AAAAAAAAAAA. GHN Market Report: Santiago. The lodging market in Santiago de Chile. Mariano Carrizo Managing Director Horwath HTL Latin America

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1 AAAAAAAAAAA GHN Market Report: Santiago Mariano Carrizo Managing Director Horwath HTL Latin America The lodging market in Santiago de Chile 1. Santiago: Overview Santiago is the main gateway of Chile and concentrates a relevant commercial and services activity, both in national and regional terms. It also holds the largest and most diversified hotel supply of the country, which shows many international hotel brands, mainly in the midscale and upscale market segments, and it is also the headquarters of the most important Chilean hotel chains such as Diego de Almagro and Atton Hotels. The 4* and 5* hotel supply in Santiago (midscale and upscale) represents 60%, approximately, of the total lodging supply in the city. According to SERNATUR, by the end of 2012, the lodging infrastructure in the Metropolitan Region of Santiago was formed by more than 150 lodging facilities and more than rooms. Considering total number of rooms in 2008, during this period, the compound annual growth of the supply was 6,4%. Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 1

2 Rooms Lodging facilities Source: SERNATUR Chile is expected to keep on being regarded as a favorable destination both for tourism development and hotel investments, due to its political and economic stability and to the fact that the arrival of foreign tourists increased steadily in recent years. National GDP is expected to grow 4.5% and consumer prices will remain low (forecasted 3%). Santiago, as well as Chile, has presented a solid scenario for the development and the performance of the hotel supply. The country continued to be regarded as one of the most solid and predictable countries in macroeconomic terms, presenting the highest GDP per capita in Latin America, a forecasted growth of the national GDP of 4.4% and a low inflation rate (about 2 % consumer prices). Other economic indicators relevant for the tourism and hotel industry point out that the Chilean currency presented a +10% annual depreciation against US dollar and remains in the 11th position of the world raking regarding host countries for FDI (Foreign Direct Investments) with over US$ 30 billion received during In 2013 the revenue regarding inbound tourism was above US$ million and Chile received more than 3.5 million international tourists reaching a figure that increased over 30% when compared with 2010 numbers. Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 2

3 2. Supply The development of the branded hotel supply in Santiago has been mostly focused in the midscale and upscale products; however, it is expected to present a larger market penetration of lower midscale, economic and branded budget products in the upcoming years. As for the branded hotels, the hotel supply in Santiago seemed to have faced two moments: 1. Development of the 5* hotel supply during the 1990s 2. Development of the 4* hotel supply during the 2000s These stages are highlighted when compared to the average room addition of 4* and 5* products in the last decades: Average room addition per year Rooms 1980/ / / /2013 4* * Total Source: Horwath HTL In the last years there has been a significant growth of the average room addition of 4* hotel rooms in the market. Additionally, and as previously said, there are many projects under development and construction oriented to the economic segments of the demand. This situation points out the orientation of the market development for the upcoming years in Santiago: economic and midscale products. Still, there is place for the development of some new upscale and luxury hotel products with brands that are entering into the Chilean market: Four Seasons and Renaissance (Marriott). Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 3

4 Hotel rooms development timeline Opening date 4* and 5* hotels Before s 1990s 2000s * * Source: Horwath HTL The branded hotel rooms supply of 5* and 4* products is directly linked to the development stage of each of the segments. Whereas the 5* supply could be considered as mature, the 4* supply seems to be still in a consolidation stage. Still, in both cases, the brands have a high penetration. The economic supply (3* and 2*) is still in an introduction stage, when considering the total number of branded hotels within this segment of the market. Hotel rooms supply and brand affiliation 4* and 5* hotels 100% 90% 80% 70% 60% 50% 40% 30% 76% 45% 37% 20% 10% 0% 15% 9% 17% 5* 4* Source: Horwath HTL Independent National hotel brands International hotel brands Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 4

