Brazil Hotel Revenue May Gain 20% on Expansion of Middle Class

Brazil’s hotels are likely to set a record for growth in demand this year, spurring international chains to double their market share in South America’s largest country within a decade, Jones Lange LaSalle Hotels said.

Brazil’s revenue per available room probably will jump at least 20 percent this year, according to Ricardo Mader, a Sao Paulo-based executive vice president at the real estate advisory firm. Revpar, a measure of occupancy and rates, rose a record 17 percent in 2010, according to a survey of about 400 hotels by Jones Lang LaSalle Hotels, part of Chicago-based Jones Lang LaSalle Inc.

Demand for hotel rooms in Brazil has been fueled by the middle class, which has grown to more than 50 percent of the country’s population for the first time, Mader said. Rising rates and occupancies have attracted increased interest from foreign investors and from international hoteliers, which operate 3.8 percent of Brazil’s hotels, he said.

“Most new projects we’re seeing are by international chains,” Mader said in a telephone interview. They are likely to double their market share in Brazil within 10 years, he said.

Room rates in Brazil, measured in U.S. dollars, soared 27 percent during the first half, the biggest increase among South American countries, according to London-based STR Global. That compares with a 3.4 percent increase in North America. STR focuses on chain hotels, while the report by Jones Lang LaSalle Hotels includes many local, independent owners, Mader said.

‘Unprecedented Uptick’

Jones Lang LaSalle Hotels has been advising private equity and institutional investors from the U.S., Europe and Latin America, as well as funds from the Middle East and Asia, on expansion in Brazil, Clay Dickinson, an executive vice president at the firm, said in a statement. There’s been “an unprecedented uptick in the amount of international investors evaluating development opportunities in Brazil this year,” he said.

Host Hotels & Resorts Inc. last year bought a 245-room JW Marriott in Rio de Janeiro, the city that will host the 2016 Olympics. The Bethesda, Maryland-based real estate investment trust paid about $48 million for the hotel, located near Copacabana Beach.

Morgans Hotel Group Co., the New York-based operator of boutique hotels including the Royalton and Mondrian, plans to add properties abroad, including in Brazil, Chief Executive Officer Michael Gross said in May.

Marriott’s 50 Hotels

Marriott International Inc., the largest publicly traded U.S. hotel chain, said in November it planned to boost its hotel count in Brazil to 54 from four. The Bethesda, Maryland-based company plans to develop 50 Fairfield by Marriott hotels throughout Brazil in a partnership with Rio de Janeiro-based real estate developer PDG Realty SA Empreendimentos & Participacoes.

An increase in international investments in Brazil, particularly in the high-end hotel market, will depend on the availability of funding, according to Mader.

“One thing that still is a big problem is the lack of financing,” Mader said. “Brazil is not a mature market and commercial banks are still not financing hotels. Once financing is more available, then we’ll see many more international luxury hotels.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE