Growth of services will drive demand for hospitality in Latin AmericaLeitura de 6min
The data are part of the new report published by JLL, which takes as its basis only the so-called relevant and qualified offer.
The demand for hospitality in Latin America will enjoy significant growth through the next decade. The four countries of the region – Brazil, Mexico, Peru and Colombia – will experience the impact of a changing economic profile, with the services sector making an ever-greater contribution to the overall composition of Gross Domestic Product (GDP).
Together, these four markets can absorb 425,900 additional hotel rooms in the period 2012 to 2022. This implies annual expansion of 5.2% and absolute growth of 65%. The data are part of the latest report from JLL, which contemplates only relevant and qualified supply – rooms in hotels that are affiliated to Brazilian or international chains; independent establishments with at least 25 rooms; and those that have a minimum two-star rating.
While each of the four countries moves with its own dynamic and pace, when the subject is increased demand for good-quality hotels there are more similarities than differences, according to Ricardo Mader, Executive Vice President for Hotels & Hospitality at JLL: “These nations are undergoing a rapid transformation that will result in services accounting for 70% to 80% of GDP in the coming years, and that will represent a major boost to domestic demand for hotels.”
Expansion is dispersed
Another factor that should cause the above-mentioned Latin American countries to see a significant increase in hospitality demand is the huge infrastructure investment that each of them is making. One of the main impacts of such investments is the development of nuclei in cities that are distant from major urban centers.
The increasing importance of the services sector in the economies of Latin American countries has given rise to secondary and even tertiary markets that have great potential for the hospitality sector,” Mader said.
According to the study, Brazil’s 39 metropolitan areas account for 40% of the country’s total population and 80% of total hotel supply. Taken together, São Paulo and Rio de Janeiro, for example, have just 25% of total rooms. Almost half (42%) of the projected demand through 2022 is located in cities with less than one million inhabitants.
The survey suggests that these locations have potential demand to absorb 80,000 new rooms, without counting the more-than 5,000 rooms already being developed. To illustrate this phenomenon in cities other than São José and Campinas in upstate São Paulo, and Macaé in Rio de Janeiro state, Mader pointed to the case of Parauapebas in Pará state, which is home to one of the world’s largest iron-ore mines, controlled by the Vale mining company: “The city is growing incredibly fast, driven by mining and other private investments; the services sector is developing to keep pace with that and this in turn will drive the demand for good hotels.”
Clay Dickinson, Hotels & Hospitality Director for Latin America at JLL, noted that infrastructure has also played a key role in the development of service activities and increasing hotel demand in countries with mature markets.
The United States and the United Kingdom went through this stage several decades ago; some U.S. cities were completely cut off from the rest of the country but the growth of the middle class and the development of the services sector contributed to increasing the number of business trips. This drove the need to improve the infrastructure,” Dickinson said.
JLL estimates that Brazil will add 192,700 hotel rooms through 2022, an increase of 71.2% over the current relevant supply.