5 The participation of international hotel brands is much significant within the group of the 5* hotels than within the group of the * hotels, where the national hotel brands have a higher participation. Regarding the location of the hotel supply in Santiago, the 5* supply is more concentrated than the 4* supply. The region of Las Condes holds the largest portion of the total rooms supply (4* and 5*). While other neighboring regions such as Providencia and Vitacura also concentrate a significant number of hotel rooms. Other regions such as Pudahuel (where the Airport and industrial facilities are located) are acting as new and alternative regions for the development of new supply. Hotel rooms supply Location 4* and 5* hotels 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 45% 76% 37% 15% 17% 9% 5* 4* Source: Horwath HTL Independent National hotel brands International hotel brands 3. Market performance Over the last years, the hotel market in Santiago presented a stable scenario in terms of AOR with occupancy rates between 65% and 72%. As for the ADR the growth reached a 15% in USD from 2010 to 2013, which resulted in an 18% growth for the RevPAR in USD in the period. Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 5

6 AOR (%) Chile 65,00 70,20 70,80 67,60 Santiago 65,40 71,50 72,40 69,00 ADR (USD) Chile 137,26 150,64 166,43 158,97 Santiago 145,87 158,12 176,02 167,55 RevPAR Chile 89,29 105,68 117,80 107,40 (USD) Santiago 95,45 113,06 127,37 112,63 Source: STR Global The market performance of Santiago is very similar to the performance of the country regarding average occupancy and daily rates. Hotel market performance - Chile & Santiago 2013 USD 180,0 160,0 140,0 120,0 100,0 80,0 60,0 40,0 20,0 0,0 107,5 115,6 Chile Santiago ADR RevPAR AOR 70,0% 65,0% 60,0% 55,0% 50,0% AOR Source: STR Global When compared to other Latin American markets (including Miami), Santiago presented acceptable AOR s over the last years, especially in The 2010 low is directly linked to the earthquake that the country suffered in February of that year. The 2013 / 2012 drop off, both in the ADR and AOR rates, could be considered as a result of a mix including: new rooms entering the market and a slight depreciation of the local currency. Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 6

7 AOR / ,00 75,00 72,40 Miami Rio de Janeiro % 70,00 65,00 60,00 65,40 71,50 Santiago 69,00 Sao Paulo Mexico City Buenos Aires 55,00 50,00 45,00 40, Source: STR Global ADR / ,00 220,00 Rio de Janeiro USD 200,00 180,00 160,00 140,00 120,00 145,87 158,12 176,02 Miami Santiago 167,55 Sao Paulo Buenos Aires Mexico City 100,00 80,00 60,00 40, Source: STR Global Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 7

8 4. Demand profile Approximately 68% of the guests accommodated in the lodging establishments in Santiago in 2013 were foreigners. Despite Santiago s profile as a business destination, the incidence of events and conventions, as well as the leisure demand (ski centers, vineyards, etc.) limits the impact of seasonal business demand. Consequently, months that are traditionally low, in terms of demand, for the business segment such as December, January and July, still remain highly demanded by foreign visitors due to the positive impact of the leisure segment. Room nights demanded - According to guests' origin - Santiago Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chilean Foreign Source: SERNATUR Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 8

9 Visitors, room nights and AOR of Hotels in Santiago Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Visitors Room-nights AOR (Hotels) 80,0% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% Source: SERNATUR Santiago is the main destination for the MICE (Meetings Incentives Conventions and Exhibitions) segment in Chile. The city receives over 60% of the total international events hosted in the country, regarding the ICCA s annual ranking. International events in Chile and Santiago - ICCA # of events % % 65% 71% 69% % 79 63% 64% 63% % 56% 60% % 70% 60% 50% 40% 30% 20% 10% Chile Santiago % of national total 0% Source: ICCA International Congress and Convention Association Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 9

