncertainty in relation to the future price of oil, the country's principal export, the 2015 economic outlook for Colombia continues to be more optimistic than for other countries of the region.
Bogota is benefitting from growth in hospitality investments, both by local and foreign investors. The key factors that drive the development of new hotels are a 30-year income tax exemption on properties built before the 31st of December 2017, an economy in ascension, improvements on the level of security, political and judicial stability, and a tendency for the growth of the tourist demand.
The average occupancy of the Luxury and Upper Upscale category declined 4.0% in 2014. Demand in the category continued to be positive, increasing 2.0% in relation to the previous year; however, rooms inventory rose at a sharper rate, causing the drop in occupancy. This increase in rooms supply, accompanied by the devaluation of the local currency, impacted the category’s room rates, reducing them an average of 6.0%. Low average daily rates coupled with low occupancies resulted in an 11.0% loss in RevPAR.
The Upscale category exhibited a slight decline in occupancy of two percentage points in 2014. Rooms demand remained constant in comparison to levels in 2013, while the rooms inventory increased, leading to the drop in occupancy. The average daily rate fell 12.0%, greatly influencing RevPAR's negative variation (-16.0%).
Peru - Lima
Peru continues to be among the three South American countries with the highest growth rate. Even though the GDP increased 2.3% in 2014, the average annual gain during the last four years was 7.0%. The local currency continues to devalue in relation to the American dollar; however, the country's monetary policy maintains a good part of their credits in dollars, reducing the impact of devaluations.
Lima exhibits the best results of the analyzed cities. The average daily rate grew 5.2%, superseding by two percentage points annual inflation. Occupancy rates rose 2.0% - a result of a rising demand and a relatively constant rooms supply - leading to an overall growth of RevPAR of 8.0%. The Trends and Opportunities has analyzed in the case of Lima only hotels in the Luxury and Upper Upscale category.
The industry expects that the increase in demand will outpace rooms supply, causing both occupancy and room rates to rise. In the future, two factors that will positively influence the performance of the destination will be the opening of the Convention Center at the end of 2015 and the expansion of the airport.
Trends and Opportunities Data
The large database of Trends and Opportunities is mostly built on STR Global database along with internal data from HVS, HotelInvest and industry partners.
All the statistical information contained in Trends and Opportunities is generated by the actual commercial performance of the 33,803 hotel rooms, and thereby, represents an accurate reflection of hospitality segments in each of the researched cities. The selected indicators are a true reflection of the hospitality activity in each market.
Information:
South America:
Fernanda L’Hopital
Tel: +54 (11) 5263-0402
Email: flhopital@hvs.com
Global:
Juie Mobar
HVS Marketing
Tel: +1 561 908 3493
Email: marketing@hvs.com