Colombia shakes stigma, ready for growth

Tax incentives, a developing middle class and a hospitable nature are attracting many international players to Colombia’s hotel industry.

HotelNewsNow – 26/09/2013 – By Jason Q. Freed, News Editor

Luis Fernando Correa Bahamon of Red Empresarial Luis F. Correa discusses Colombia’s opportunity for hotel development.
Luis Fernando Correa Bahamon of Red Empresarial Luis F. Correa discusses Colombia’s opportunity for hotel development during SAHIC 2013

BOGOTA, Colombia—Colombia’s hotel future is bright, and both domestic and international investors are touting the country’s readiness for growth.

A long-term government tax incentive aimed at improving the country’s infrastructure is helping hotel developers justify financing. A developing middle class is creating demand for more economy and midscale hotels. And the hospitable nature of Colombians helps hotel managers put together solid staffs rather easily and inexpensively.

Inflation is “under control” in Colombia, and the coffee-growing region, beaches, the tropical conditions all provide investment opportunities, said panelists at this week’s South American Hotel & Tourism Investment Conference. The Colombian hotel industry hit its stride when it recently began attracting institutional funds and sovereign wealth.

A group of secluded islands off the coast of Cartagena remain largely undeveloped, providing development opportunity if infrastructure is planned strategically, panelists said.

Government
Luis Fernando Correa Bahamon, president of Red Empresarial Luis F. Correa, pointed to Bogota as an opportunity for more hotel development. Red Empresarial Luis F. Correa opened a Tryp by Wyndham near the Bogota airport last year and plans to open an attached Wyndham Hotel in late October.

“Thanks to the new century policies there are no political colors so, as we have desires to develop more, we can do that,” Correa Bahamon said.

Roger Rafael Alfaro Araujo, legal and development director at Real Hotels & Resorts, said the transparency among Colombia’s government has improved significantly. Real developed Bogota’s only luxury hotel, the JW Marriott, where SAHIC was held.

“It was a surprise to the group to find there was a single line of thought from the president down; we were really delighted by this,” Rafael Alfaro Araujo said. “We saw the opportunity that there was no brand such as Marriott in Colombia.

“We found synergies with developers who had land in the area, and we felt the mixed-use approach with office space and malls was a great opportunity,” he continued. “We wanted to give it a Colombia flavor.”

The legal framework was an important part of looking to develop in Colombia, said Camilo Bolanos Dutriz, VP of real estate and development in South America for Hyatt Hotels Corporation.

“The rules of the game must be clear so national investors are comfortable,” he said.

“I would place my money in Colombia providing you don’t change the rules of the game—continue strengthening the legal framework and be consistent in local government,” Rafael Alfaro Araujo said. “How many parking spaces do I need? What are the land costs? What are the municipal taxes and (value added tax)?”

Labor
While real estate is often about location, location, location, for Hyatt it’s more about people, people, people, Bolanos Dutriz said.

“For us it has truly been something that in other countries we don’t find at the same level—to the point of view of training and preparation,” he said. “We see there are well-prepared people here and hospitality is something they carry in their blood.”

Hyatt is looking to develop in what Bolanos Dutriz called “Colombia’s most important cities—Bogota and Cartagena.”

“We think there is a lot to be done in the future,” he said. “There are many reasons to continue to work in Colombia—the economy is doing well and what Proexport (Colombia) is doing, they’re doing things very well.”

Human resources are very important, Bolanos Dutriz said, adding: “People in Colombia are very professional.”

“If you don’t have the right human resources, perhaps the clients don’t come back,” Rafael Alfaro Araujo said.

Secondary cities
Because the two main urban locations in Colombia are reaching peak supply, secondary cities are looking increasingly attractive, panelists said.

Roberto Palacios, chief financial officer at Hoteles City Express, said improving economic conditions are opening travel possibilities for domestic travelers.

“We found attractive conditions here,” Palacios said of Colombia’s secondary cities.

Bolanos Dutriz said the growing middle class today represents about 60% of the general public.

“If I had to invest my money in a project I would go to a secondary market,” he said, suggesting Bucaramanga as an example.

Palacios said Colombians “must be extremely proud” about how they’ve increased safety and turned around the dominant perception of crime in the country.

“We feel there is legal transparency,” he said. “We’ve always felt safe in Colombia. I think you should be extremely proud for what you’ve done.”

“There’s still some ignorance from different countries,” Bolanos Dutriz added. “The perception needs to be changed, but from the investors’ perspective it’s not a concern.”

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