AAAAAAAAAAA. Sergio Giorgetti Director Horwath HTL Latin America

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1 GHN Market Report: Lima Sergio Giorgetti Director Horwath HTL Latin America 1. Lima: Overview Lima is the capital and main city of the Republic of Peru, not only because of its population (the highest of the country) but also because of its importance as a political, cultural, financial and commercial center. With a population of approximately 9 million people it ranks fourth as one of the most populated cities in Latin America and The Caribbean. It is also one of the top 30 most populated urban agglomerations in the world. It s a city with a very important geopolitical position in the world, considered a strategic point for various kinds of commercial activities, which turns it into one of the most important financial centers in Latin America. The hotel supply in Lima is diversified and hotel chains have a significant presence in the city, though some international hotel chains were not able to make their entry into the market so far. According to data provided by the MINCETUR (Peruvian Ministry of Tourism and Foreign Commerce), Peru received approximately international tourists during 2014, that generated an average currency income of USD per tourist. During the period, international visitors arrival to Peru almost tripled from over 1 million to 3.2 million. Average expenditure per tourist also grew significantly from USD 787 in 2002 to USD in 2014 (+54%). Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 1

2 Note: The values of average expenditure include the items Travel and Transportation of passengers. Source: BCRP / MINCETUR Regarding Lima s hotel employment values, and according to the statistics provided by MINCETUR, categorized lodgings are responsible for employment positions per month, whereas those under no category are responsible for employment positions per month. As in most of the South American markets, informal lodging establishments still represent the majority of the lodging supply. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 2

3 Source: MINCETUR Ministry of Tourism and Foreign Commerce The International Airport Jorge Chavez (Lima) received a total passenger flow of almost 15 million during Peru will still be considered as a target destination for tourism and hotel business development, not only due to the national economy (GDP) sustained growth, but also because of international and national tourism s positive behaviour over the last years. According to the report published in May 2014, regarding the Ranking of Latin-American cities by investment appeal produced by the company IDN- Inteligencia de Negocios (based in Santiago, Chile) and the University of Rosario (Bogotá, Colombia), the city of Lima ranks 5 th in the ranking of Urban Investment Attractiveness Index (INAI) for 2014, only after Santiago (Chile), Sao Paulo (Brazil), Mexico City (Mexico) and Bogotá (Colombia). This report also notes that Lima remains at the top five, although it has dropped one position compared to the previous year. It also states that the city is attractive due to its national macroeconomic platform, its good reputation in the international area and the growing improvements in urban comfort, despite certain challenges regarding their human capital quality. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 3

4 Investment climate (city scale) Investment N RK. 14RK. 13City / Country climate (country Index 2014 Multionational INAI 2014 scale) Companies Financial Business Human Urban *** potential reputation Resources Comfort 1 1 Santiago, Chile Attractive 98 Very High 75,3 59, ,1 2 2 Sao Paulo, Brazil Nice 144 Very High 73,0 68, ,0 3 3 México City, México Attractive 132 Low 65,6 70, ,4 4 5 Bogotá, Colombia Nice 99 High 68,8 65, ,2 5 4 Lima, Peru Attractive 77 High 76,6 45, ,2 6 6 Monterrey, México Attractive 36 Low 41,9 29, ,0 7 8 C. de Panamá, Panamá Nice 24 High 44,8 8, , Buenos Aires, Argentina Reluctant 144 Low 74,3 71, ,6 9 7 Rio de Janeiro, Brazil Nice 52 Middle 46,2 63, , Medellin, Colombia Nice 29 Middle 50,1 33, ,6 Note: *GDP 2014 USD Billions forecasted ** GDP per capita in USD forecasted ***This report also identified, in 2014, the number of multinational companies that were part of the top 500 largest companies in the world according to the Fortune Magazine, and the number of the MultiLatin companies (largest companies within the region according to the Forbes Magazine) that are present in the Metropolitan Regions in countries different from their origin and that might present potential to bring Foreign Investments from other countries. Source: IdN Inteligencia de Negocios (Santiago, Chile) / University of Rosario (Bogotá, Colombia) 2. Supply Lima s hotel supply is the largest and most diversified supply within Peru (it represents 31% of the total national supply.) Three, four and five-star hotels (economic, midscale and upscale) represent approximately 37% of the total supply of hotel establishments and 57% of the total supply of categorized hotel rooms, within Lima s department (taking into account that noncategorized hotels are not included in these figures). According to MINCETUR, by the end of 2014, Lima s lodging structure included 362 categorized hotel establishments (22 Upscale/Luxury; 30 Midscale; 81 Budget/Economic; and 229 categorized as Others ) and non-categorized establishments. The total number of rooms from categorized hotel establishments amounts to Between 2003 and 2014, and taking into account both, categorized and non-categorized hotel establishments, the hotel supply has grown at an average rate of 3% per year. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 4

5 Years Number of hotels Number of rooms Number of beds Source: MINCETUR Ministry of Tourism and Foreign Commerce Source: MINCETUR Ministry of Tourism and Foreign Commerce The share of the market of the categorized accommodation in Lima is much higher in terms of total number of rooms (+50%) than in terms of establishments (+35%). Typically, the noncategorized lodging supply presents a much smaller number of rooms per establishment and they are typically managed by families and disregarding professional management practices. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 5

