Jones Lange to Latin America: Brother, Can You Spare a Half-Million Hotel Rooms?

Global real-estate consultancy firm Jones Lang LaSalle says that Latin America’s lodging industry may have to add nearly half a million rooms over the next decade to keep pace with the expanding service sector. The report underscores a long-held perception that the service sector is fast outshining other sectors in the region.

The lodging supply is set to increase by 65% in the next ten years, particularly in four major countries – Brazil, Mexico, Colombia and Peru. The consultancy firm also notes that these four countries account for nearly 70% of the total population in Latin America and approximately 75% of the region’s GDP.

According to Jones Lang LaSalle, these countries are “poised to undergo rapid, largely domestically driven economic growth reminiscent of the United States and other mature economies in decades past.”

“These countries are still at the initial stage of their transformation toward services-oriented economies,” said Clay Dickinson, Executive Vice President of Jones Lang LaSalle’s Hotels & Hospitality Group responsible for the Latin America region.

“By its very nature, increases in hotel supply tend to be cyclical, leading to periods of oversupply. Nonetheless, our bullish outlook on hotel development in the region for the long term is based upon the countries’ fundamental economic transformation, significant capital investments already committed in infrastructure and increasing productive capacity and rapid increases in accumulated domestic savings,” Dickinson added.

Nearly 60% of the productive activities of Brazil, Mexico, Peru and Colombia are services-oriented, says the report, underlining that the service sector is driving demand for lodging.

The consultancy firm has cited four examples to substantiate its argument that a macro-level economic transformation is underway across the region:

• The world’s largest iron mine is expected to create some 30,000 new jobs in Parauapebas, Brazil.
• The $4 billion Bicentenario pipeline will connect Yopal, Colombia and its newly discovered oil fields to the Caribbean at Puerto Conveñas by 2015.
• Mexico’s new Durango-Mazatlan superhighway will dramatically improve travel time between the two cities from eight hours to just three.
• Peru’s $50 billion backlog of announced gold, copper and other mining activity will stimulate road and maritime infrastructure projects, including a $600 million investment in the Almirante Miguel Grau Port facility.