Brazil's Hotel Market Continues Explosive Growth, Unprecedented Increase of International Investors

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Based on Jones Lang LaSalle Hotels recently released Lodging Industry in Numbers - Brazil 2011, Brazil is enjoying continued high economic growth that is spurring high revenue per available room (RevPAR) growth in the hotel sector for the second consecutive year.

In 2010, the country posted the highest RevPAR growth rate on record at 17.3 percent, and hotel performance in 2011 is tracking at a similar increase, with growth on pace to reach the double-digit mark again this year. The firm's annual report provides a detailed performance analysis of nearly 400 hotels, condo hotels and resorts in Brazil and is the largest surveyed sample of hotels available in the region.

"Booming domestic and international travel demand in the country continues to drive up occupancy and average daily rates, or ADR, in markets across Brazil," said Ricardo Mader, Executive Vice President for Jones Lang LaSalle Hotels in São Paulo. "The rise in ADR has outpaced the country's GDP growth, highlighting the significant recovery in the sector."

"We're seeing this trend continue. In 2011, RevPAR has reached the double-digit growth mark in the 16 hotels we asset manage throughout Brazil, which is indicative of the overall market conditions," Mader said.

Investors are undoubtedly taking note. "Following Host Hotels & Resorts' acquisition of the JW Marriott Rio de Janeiro in the fourth quarter of last year, there has been an unprecedented uptick in the amount of international investors evaluating development opportunities in Brazil this year," said Clay Dickinson, Executive Vice President for Jones Lang LaSalle Hotels. "The firm is advising private equity and institutional investors from the United States, Europe and Latin America on market expansion strategies. Investment funds from the Middle East and Asia have Brazil on their radar as well." Domestic investors, comprised of local hotel companies and private developers, are also increasingly focused on expansion.

Yet amid all this interest, the supply pipeline for Brazil remains moderate. "The market is not facing an explosion of new supply. The number of rooms under construction and in advanced stages of planning for the next three years represents a moderate increase of 6.8 percent of total existing rooms in the country," said Manuela Gorni, Senior Vice President for Jones Lang LaSalle Hotels in São Paulo.

This is based on the firm's database of hotel projects that will be affiliated with the dominant hotel chains present in Brazil. The pipeline of properties in these stages encompasses 198 hotels with 30,500 rooms, largely concentrated in the economy and mid-market segments. Additionally, with only approximately 27 percent of hotel room stock in the market affiliated with an international or domestic brand, the opportunity for the expansion of branded product remains strong.

Brazil possesses solid long-term fundamentals, a rapidly growing middle class, rising demographic trends, a diversified list of trading partners and tepid supply pipeline. "The investment cycle is gaining continued momentum, including further announcements of foreign brands planning a multi-unit roll out of hotel product. Additionally, the consolidation of domestic players is expected as the country gears up for the FIFA Soccer World Cup in 2014 and the 2016 Summer Olympic Games in Rio de Janeiro," said Gorni.

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