6 Source: MINCETUR Ministry of Tourism and Foreign Commerce Generally, hotel staff ratios from different hotel categories within Lima match with hotel staff ratios from other cities within the region and similar characteristics, taking into account that in the case of international hotel chains these ratios could vary. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 6

7 Source: MINCETUR Ministry of Tourism and Foreign Commerce 3. Market performance Over the last years, Lima s market has presented steady occupancy rates, with an average between 23% and 40%. It must be taken into account that these occupancy levels include both categorized and noncategorized lodgings. Non-categorized accommodation usually presents low occupancy rates when compared to hotels that have professional management and are chain affiliated. At the same time, the average stay fluctuated concerning national and foreign markets, given the fact that in the last 2 years, the national market increased the average stay, whereas the international market acted on the contrary. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 7

8 Years Annual Average AOR (%) 23,6% 26,0% 27,4% 27,1% 29,7% 31,2% 29,1% 29,6% 33,1% 38,3% 39,9% 37,0% Average stay (days) 1,22 1,22 1,21 1,35 1,37 1,35 1,31 1,27 1,27 1,32 1,38 1,38 Nationals (days) 1,14 1,12 1,12 1,24 1,26 1,23 1,21 1,19 1,20 1,21 1,26 1,31 Internationals (days) 2,04 2,15 2,08 2,38 2,42 2,03 2,02 1,98 1,79 1,93 1,98 1,83 Source: MINCETUR Ministry of Tourism and Foreign Commerce During 2014 AOR of the three, four and five-star hotel categories (budget/economic, midscale and upscale/luxury) indicated a major gap, compared to the AOR from total hotel supply. The categories that presented the best occupancy levels during the last year were upscale/luxury, with an average of 68%, and midscale with an average of 67%, whereas three-star category (budget/ economic) obtained an average occupancy rate of 52% per year, regarding market general average of 37%. Regarding seasonality, the occupancy curve in Lima is similar to the one that is present in markets oriented to the corporate segment/mice, with lower AOR during holiday periods and weekends, and with occupancy peaks during the last months of the year, in which most events at national and international level take place. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 8

9 Source: MINCETUR Ministry of Tourism and Foreign Commerce The highest average stay ratios are present in the midscale lodging category, as it is the most frequently used by guests in cities with similar characteristics to Lima. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 9

10 Source: MINCETUR Ministry of Tourism and Foreign Commerce According to STR Global, during the last years the Peruvian market has presented a stable scenario in terms of AOR with occupation rates between 64% and 69%. On the other hand, the ADR presented an accumulated growth of 13% in USD between 2010 and 2014, which resulted, according to occupation levels, in an accumulated 18% growth of the RevPar in USD for the same period. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 10

11 AOR ADR (USD) RevPAR (USD) Source: STR Global Argentina 62% 62% 59% 59% 59% Brazil 67% 69% 66% 65% 63% Chile 65% 70% 71% 68% 66% Colombia 59% 59% 58% 60% 57% Mexico 55% 57% 58% 60% 62% Peru 64% 68% 69% 66% 67% Argentina 130,6 139,8 137,6 130,3 123,0 Brazil 115,6 140,3 136,9 127,9 127,2 Chile 137,2 150,6 166,4 159,0 145,3 Colombia 141,2 150,9 140,7 131,5 118,5 Mexico 101,8 102,6 104,5 124,3 120,2 Peru 126,6 134,3 133,1 136,1 143,7 Argentina 80,4 86,8 81,4 77,0 72,6 Brazil 77,3 96,1 90,6 83,4 79,7 Chile 88,9 105,7 117,8 107,4 95,9 Colombia 83,3 88,5 81,4 78,6 67,5 Mexico 55,9 58,3 61,1 74,5 75,1 Peru 81,2 91,0 91,4 89,7 96,7 When comparing Peru with other Latin American countries, it presents AOR levels above average during the last years, especially during 2014, with the highest global occupancy rate (67%) and one of the highest ADR (USD 144) Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 11

12 Source: STR Global 4. Demand profile Approximately 63% of the people who stayed at categorized Hotels in Lima during 2014 were of national origin, while only 37% of the visitors were foreigners. Regarding overnight stays, the foreign market share increased surpassing the national market (52% foreign; 48% national) mainly due to the fact that their average stay is longer. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 12

13 Source: MINCETUR Ministry of Tourism and Foreign Commerce According to a report issued by the Peruvian Commission for the Promotion of Exports and Tourism (PROMPERU), out of the number of foreign visitors who entered Lima in 2013, USA represented 20%, generating the highest flow of tourists, followed by Chile (9,0%), Argentina, Brazil and Colombia (6,0%) amongst others. It can be observed that most tourists arrived from South and North America, with a lower flow of tourists from other continents such as Europe. Regarding the age range of visitors, foreigners are mainly between 25 and 34 years old, although tourists between 35 and 64 years old also represent an important share. In the case of national tourists, however, most people who enter Lima are between 45 and 64 years old. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 13

