At
the HOLA conference, hospitality executives discuss labor, investments, demand
and partnerships.
MIAMI — Charles Macon said that for the hospitality industry, COVID was the
best learning experience possible.
“Because you really tore everything apart,
micro-analyzed everything, and found new breakpoints in terms of occupancy. You
generally found big gains in expense controls and improvements, some of which
were not sustainable over time,” said Macon, CEO of the Americas for London-based
L+R Hotels.
Macon participated in a “Views from the Boardroom” panel on Thursday at the 14th annual Hotel Opportunities Latin America (HOLA) conference held at the Loews Coral Gables Hotel in Florida. The panel included Macon, Giacomo Sissa, CEO of Lima, Peru-based Urbanova and Gustovo Viescas, president of LATAMC at Wyndham Hotels & Resorts.
Macon said his biggest concern is that all
those costs are returning. “When you look at the CAGR on wage growth,
especially in the United States, and at the CAGR on projected RevPAR growth,
you start to say, okay, margins are going to get pinched,” he said. “So, margins
will continue to be one of the leading key indicators for us as we explore new
investment opportunities, and as we asset manage our existing portfolio, it’s
just critical that we stay on top of it.”
Latin America could be set up, I think, over the next 10 years to be the net beneficiary of a lot of travel demand, but also a lot of ownership interest in developing more products because the simple economics will be better.
Charles Macon
Macon said looking at hotel investment in
Latin America and achieving excellent returns requires the company to put a
risk premium on doing business in that market. Those risks could be with
currency, working with different operators, political stability, etc. However,
he said the next 10 years will be “very interesting” in Latin America, and he
again goes back to tracking CAGR wage growth, especially if labor is much less
expensive in the market.
“If you put all that into a blender, and
you say, what will it take me to invest in Latin America? If the labor model
becomes much less expensive, and 70% of my expenses are 10% less, and we’re
driving good experience and have stable governments and stable currencies, then
those risk factors come down,” he said.
“Then, all of a sudden, Latin America could
be set up, I think, over the next 10 years to be the net beneficiary of a lot
of travel demand, but also a lot of ownership interest in developing more
products because the simple economics will be better.”
Latin American demand
Sissa said Urbanova is a multi-asset class
owner in Peru. While it isn’t currently developing hospitality in the country,
he is optimistic about more developments in the near future.
“Is demand going to be
sustainable?,” Sissa said. “There’s optimism, but at the same time, we’re
recognizing that we still have uncertainty.”
Is demand going to be sustainable? There’s optimism. But at the same time, we’re recognizing that we still have uncertainty.
Giacomo Sissa
Sissa does see plenty of “white spaces” in
the country, especially in secondary markets. “There are opportunities, and I know that
many of the people in this room are looking at those from a development
perspective; we feel that probably 12 to 18 months from now, there’s going to
be a little bit more clarity of how things will play out.”
Viescas said Wyndham has had great success
with its strategic partnership with Playa Hotels & Resorts and Palladium
Hotel Group, which has allowed the company to enter new markets and attract a
new type of customer in Latin America. “With these partnerships, we’ve entered
into the all-inclusive segment now… what we see in these kind of partnerships
is a way to accelerate our growth,” he said. “With our development team, we can
sign between 30 to 40 deals per year, which is a way to grow.”
Viescas said the key word for leisure,
business and group is “normalization.” “Since the pandemic, people are willing to
spend more and more money on experiences than on goods, and vacations are the
best experience that someone could have, so that demand will remain,” he
said. The demand is back for business, but we have a wide region, so we should
go market-by-market because we have several situations.”
He mentioned strong demand markets like
Mexico, strengthened by the success of nearshoring, and markets with more
challenges, like Argentina. “The party is over in Argentina in some ways,” he
said. “The ones who had the chance to visit my country during the last few
years, it was extremely cheap for foreign people. Now that’s over. That’s good
for the country, but it’s not good for the occupancy rate.”