Steady economy lifts Santiago hotels

SANTIAGO, Chile—The steady performance of Chile’s economy through the global downturn has provided a lift to Santiago’s hotel sector.   07 September 2011, By Shawn A. Turner, Finance Editor – HotelNewsNow.com

Santiago, Chile

The steady performance of Chile’s economy through the global downturn has provided a lift to Santiago’s hotel sector.

Chile’s estimated annual real growth rate in gross domestic product increased by 5.2% in 2010, according to the Central Bank of Chile.

“The past two years (in Santiago) have shown more and more demand,” said Tom Potter, area VP, South America for Hilton Worldwide. “It’s becoming a stronger destination for the leisure market. There’s a good business environment and a strong economy.”

Year-to-date through July, Santiago’s occupancy increased by 19% to 71.2% while average daily rate grew at an 11.4% clip to US$156.50 and revenue per available room jumped 32.5% to US$111.50, according to data compiled by STR Global, a sister company of HotelNewsNow.com.

“All hotels are running with very good occupancy,” said Eduardo Fahrenkrug, GM of the 293-room Crowne Plaza Santiago.

The market has recovered from the 8.8-magnitude earthquake that rocked central Chile in February 2010 and left hundreds dead, said Arturo Garcia Rosa, president of HVS Argentina.

“Not only has it recovered,” he said, “it’s growing.”

Read «S. American hotel market growing strong

The development picture
Overall, there are 75 properties representing 8,126 rooms in the market, according to STR Global.

Marriott International manages two properties in the city: the 280-room Marriott Santiago and the 205-room Ritz-Carlton Santiago.

That number could increase.

“We have a healthy pipeline of opportunities in the Santiago market, which we are looking at with our different brands,” Laurent de Kousemaeker, chief development officer, Caribbean and Latin American region for Marriott International, wrote.

Fahrenkrug anticipates supply to ramp up in 2014, which could hurt hotel operations, he said.

“Too many hotels coming; too many new problems coming,” he said.

Clouds on the horizon?
As strong as the market has performed during the past couple of years, there are potential threats to the city’s hotel performance beyond increasing supply.

First, there are signs Chile’s stalwart economy could be due for a hiccup, which could mean a hiccup for Santiago hotels, too.

Crowne Plaza Santiago

The country’s economy is tied closely to mining activity, especially copper mining. But copper futures dropped by as much as 1% to US$8,870 per metric ton on 6 September on worries that European countries will be unable to control respective mounting debt crises, according to a Bloomberg report.

Second, the cost of land is increasing at a fast pace, Hilton’s Potter said. Such increases could stymie develop. “Cost of land is an issue,” he said.

Despite these headwinds, de Kousemaeker said the outlook for Santiago hotels during the next 12 months is “rising.”

“All things being equal, Santiago will continue to grow in the foreseeable future,” he said.