JLL Research Indicates Region Could Support Nearly 450,000 New Hotel Rooms by 2025
MIAMI, FL -- (Marketwired) -- 05/23/16 --
The Latin American lodging market continues to undergo a significant transformation despite economic pressures. According to research that JLL (NYSE: JLL) presented at this year's Hotel Opportunities Latin America (HOLA) Investment Conference, sustained investment in existing and new hospitality projects will fuel lodging demand to support supply growth through 2025.
The firm's paper, Impact of Economic Transformation on Latin America's Lodging Industry, includes an analysis of hotel supply and demand in six Latin American countries: Mexico, Chile, Argentina, Brazil, Colombia and Peru. Combined, these countries account for more than 75 percent of the total population in Latin America and approximately 85 percent of the region's GDP.
JLL's research confirms that the economic outlook of the world's emerging countries is indeed less optimistic than it was a few years ago. Decreases in commodity prices, particularly oil and gas, currency devaluations and shifting investor sentiment, have impacted economic growth. Despite the region's impediments to growth, which are being experienced unevenly across the six targeted countries, the broader transformation toward more open, services-oriented economies continues largely unabated.
"We estimate that 449,500 new hotel rooms, including many that are already in the pipeline, could be supported in the six profiled countries between 2015 and 2025," said Clay Dickinson, Managing Director with JLL's Hotels & Hospitality Group for the Latin America region. "This gross increase is expected to be dispersed across more than 300 local lodging markets of various types and sizes, representing a 57 percent increase in the amount of quality hotel rooms currently available."
The research includes additional supportable lodging supply estimates for each of the six countries, as well as the following highlights:
- Mexico's lodging market is the most advanced in the region with an existing hotel supply ratio (a measure of the estimated relevant hotel rooms in a country per 1,000 inhabitants) of 2.6. A steady volume of business, tourism and infrastructure investment over the next decade will increase its hotel supply ratio to 3.8.
- Chile, generally regarded as one of Latin America's most stable economies, is expected to see a robust 5.3 percent increase in supportable supply, bringing in an estimated 46,700 quality hotel rooms by 2025.
- Argentina has the third largest existing supply of quality hotel rooms, and a significant number of hotel projects should materialize in the next two to three years. Buenos Aires presents the highest growth opportunity with 14,000 new rooms expected over the next 10 years, although an anticipated uptick in agro-industrial investment and pent-up demand are expected to support new supply in the provinces.
- Brazil, which has the largest and most diversified economy in Latin America, has received significant investment over the past decade. This, combined with two global events -- the 2014 FIFA World Cup and 2016 Summer Olympic Games -- has already propelled considerable investment in the lodging sector, with more than 30,000 rooms currently under construction.
- Colombia has also experienced substantial supply increases driven by tourism, general economic growth and special tax incentives. While the petroleum sector has suffered, Colombia is expected to garner a steady amount of investment volume over the next decade as it continues to emerge as an attractive business and tourist destination.
- Coming off a comparatively small base of existing stock, Peru shows the highest growth rate among the profiled countries, with an 8.3 percent compounded annual growth rate in quality lodging supply over the next decade.
JLL's research also revealed the proliferation of regional and global branded hotels across all of the countries. The vast majority of new hotels added between 2012 and 2015 are branded, as are planned projects. Brand changes and conversions from independent properties were also prevalent during the period, with approximately 11,000 room conversions in Brazil and 10,000 in Mexico. The trend toward branding is expected to accelerate with the addition of new hotels and the removal of obsolete product, and by 2025 branded assets are expected to surpass independent products.
The paper, Impact of Economic Transformation on Latin America's Lodging Industry, was prepared by JLL's Hotels & Hospitality Group and supported by Wyndham Hotel Group, AccorHotels, Hilton Worldwide and Interstate Hotels & Resorts. Information was derived from a number of sources, including Smith Travel Research, national hotel associations, online travel agencies, JLL's proprietary databases and Financial Times (FT) Confidential Research. The full report is available at www.jll.com/latam-whitepaper.
JLL (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. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
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