The Brazilian Hotel Sector - April 2015
Introduction
 
“Soaring property prices have made it virtually impossible to develop new hotels in the primary markets due to extremely elevated land values … most of the main hotel developers in Brazil are real-estate developers who can earn higher margins in the residential market … nevertheless, there are windows of opportunity for hotel development in Brazil, especially as concerns budget and economy hotels in secondary or tertiary cities with populations of between 80,000 and 1,000,000, where the average GDP growth, in 2012 and 2013, has exceeded 10%.”

This report provides an overview and update about Brazil’s hotel sector, including: the outlook for spending on travel and tourism in Brazil; hotel capacity and recent growth by region and province; recent hotel performance; the ranking and penetration of hotel chains in the country; major hotel developments and pipeline; and distribution channels.

This report looks at the following areas:

●	What will be the medium-term impact of the 2014 World Cup and the 2016 Summer Olympics on Brazil’s hotel sector?
●	How is hotel development financed in Brazil?
●	What are the leading domestic and international hotel chains in Brazil?
●	Where are the best hotel development opportunities in Brazil?

KEY FINDINGS
●	The two big sporting events held in Brazil, the 2014 World Cup and the 2016 Summer Olympics, are unlikely to have a durable impact on Brazil’s tourism and hospitality sector.
●	The hotel sector is being impacted by a slowing economy where the growth rate has dropped to practically zero; however, a depreciating Real could make Brazil more attractive as a destination for incoming tourists and encourage Brazilians to travel domestically.
●	The best opportunity for hotel development in Brazil is for branded budget and economy hotels in secondary and tertiary cities, due to the low cost of land and lack of quality hotel product.
●	There are approximately 65,000 new hotel rooms in the pipeline across Brazil.
●	Accor and Choice are the leading branded hotel operators in Brazil.
●	The two leading Brazilian hotel companies are Atlantica, the master franchisee of Choice in Brazil and a franchisee of Carlson’s Radisson brand, and BHG (Brazil Hospitality Group), the master franchisee of Louvre Hotel’s Golden Tulip brands (Royal Tulip, Golden Tulip, Tulip Inn) in Brazil.
●	Debt financing for hotel projects is virtually non-existent due to very high real interest rates, which exceed 6%. Consequently, most hotel projects are financed with 100% equity and are very often condo structures whereby each individual room is sold off as an investment product.