Travel demand persists for Latin America, but recession and hotel supply growth loom

 Wednesday, April 5, 2023 


Latin America will not be immune to the global recessionary conditions economists predict in the second half of 2023, but overall, the region’s economic growth as well as hotel sector performance indicate recovery despite lagging pockets.

At the beginning of the pandemic, they thought Latin America was especially vulnerable to external shocks and they wouldn’t be able to recover GDP until 2024, but by last year most countries had recovered growth, said Adriana Arreaza, Director of macroeconomic studies at Banco de Desarrollo de America Latina, during the SAHIC Latin America & The Caribbean Hotel & Tourism Investment Forum.

In 2022, the region notched 3.7% GDP growth overall; however, growth was uneven as it typically is across a region with such a wide variety of government policies and pandemic recovery protocols.

Factors that will help Latin America even in a global recession include that inflation is calming down, though it likely will remain high this year, Arreaza said.

However, the cycle of reducing interest rates is expected to start in Latin America likely before advanced markets because they started increasing interest rates earlier, and inflation could go back to targets faster, she said.

Another plus for the region’s overall economy is that “adequate” foreign exchange reserve levels in most countries grant resilience against some external shocks, even if there was a panic and some flight to quality or to safe havens in international markets, Arreaza said.

And while tourism contribution to GDP continues to grow, international arrivals have not reached 2019 levels in most countries, with the exception of Puerto Rico and the Dominican Republic.

Still, she predicted that following the rapid recovery in 2021 and 2022, economic growth in Latin America will decelerate significantly due to recessionary conditions.

Hotel Performance

Despite the cloudy global backdrop, tourism recovery across Latin America for leisure and business travel generally continues to be a bright spot, said Patricia Boo, senior area director of Latin America for STR, CoStar’s hotel analytics firm.

Hotel occupancy across the region was just shy of 2019 levels in 2022 and started 2023 strong, though Peru’s hotels lag in this metric “because the political and social situation there is complicated and it will take longer to recover occupancy,” Boo said via translation.

However, all countries are seeing recovery so they’re arriving at or surpassing pre-pandemic levels.

Average daily rate has grown generally in Latin America, led by Mexico, Boo said.

High ADR in Argentina has been driven by the country’s outsized inflation, which topped 100% in mid-March as a result of failed economic policies levied by the government in recent years.

Major cities across the region are growing real ADR, adjusted for inflation, though Buenos Aires still lags.

Boo presented three major themes characterizing the region’s recovery:

Leisure persists: Major resort and vacation destinations in the region have been able to grow revenue per available room above 2019 levels, driven by ADR.

Boo cited Mexico as “the good example of this, since during the pandemic it’s been an outstanding market, given relaxed restrictions.”

Brazil in particular has had above-average occupancy in its resorts, and STR data shows demand growing faster for the country’s non-all-inclusive resort options.

Boo called Cancun “the bleisure destination,” and said weekend occupancy never dipped below 60% in 2022.

“When we look at future occupancy in Cancun, we see peaks of holidays that have a huge impact on the market,” she said. “The takeaway is that we expect occupancy to be strong and growing.”

Business travel returns: Hotel demand recovery accelerated in Latin America’s main corporate destinations during the last quarter of 2022, with hotels in those cities at between 68% and 84% occupancy in November, which was high for the market, Boo said.

Further recovery of business travel also is evident in daily booking trends. Typical “shoulder days” of Sunday and Thursday show more occupancy growth, bridging the gap to weekends.

Group business demand also is making a strong start in 2023, and to illustrate this, Boo showed occupancy by segment in Panama City, Panama, where group occupancy levels hit all-time highs in 2022, topping 2018 and 2019 levels.

Profitability: Hotels in Colombia in particular are pushing profitability, with revenue growth exceeding costs, and Cartagena in particular is leading major cities in the region in total revenue per available room.

Supply Outlook

Boo warned that new hotel supply is on the horizon across Latin America, most notably in Mexico,which has 29,000 rooms across 200 hotel projects and 45 brands in its pipeline; and 11,000 of those rooms are already under construction.

That pipeline represents 4% growth of Mexico’s existing rooms supply. Central and South America have nearly 36,000 rooms in the regional pipeline, led by Brazil with 17,000 rooms.

The majority are slated for Accor brands, followed by Hilton and Wyndham Hotels & Resorts.

Outside Brazil, Costa Rica has the most rooms in its pipeline, followed by Panama and Belize, and those rooms are committed primarily to Marriott International, Hilton and Wyndham brands.

« Back to Page

Related Posts


Subscribe to our Newsletter

I want to receive travel news and trade event update from Travel And Tour World. I have read Travel And Tour World's Privacy Notice.

Sep 26
September 26 - September 28
Sep 29
September 29 - September 30
Oct 03
Oct 04
October 4 - October 6