SAO PAULO, BRAZIL - Big changes are on the horizon for the Latin America lodging industry as more than 425,000 new rooms are expected to be required throughout the region over the next 10 years. According to an industry-sponsored white paper prepared by Jones Lang LaSalle, "Economic Transformation Drives Latin America's Lodging Industry," a surge of hotel opportunity is predicted for the coming decade in Brazil, Mexico, Colombia and Peru. The research found that the four countries face a crucial inflection point, and are poised to undergo rapid, largely domestically driven economic growth reminiscent of the United States and other mature economies in decades past.
Check out a video summary of the white paper: http://www.youtube.com/watch?v=f8BHU2R1RNU
Jones Lang LaSalle forecasts the gross room supply growth for these four countries at 425,900 rooms, representing a compound annual growth rate of 5.2 percent and an absolute percentage increase of more than 65 percent over a 10-year period.
The research includes data from a wide variety of sources on 1,100 projects located across 900 cities and towns in Brazil, Mexico, Peru and Colombia. Combined, these countries account for nearly 70 percent of the total population in Latin America (excluding the Caribbean) and approximately 75 percent of the region's GDP.
"Every calculation points to a disproportionate increase in the amount of hotel and timeshare development required to satisfy projected demand within those target countries," said Clay Dickinson, Executive Vice President of Jones Lang LaSalle's Hotels & Hospitality Group responsible for the Latin America region. "These countries are still at the initial stage of their transformation toward services-oriented economies."
Included in the findings are the two primary driving forces behind the regional economic growth, and the pronounced increases in required hotel supply. The first is this transformation to a high proportion of service-oriented industries, economic activities which have been demonstrated to be strong generators of hotel demand. In the aggregate, nearly 60 percent of the productive activities of Brazil, Mexico, Peru and Colombia are services-oriented.
The second driver that not only underscores the macro-level economic transformation underway, but supports outsized growth in required hotel development is the sheer volume of public and private sector investment in thousands of infrastructure, industrial, mining, manufacturing and services-oriented projects across these countries. For example:
- the world's largest iron mine is expected to create some 30,000 new jobs in Parauapebas, Brazil;
- the $4 billion Bicentenario pipeline will connect Yopal, Colombia and its newly discovered oil fields to the Caribbean at Puerto Convenas by 2015;
- Mexico's new Durango-Mazatlan superhighway will dramatically improve travel time from eight hours to just three; and,
- Peru's $50 billion backlog of announced gold, copper and other mining activity will stimulate road and maritime infrastructure projects, including a $600 million investment in the Almirante Miguel Grau Port facility.
"We are at the onset of a period of explosive, sustainable growth in the region, and now is the time to seize the opportunity for those investors who are looking to develop a long-term, high-margin and scalable business in the hotel industry in Mexico, Brazil, Colombia and Peru," said Daniel del Olmo, Wyndham Hotel Group's Senior Vice President & Managing Director in Latin America. "As the world's largest hotel company, our portfolio of renowned brands provides investors with great options, particularly in the economy and mid-scale segments which will drive the greatest growth in the years to come in Latin America. With 120 hotels open and operating in the region and over 10,000 rooms in our pipeline representing one in every four rooms under development in South America, we believe we are well positioned to take advantage of the region's future growth."
The combined effect of these two drivers was analyzed and used to forecast changes in the Hotel Supply Ratio (HSR) – the number of hotel rooms per 1,000 inhabitants – at the country and market level. The aggregate HSR for these same countries is expected to increase by more than 52 percent (from 1.6 to 2.5); which equates to a 65 percent increase over current supply.
"By its very nature, increases in hotel supply tend to be cyclical, leading to periods of oversupply. Nonetheless, our bullish outlook on hotel development in the region for the long term is based upon the countries' fundamental economic transformation, significant capital investments already committed in infrastructure and increasing productive capacity and rapid increases in accumulated domestic savings. We believe these factors, along with the emergence of a solid middle class, create a virtuous circle of increasing affluence which will spur further spending on commercial and leisure travel, boosting hotel demand and benefiting investors in the region," said Dickinson.
The white paper, "Economic Transformation Drives Latin America's Lodging Industry," was prepared by Jones Lang LaSalle and supported by industry partners, including Wyndham Hotel Group, DLA Piper, VOA Associates and RCI, Inc.
Jones Lang LaSalle's Hotels & Hospitality Group serves as the hospitality industry's global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm's more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory, valuation and asset management assignments. The group's hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.
About Wyndham Hotel Group
Wyndham Hotel Group, part of the Wyndham Worldwide (NYSE:WYN) family of companies, is the world's largest hotel company with approximately 7,410 hotels and over 635,100 rooms in 67 countries under 15 hotel brands: Wyndham Hotels and Resorts®, Ramada®, Days Inn®, Super 8®, Wingate by Wyndham®, Baymont Inn & Suites®, Microtel Inn & Suites® by Wyndham, Hawthorn Suites by Wyndham®, TRYP by Wyndham®, Howard Johnson®, Travelodge® and Knights Inn®. In addition, the company has licence agreements to franchise the Planet Hollywood Hotels, Dream® and Night® brands and provide management services globally.
All hotels are independently owned and operated excluding certain Wyndham, Hawthorn Suites by Wyndham and TRYP by Wyndham hotels, as well as certain Ramada, Days Inn and Super 8 hotels outside of the U.S.A., which may be managed by one of the affiliates of Wyndham Hotel Group.
Wyndham Hotel Group is based in Parsippany, New Jersey, U.S.A. Additional information is available at www.wyndhamworldwide.com. For more information about hotel franchising opportunities visit www.whgdevelopment.com or desarrollo.grupowyndham.com.