Latin America

Latin Trade, August, 1998 by Claire Poole

With additional reporting by Sally Bowen in Lima, Brendan M. Case in Mexico City. Douglass Stinson in Miami and Mery Galanternick in Rio de Janeiro.

Tourism is picking up in many countries across the region. And the outlook remains bright.

LATIN AMERICA'S TOURISM SECTOR has put out the welcome mat, and both foreign visitors and foreign investors are flooding in.

Up-to-date region-wide statistics are hard to come by. But countries like Brazil, Argentina and Chile are enjoying healthy increases in the number of foreign tourists. After problems with local guerrilla movements and bad weather, the tourism sectors in Mexico and Peru are starting to turn the corner. And now that peace has come to Central America, countries like Costa Rica, Guatemala and Nicaragua are beginning to bring in more foreign visitors looking for a bargain vacation spot.

"Latin America has been virgin territory for so long," says Scott Berman, director of hospitality consulting services at U.S.-based consulting firm Coopers & Lybrand. "But it's really starting to pick up."

Why? The infrastructure that supports tourism--air access, hotels, ground transportation, multilingual tour operators and the like--has improved considerably in many countries across the region, particularly in Argentina and Chile. But Brazil and Peru are beginning to make inroads as well, as are many of the Central American countries.

The trend has caught the attention of regional and foreign hotel operators. More than US$750 million has been invested in Latin America over the last five years by some two dozen hotel chains, according to a new survey by U.S.-based consulting firm KPMG Peat Marwick.

Mexico-based Grupo Posadas, for example, operates a four-star Fiesta Inn in Belize City and has already bought some land to put up a new five-star Fiesta Americana in Caracas. But the group's big news came in early May, when the company acquired the Caesar Park brand name for Latin America for $123 million. The sale included three existing hotels, two in Brazil (Rio de Janeiro and Sao Paolo) and one in Argentina (Buenos Aires). The purchase made Posadas the largest hotel company in Latin America with 51 hotels in five countries.

Recent foreign investment includes plans by Choice Atlantica Hotels, a franchise of U.S.-based Choice Hotels International, to build and operate 100 hotels in Latin America in partnership with a fund managed by Darby Overseas Investments, a venture capital firm headed by former U.S. Treasury Secretary Nicholas Brady.

All in all, the top ten hotel chains in Latin America boosted their room capacity by an average of 17% between 1991 and last year, according to KPMG.

"Latin America's...outstanding economic performace [last year]...combined with recent market reforms, has created conditions for sustained increases in hotel investment," Clay Dickinson, senior manager of KPMG's real estate and hospitality practice, said when releasing the firm's survey.

Domestic tourism also seems to be improving, especially in countries like Brazil and Mexico. With many economies across the region on the mend, joblessness declining and real incomes rising, residents are more willing--and able--to splurge on a vacation. It has also helped that air fares among the local carriers are coming down, especially in countries like Brazil.

Inter-regional tourism is up, too, with Argentines going to Uruguay and Brazilians visiting Argentina and Chileans venturing all the way to Mexico. With agreements like Mercosur increasing trade between countries, it's a lot easier for residents to jump borders. It's also a lot cheaper to travel a few countries over rather than all the way to the United States or Europe.

Berman thinks this trend has created a huge opportunity for international developers that cater to mid-market tourists, rather than the upper echelon. "Regional tourism is really embryonic and often overlooked," Berman says. "But it shouldn't be ignored."

Bustling Brazil. Brazil's tourism authorities have set a goal to put the country firmly on the international tourism map by the end of this decade.

As part of a five-year program that started in 1996, the government is deregulating the air travel market and investing massively in the tourism industry.

Embratur, Brazil's tourism agency, and the Inter-American Development Bank are spending $1.2 billion to improve roads, airports and sanitation in three of Brazil's tourism regions: the Northeast, the Amazon and the Pantanal.

The private sector is responding positively to the government's action. About $5 billion in private projects has been allocated to build new hotels and thematic parks before the year 2000. Early this year, Terra Encantada. Brazil's answer to Disneyworld, opened its doors in Rio de Janeiro following a $300 million investment by Brazilian investors.

Foreign tourists are now starting to arrive. After dipping to one million in 1990, the number of foreign visitors to Brazil peaked at 2.6 million in 1996. Official figures for 1997 haven't been released vet, but tourism officials estimate that more than three million foreign visitors came to Brazil last year.