By Eduardo de Farias Lima, Contributing writer

The scenes that have been broadcast all around the world are impressive: Thousands of people in Buenos Aires, Córdoba or Mendoza, marching in the street, demonstrating against any new measure Argentina's government has launched.
                        
Then, in order to make people more peaceful, the government discusses and then simply relaxes the measures. But that doesn�t do, as people continue demonstrating. They complain about unemployment or fears of losing their jobs. Finally, when President Eduardo Duhalde announced the devaluation of peso, in the second week of January, economics started to become less blurred.
                        
For investors, this lack of decision from the government has not been good. Roger Titley, Miami-based vice president of development and assets management at Six Continents says, "For the last two years, capital for investment became scarce and money became gradually very expensive, due to interest rates. All we have opened in Argentina since 2000 was only three new hotels. Other projects have been abandoned."

Six Continents originally had five hotels planned. They have given up on two Holiday Inn projects. Interest rates from January 2000 to January 2001 increased from 20 percent to 45 percent a year, a study published by Latin-Focus.com finds.

Problems with Spanish companies: The hospitality case

Problems with foreign investment center around Spanish companies, which during the last 10 years have invested around US$41 billion, according to a report recently published in the Gazeta Mercantil newspaper. 

That makes Argentina one of the main destinations for Spanish money in the world. A good deal of the commercial activity comes from companies such as BBVA (Banco Bilbao-Vizcaya Atlántico), BSCH (Banco Santander Central Hispano), Repsol or Telefónica, a survey from BSCH states.

For Spanish investors, devaluation might represent a US$2.7 billion loss. This means one main worry for them.

Concerning Spanish hotel chains, the situation is not that bad. NH Hoteles, for instance, as one of the most important Spanish hospitality companies in Argentina, sees very good potential in Madrid�s stock exchange: about 18.19 percent increase, until the stock�s price reaches 13.20 euros each, according to UBS Warbug bank. 

According to the same report, "it is a company with fast growth." In Argentina, this is one of the most important chains. They own seven hotels there, all of them in business destinations: four in Buenos Aires, two in Córdoba and one in Tucumán.

The lack of money does not make them less bold. They are planning to inaugurate their eighth hotel, this time in Mendoza. Enrique Fortin, responsible for NH in Argentina, doesn�t want to hear about new developments. Right now he is recalculating the chain�s costs and whether or not to increase their prices.

"As 50 percent of our guests are local business people, devaluation did not yet induce new prices, but if our costs increase, we will certainly increase our rates," he says. In Argentina, NH hotels has an average occupancy rate of 50 percent, says Gabriele Burgio, the chain�s president.

Situation not comfortable for everyone

The situation is not comfortable for some other companies, such as Atlantica, a multi-brand hotel franchiser, based in São Paulo, Brazil. They franchise Choice, Sheraton and other brands to hotel owners. 

They have helped introduce the economy hotels concept in Brazil. Annie Morisey, the company�s vice president of sales and marketing, says: "I have been informed that the average occupancy rate in our two Choice brand hotels in Buenos Aires is as low as 20 percent," during January.

"We are about to prepare a new marketing strategy focused on Brazil (our most important market), that includes discounts on a 40 percent basis." 

Andersen's Hotel Benchmark Survey showed that as of October 2001 (some months before the financial crisis erupted during December 2001), a trend of declining occupancy rates in Buenos Aires, the largest market in Argentina, had already begun. 

Figures show that occupancy rates are very close to the break-even point, dropping nearly 20 percent between 2000 and 2001. 

"Some industry analysts see devaluation of the peso as an opportunity to attract tourists," says Rafael Pampillón, director of the Instituto de Economía, Madrid, Spain. Specialty leisure tourists, such as those going to Aconcágua, are creating a very prosperous region which sees few problems in offering a very good ecotourism product. 

There, no crisis is seen: some hotels are constantly crowded, some industry analysts say.

In Brazil, Argentinians might not come

In Brazil, as the most important market for international tourism for Argentina, fears are that tourists might not come.

Yet in Rio de Janeiro, the impact might not be to such a great extent (about 8 percent fewer tourists, according to Francisco Grabowsky, president of Rio de Janeiro�s department of the Brazilian Association of the Hotel Industry �
ABIH-RJ). In Santa Catarina, a destination closer to the Argentinian border, the decrease in the flow of tourists should mean a drop of US$90 million.

"Tourists from Argentina mean 70 percent of the overall occupancy for some hotels on the coast�, says Volnei Koch, president of ABIH�s in the state. In Bahia state, tourism entities recommend their associates to only accept people from Argentina who pay in advance, some industry insiders say.