Lodging Real Estate Trends – Executive Summary
Latin America Pipeline Shows Steady Growth.
The Latin America Hotel Construction Pipeline has grown steadily for five years and is now at 846 Projects/141,433 Rooms, nearly double the 2010 low-point. Hotel development continues to be concentrated in the region’s two largest economies, Brazil and Mexico, which together now account for 71% of the Total Pipeline.
Brazil’s Pipeline has 453 Projects/79,431 Rooms and is up 11% and 15% Year-Over-Year (YOY) respectively. The Pipeline should continue to grow as the country prepares to host the 2016 Summer Olympics. The upcoming world-class event, expected to draw one million visitors, has helped spur development in key Brazilian markets and throughout the broader Latin America region.
Eight of the top ten Latin America markets are in Brazil, including Rio de Janeiro with 56 Projects/11,712 Rooms, Campinas with 35 Projects/6,622 Rooms and Sao Paulo with 34 Projects/6,894 Rooms. Rio de Janeiro, among the top ten hotel construction markets in the world and the epicenter of the upcoming Olympics, added 11 projects YOY and now has 39 projects currently Under Construction, 2 projects Scheduled to Start in the Next 12 months and 15 projects in Early Planning.
The Pipeline for other South American countries has grown modestly and is at 137 Projects/19,026 Rooms. Development in Columbia, 43 Projects/6,963 Rooms, has continued to benefit from a resurgent economy and an improved business climate. It is now the third largest country for hotel construction in Latin America. The top markets in Columbia are Cartagena with 12 Projects/2,426 Rooms and Bogota with 8 Projects/1,840 Rooms.
Mexico, Latin America’s number one tourist destination, has the region’s second largest Pipeline with 147 Projects/21,942 Rooms. Projects in the Early Planning stage, 34 Projects/6,165 Rooms, are up almost 50% YOY by projects and more than 100% by rooms, while projects Under Construction and Scheduled to Start in the Next 12 Months have shown only limited growth.
As a consequence, Mexico will see an increasing number of projects move through the Pipeline, break ground and open later in the real estate cycle. The country’s Pipeline is bolstered by a strong US economy and currency that continues to fuel tourism to Mexico and by recent legislation that permits the formation of Real Estate Investment Trusts, effectively attracting more developers and investors to the country’s hotel industry.
Central America’s Pipeline dropped by more than 25%, now at 39 Projects/6,166 Rooms, and appears to have peaked. The Central America Pipeline consists of seven countries and is heavily influenced by Panama which accounts for 18 of the 39 projects. As a result of the decline, Panama has dropped from the fifth largest Pipeline in Latin America to the ninth.
Of the 846 Pipeline Projects in Latin America 230 projects, 27%, have yet to select a brand. Many of these projects have entered the Pipeline in the Early Planing stage, which is up more than 25% YOY. The Pipeline is skewing towards bigger, more upscale projects, which typically have longer timelines for planning and permitting. Increasing project counts in Early Planning suggest that the current real estate cycle will probably peak within the next two to three years.
Accor leads in Brazil, as Hilton leads in Mexico
Of the 846 projects in the Latin America Pipeline 73% or 616 projects have already selected a brand. The top five franchise companies account for more than half of those brand selections. Accor with 112 Projects is the leading franchise company in Latin America and has more than double the number of projects of any other franchise company. Choice Hotels follows with 53 Projects, Marriott International 51 Projects, Hilton Worldwide 51 Projects, and InterContinental Hotels Group (IHG) 48 Projects.
Accor has 98 (88%) of its projects in Brazil, 75 of which are Ibis branded. Hilton’s Pipeline in Latin America has grown by 24% in the last year, the biggest increase of any franchise company. It is the leader in Mexico with 26 projects, 17 of which are Hampton Inn & Suites.
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