Close

Cart

Total $0.00

Checkout

By Dr. Achim Schmitt

The hospitality industry has shown great dynamism in Latin America over the past five years and that trend looks set to continue in 2018. While tourism growth in Central and South America can be partly explained by the region’s diversity and natural resources, most of its progress stems from the continuous commitment of governments to promote the sector. So it did not come as a surprise that last year’s Travel and Tourism Competitiveness Index, published by the World Economic Forum, listed six Latin American countries among the top 50 most competitive globally.

While Mexico has traditionally been the strongest tourism economy in the region, Brazil, Panama, Costa Rica, Chile, and Argentina have also become increasingly competitive in this sector. For instance, Chile experienced increases in European (+6.3%) and Chinese (33.8%) tourist arrivals in 2017, with the number of foreign tourists rising by 14.3% compared with the previous year.

In addition, Ecuador and Colombia have followed the positive examples of Brazil (in 2014) and Argentina (in 2015) and have benefited from simplifying the visa procedures for tourists, in particular from China.

Tourism has also gained from regulatory improvements. Colombia, for instance, was able to secure major investment in the hotel industry after creating tax incentives and stabilizing the region. International hotel chains, such as Hilton, Marriott, and Hyatt, have increased their presence in the region and invested heavily in their Latin American hotel pipelines.

This investment not only increases the country’s competitiveness but also allows local tourism markets to perform better. Brazil offers a good example of such dynamics. According to STR, Sao Paolo’s hotel market increased its revenue per available room (RevPAR) by 10% during the peak season, whereas Rio de Janeiro’s hotel occupancy rates and RevPAR declined. This competition within Brazil will continue to have a positive impact on improving the country’s overall competitiveness and the sector’s sustainability.

That said, there are still great differences between countries and the region as a whole is far from being a stable tourist destination. Future investments are needed to fuel the development of businesses and infrastructure. If we examine developments over the past three years more closely, we see three main trends that will additionally impact the region.

  1. Focus on sustainable luxury accommodation

Greater political and economic stability and competition have traditionally served as the drivers of market differentiation – and Latin America is no exception to that.

According to Euromonitor International, the region’s luxury segment has consistently outperformed other hotel segments in the region over the past years.

For instance, revenue grew by 80 percent at Brazilian luxury hotels in 2017 compared to 2012. Niche luxury hotel chains, such as Six Senses and Banyan Tree, have spotted this opportunity and are increasingly willing to take on investment risk in the region. Such sustainable and eco-friendly luxury hotel accommodation can provide alternatives to the traditional five-star hotel chains.

In contrast to traditional “turismo rural”, eco-luxury hotels are able to embrace and leverage the cultural and natural diversity to attract tourists in the luxury segment. This makes them highly suited to position themselves sustainably in the Latin American hospitality market. But also independent hotels, such as Anavilhanas Jungle LodgeBotanique Hotel & SpaHotel Vira Vira, and Aite Eco Hotel, have identified this trend and started to position themselves in local hotel regions.

  1. Ageing travelers

According to Euromonitor International, Latin America’s traveler profile is also rapidly changing. As in many other global tourist destinations, repeat and new tourist arrivals to Latin America are 50 years and over. Fueled by growing global GDP, this segment has constantly outpaced all other age groups and is expected to reach 88 million travelers by 2020.

These forecasts will mean increased investments to cater to the needs of this segment. As retirees, baby boomers enjoy better health, have more disposable income, are better educated and are more willing to travel than the traditionalist generation before them (born before 1946).

Specialized travel agencies, seniors-only hotels, as well as extended stay hotels are just some examples of hospitality players positioning themselves for ageing travelers. Brazil, Chile, and Argentina seem to be particularly equipped to target this segment due to government subsidies and programs.

  1. The sharing economy

Traditionally, Latin America has been held back by the digital divide – between those who have access to the internet and digital technologies and those who don’t.

The populations of Argentina, Chile, Colombia and Mexico have been among the top Latin American countries where 50 percent or more of the population enjoys access to the internet. With increasing efforts to reduce this digital divide, more countries will enable their citizens to go online, which in turn will allow more individuals to participate in and benefit from the sharing economy.

Even though card payment volumes have been increasing in Latin America, cash will still be widely used in the near future. Given that access to, and use of, digital tourism platforms such as Airbnb are heavily dependent on digital payments, a large portion of the population, both as room providers and consumers, will continue to have limited access to these platforms.

Consequently, players in the sharing economy will focus their efforts on very attractive and stable local hotel markets. In Brazil, for instance, Euromonitor International states that Airbnb has again increased its listings in the most attractive tourist destinations to 290,000 offerings.

This trend will certainly continue throughout Latin America which will further increase the competitiveness of hotel offerings in major cities. With increasing security, tax reforms, and the growing desire of individuals to possess stable sources of income, the sharing economy is expected to provide an increasingly attractive alternative for national and international travelers.

In summary, Central and South America will continue to grow as tourist destinations throughout 2018. Through the promotion of domestic and international tourism, greater competitiveness, and alternative offers, the industry will provide attractive opportunities for hospitality companies and employment prospects for regional workforces in the years to come.

About Dr. Achim Schmitt

Achim holds a PhD from the University of Geneva, obtained his Habilitation at the University of Paris-Dauphine in France, and is a Visiting Professor at the University of Geneva as well as an Associated Researcher at the University of St. Gallen in Switzerland.

Before joining the academic world, Achim has been a strategy consultant for 4 years in Germany, Austria and Switzerland. He has gained academic experience at Audencia Business School in Nantes (France), Columbia Business School (USA), HEC University of Geneva (Switzerland), and the Universidad de Los Andes in Bogota (Colombia).

Achim’s research focuses on organization theory and strategic management, with particular interest in organizational ambidexterity, organizational decline, corporate turnarounds and strategic renewal.

About Margarita Cruz

Margarita Cruz, Ph.D in Economics, is an Assistant Professor of Strategic Management and Entrepreneurship at Ecole hôtelière de Lausanne. 

Margarita’s research lay at the intersection between organizational theory and entrepreneurship, with a particular focus on the role of authenticity on entrepreneurial outcomes such founding of new organizations and introduction of new products. 

During her doctoral studies, Margarita has also been a visiting PhD student at Robert H. Smith Business School, University of Maryland (2015-2016), thanks to the competitive Fellowship for most promising candidates granted by the Swiss National Science Foundation. In her research, Margarita is passionate about breweries, restaurants, and luxury hotels. 

In the classroom, Margarita likes to bring state-of-the-art trends and practices about the entrepreneurial and strategic scene in the hospitality and F&B industries. 

Before joining academia, Margarita gained experience as business engineer in the banking and chemical industries.

Please login or register to post a comment.