by Carlos Alonso*
With the continuous economic growth of the countries of the region, Hotel investments continue their upward curve. The arrival of foreign capital and domestic investments are modernizing and diversifying the types of Hotels that are being developed. With construction costs below other markets, South America has a very large appeal for foreign investors, as it is growing and with destinations where demand is high.
But investing in this region means understanding that there are very marked habits when making investments, and you have to know these to be able to manage successfully. Negotiating contracts and investments and getting them to materialize tends to be a task of knowing the local idiosyncrasies rather than the global norms that tend to govern in other markets.
Investing in Colombia is very different from investing in Brazil, and this is not only due to the economic cycle, but also to the consumption and investment habits that are part of the culture of each country. While in Colombia many hotel projects have materialized and continue to be done through trust companies and with the sale of titles, in Brazil the business is carried out with Property Deeds such as Condo Hotels.
An example of these systems is the successful Colombian chain GHL that with the system of trusts that predominates in Colombia for real estate developments and sale of titles has built one of the most important hotel companies in the country and thus achieving a very good return for its shareholders.
In Brazil, the Blue Tree chain is another example of a successful company, with 29 Hotels and expanding. Part of the investment of this chain comes from the pension funds of the Caja Económica Federal – Funcef, which saw in the hotel business an interesting investment option. In 2007 Blue Tree expanded its operating radius to the Argentine market.
In Argentina, on the other hand, hotel investments have historically been private, and only in the last five years some national groups are beginning to diversify their capital raising to develop their projects and expand.
With all these variants and existing differences, the investor who is evaluating investing in a South American country will have to be informed of these concepts and plan according to the characteristics of each market, so that his project is a success.
*Director of Carlos Alonso & Associates, a hotel project developer specialized in the South American market. I work in Executive positions for Intercontinental Hotels in Brazil, Argentina, Central America and the United States. More information in www.calonsoassociates.com
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