14 Source: PROMPERU - Peruvian Commission for the Promotion of Exports and Tourism With regards to reasons for visiting Lima, as of 2013 most foreign visitors arrived on vacations or leisure (56%) while a lower number arrived to visit family or friends (17%) and for business purposes (17%). Source: PROMPERU - Peruvian Commission for the Promotion of Exports and Tourism Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 14

15 The average spending of national tourist during 2013 was USD 87, while that of foreign tourists was USD (about 1400% higher than national tourists). Source: PROMPERU - Peruvian Commission for the Promotion of Exports and Tourism Lima is the main destination for the MICE (Meetings Incentives Conventions and Exhibitions) segment in Peru. The city receives over 84% of the total international events hosted in the country, according to the ICCA s annual ranking. During the last 10 years the number of events held in the city increased by 73%, and although in 2012 Lima suffered a big decrease, it was able to recover quickly. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 15

16 Source: ICCA International Congress and Convention Association Presently, Lima ranks 10 th in the Americas regarding the rankings provided by the ICCA (International Congress and Convention Association). Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 16

17 Source: ICCA International Congress and Convention Association 5. Development: pipeline The hotel supply in Lima presents many of the most important hotel chains in the world such as: IHG, Hilton, Marriott, Wyndham, Accor, Starwood, Carlson Rezidor, Meliá, amongst others. The city also presents establishments managed by regional hotel chains and operators such as Atton Hotels (Chile) or Grupo Fën (Argentina), and the most important national players (Casa Andina and Libertador Hotels, for example). Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 17

18 Recent Hotel Development in Lima Name Category # of Rooms Affiliation / Hotel Chain Location Opening Year Investment Ibis Larco 3* Economy 247 Accor Hotels Miraflores 2010 USD The Westin Lima Hotel & Convention Center 5* Super Luxury 301 Libertador Hotels, Resorts & Spas San Isidro 2011 USD Hilton Lima 5* Upscale 207 Hilton Hotels Miraflores 2012 USD Arawi Lima 4* Midscale 30 Arawi Hotels Miraflores 2012 USD Casa Andina Casa Andina 4* Midscale 155 Select Hoteles Miraflores 2012 USD Four Points Lima 4* Midscale by Sheraton 134 Starwood Hotels Miraflores 2013 USD Arts Boutique Hotel Hotel Boutique 14 Independent Barranco 2013 USD Dazzler Tower Grupo Fën 3* Economy 140 Lima Hoteles Miraflores 2013 USD Source: SHP - Hotels Association of Peru The Westin Lima At the same time, many international brands, such as Four Seasons, Hyatt and NH Hoteles, are developing projects in Lima due to its great potential and forecasted demand growth. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 18

19 For the next years, more than 10 hotels, most of them branded, are being projected and would add approximately new rooms to the market. Lima Hotel projects pipeline Project / Brand Category # of Rooms Hotel Costa del Sol Ramada Ibis Miraflores 3* Economic 3* Economic 123 Best Western Plus 4* Midscale 40 Affiliation / Hotel Chain Hoteles Costa del Sol Location Estimated Opening Year Estimated Investment San Isidro 2015 USD Accor Hotels Miraflores 2015 USD Best Western Hotels Miraflores 2015 USD Courtyard By Marriott 4* Midscale 150 Marriott Hotels Miraflores 2015 USD (new Swissotel Hotels Swissotel Lima 5* Upscale San Isidro 2015 USD rooms) & Resorts 3* Ibis Lince 146 Accor Hotels Lince n/a n/a Economic Wyndham Hotels Tryp Lima 4* Midscale 140 Miraflores n/a n/a and Resorts Wyndham Hotels Wyndham Lima Airport 4* Midscale 144 Airport n/a n/a and Resorts Novotel Lima Airport 4* Midscale 150 Accor Hotels Airport n/a n/a NH Lima 4* Midscale 160 NH Hoteles Miraflores n/a n/a Holiday Inn Lima Airport 4* Midscale 179 IHG Group Airport n/a n/a Hotel San Agustin Hoteles San Agustín Miraflores n/a n/a Source: Horwath HTL Apart from the above mentioned projects, there are also rumours (yet to be confirmed) about the opening of two new 5-star Hotels (luxury) in the Miraflores area: a Hyatt in Larcomar, in the low part of Costa Verde which would allegedly demand a USD 60 million investment, and a Four Seasons as part of a Mixed Use Project (retail, hotel, offices and housing complex) located in the former San Martin Quarters, which is expected to demand a USD 680 million investment. Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 19

20 Four Seasons Hotel Project (Mixed use) Hyatt Hotel Larcomar Project Horwath HTL is a long-standing member of GlobalHotelNetwork.com and GHN s Investment Committee. Sources INEI National Institute of Statistics and Informatics of Peru MINCETUR Ministry of Foreign Commerce and Tourism of Peru PROMPERU Commission for the Promotion of Peruvian Exports and Tourism SHP - Hotels Association of Peru ICCA International Congress and Convention Association Copyright (c) 2015 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 20