10 International events in Chile - Top host cities 2012 Other cities Concepcion Valparaíso Vina del Mar Santiago # of events Source: ICCA International Congress and Convention Association Presently, Santiago ranks 5 th in the Americas regarding the rankings provided by the ICCA (International Congress and Convention Association). International events the Americas - Top ten host cities 2012 Washington Vancouver Bogota Mexico City Toronto Santiago de Chile Montreal Sao Paulo Rio de Janeiro Buenos Aires # of events Source: ICCA International Congress and Convention Association Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 10

11 5. Development: pipeline The Chilean hotel transaction and investment market, and particularly Santiago s, is one of the most transparent and consolidated ones in South America. This is sustained in solid macroeconomic and financial indicators and local availability of debt financing for hotels. There are currently 16 ongoing international projects that will add more than 2,300 rooms to the market. Santiago Hotel projects pipeline Project Renaissance Four Seasons Affiliation / Hotel Estimated Opening Category # of Rooms Location Chain Semester / Year 5* Super Luxury 201Marriott Vitacura 2 nd * Super Luxury 200Four Seasons Las Condes 1 st 2016 The Singular 5* Upscale 62The Singular Downtown 2 nd 2014 Plaza El Bosque 4* Midscale 276Plaza El BosqueLas Condes 2 nd 2014 DoubleTree by Hilton 4* Midscale 230Hilton Vitacura 2 nd 2014 Courtyard by Marriott 4* Midscale 200Marriott Las Condes 2 nd 2014 Nhow 4* Midscale 140NH Hotels La Dehesa 1 st 2016 Park Inn 4* Midscale 126Carlson Rezidor Las Condes 1 st 2014 Innside by Meliá 4* Midscale 120Meliá Hotels Providencia 1 st 2016 Ibis Manquehue 3* Economic 216Accor Hotels Manquehue 1 st 2014 Ibis Downtown 3* Economic 130Accor Hotels Downtown 1 st 2016 Ibis Providencia 3* Economic 120Accor Hotels Providencia 1 st 2016 Ibis Budget Downtown 2* Budget 169Accor Hotels Downtown 1 st 2016 Ibis Budget Providencia 2* Budget 150Accor Hotels Providencia 1 st 2016 Source: Horwath HTL In addition to the above mentioned projects, there are also another two projects (for a 4* and a 5* hotel) that would be part of Costanera Center, a major mixed use real estate development that includes offices, mall (both already opened) and a Convention Center. The project is being developed by Cencosud, one of the most important players within the real estate and retail market in Chile and in the Region. Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 11

12 As previously mentioned, the hotel supply development curve in Santiago shows an aggressive growth of the 5* branded hotels during the 1990s decade. Afterwards, during the 2000s and beginning of 2010s the development was focused in the 4* products. As a result of this trend almost a thousand 4* midscale rooms will be added to the market before the end of this year. Subsequently, the development of new branded hotel rooms is expected to be focused in the economic and budget segments of the demand. Santiago Future branded rooms supply (% of total new branded rooms) Source: Horwath HTL Renaissance Hotel Project Costanera Center Project Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 12

13 Transactions In 2012 the hotels that were part of the Mexican company Grupo Posadas (Caesar Business and Caesar Park hotels) were sold to Accor Hotels. This operation included the Grupo Posadas hotel in Santiago (Caesar Business). In 2013, a local private equity fund acquired the Meridia Capital portfolio, which included three hotel properties, becoming one of the most relevant hotel transactions within the South American Region. Santiago Recent transactions Price # of YearProperty USD rooms Buyer Seller Gamma Capital / 2013InterContinental Santiago Meridia Capital Larrain Vial Gamma Capital / 2013Crowne Plaza Santiago Meridia Capital Larrain Vial Gamma Capital / 2013Ritz Carlton Santiago Meridia Capital Larrain Vial Sources INE National Institute of Statistics of Chile SERNATUR National Tourism Service of Chile STR Global Horwath HTL is a long-standing member of GlobalHotelNetwork.com Copyright (c) 2014 Global Hospitality Resources, Inc., San Diego, CA USA. All rights reserved. 13