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Buenos Aires in 2011 Top Hotel Investment Market

Source: Real Estate Channel
By: Michael Gerrity
09.28.2010

According to a new Jones Lang LaSalle hotel investment report, Bogotá, Buenos Aires, Lima and Santiago emerge as key strategic markets for Latin America in 2011.

Jones Lang LaSalle Hotels proprietary research report FocusOn: Strategic Spots for South American Hotel Investment which reveals four of the most favorable destinations for hotel investment in South America. The list was compiled based on the strong demand fundamentals driving the markets and potential for investment-grade branded supply. While Brazil, South America's largest economy by a wide margin and most populous nation, offers the largest array of opportunities for growth, a number of cities in other countries beyond Brazil boast strong demand fundamentals and a favorable investment environment which is resulting in real estate opportunities.

"Four of the key markets are Bogotá, Colombia; Buenos Aires, Argentina; Lima, Peru; and Santiago, Chile," said Ricardo Mader, executive vice president for Jones Lang LaSalle Hotels in São Paulo. "Real GDP in these countries is set to increase by a compound annual growth rate of four percent or more through 2015--well above growth rate projections for most mature markets."

Santiago has become a preferred destination for hotel investment due to the country's relatively sophisticated capital markets. Santiago has often been the test market for the introduction of an international brand to South America. As such, the city comprises the highest number of international-grade, four-and five-star hotel rooms of the four cities in the report.

Due to the country's stability and growth prospects, Santiago's market will continue to support opportunities for the development of new hotels over the longer term. "Las Condes and El Bosque are currently the most sought after areas for hotel development. With the city's luxury segment well-served, the primary opportunities are to develop both limited service and upscale hotels in Santiago or to make strategic acquisitions and conversions in order to gain a foothold," said Mader.

Buenos Aires is the second largest metropolitan area in South America after São Paulo. "Though the hotel market experienced significant declines in performance in 2009, visitation trends and economic fundamentals are rebounding and investors continue to seek investments in Buenos Aires on a selective basis," said Clay Dickinson, executive vice president for Jones Lang LaSalle Hotels.

The city's stock of institutional-grade, four- and five-star hotels spans 14 hotels, encompassing approximately 3,200 rooms. "This hotel segment is expected to grow to 3,800 rooms by 2014 with the opening of approximately five new hotels," said Dickinson. The small initial base of rooms will help keep this development pipeline from creating an oversupply. "The continued appeal of Buenos Aires as South America's preeminent tourist destination is expected to continue to produce respectable operating performance for existing and new hotel supply," said Dickinson.

Bogotá, the main gateway to Colombia and the distribution hub for tourism within the country, is experiencing growing demand for hotels. Colombia finds itself on a solid path of recovery. In year-to-date July 2010, over the same prior-year period, RevPAR at Bogotá hotels rose by four percent, according to Cotelco.

Unlike São Paulo and Santiago, Bogotá did not experience a significant amount of hotel construction during the past 15 years due to the country's previous political instability. "This has now turned around with the addition of several new hotels. In addition, the stock of institutional-grade, four- and five-star hotels is expected to grow by 37 percent between now and 2012, which creates a myriad of investment opportunities, including potential conversions and management contracts," said Dickinson.

Lima has seen a lesser degree of international hotel development and the market still lacks the depth of international hotel brands seen in Buenos Aires and Santiago. "Over the next three years, the city of close to nine million residents is expected to see the addition of just three institutional-grade four- and five-star hotels. Growth in operating fundamentals is expected to be sustained over the medium term as the city is not facing a boom in new supply," said Liliana Ribeiro, vice president for Jones Lang LaSalle Hotels in São Paulo.

As Lima continues to experience rising economic growth, there are still market opportunities for the development of new hotels across all categories. "Lima has virtually no representation of upscale branded select service hotels and this remains an investment opportunity," said Ribeiro.

Domestic and international hotel investors should keep Bogotá, Buenos Aires, Lima and Santiago on their radar as the cities' economic and demographic trends continue to strengthen, resulting in a number of exciting hotel investment prospects.

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