Latin America

While luxury travel suffers globally due to the economic crisis, Latin America is investing in luxury infrastructure to appeal to local and international travellers after the crisis is over. Often perceived as a low-cost destination with limited high-end infrastructure, Latin America is preparing to steal its share from North America, Europe and Asia Pacific.

Wealthy travellers spend eight times more than average tourists, according to Core Brazil, but account for only 3% of travellers. Pre-crisis, players embarked on transforming Latin America into a luxury destination and will continue with investment plans in preparation for the recovery. In Mexico, US$3.6 million will be invested in states like Guanajuato to build luxury infrastructure including high end hotels e.g. Rosewood Hotels and Resorts and the revitalisation of its historic centre. PromPeru actively pursues luxury travellers promoting the region’s exoticism and exclusive services such as taking a luxury cruise in the Amazon and travelling to Machu Picchu in a luxury train.

The World Wealth Report reveals that wealthy Latin Americans are the least impacted by the global crisis, registering the smallest fall of -6% compared to the global average of -20%. North America, Europe, Asia Pacific registered heavy losses in the High Net Worth Individuals (HNWI) indicator, Brazil, the largest by HNWI in Latin America, saw wealth decline by 8%.

Hotels continue to pursue luxury strategies in Latin America, especially as the region weathers the economic crisis well. Low penetration of global luxury brands in Latin America illustrates the potential for growth where only 8% of hotel outlets are part of a hotel chain. In April 2009, Four Seasons announced plans to open three hotels in Brazil by 2012 including Rio de Janeiro and São Paulo total investment is expected to reach US$450 million. Five Brazilian luxury hotels made the top of Condé Nast’s luxury hotels list in Latin America and Colombia, Peru, Panama and Argentina are seeing aggressive investments in the luxury segment. Argentina is set to open five five-star hotels in the next two years, adding 500 rooms to its hotel supply.

“With a population of nearly 376 million people, South America has very few international brands. The cost of construction, land and labour are significantly lower than in North America and Europe, therefore requiring less investment for setting up new businesses. The luxury boom is already happening in some areas and the result will be noticed in about five years from now when the region will be booming with new properties being launched and demand driven this way as never before.”
Nicolas Klenner Peluffo, President,
Brazilian Luxury Tourism Association (BLTA)

The global crisis caused travel declines to Latin America from the US, France, Italy, UK and Germany. In 2008/09 Brazil and Mexico increased air links with Middle Eastern countries through Emirates, in March 2009, Brazil and Argentina joined together to attract South Koreans, Japanese and Chinese travellers. By 2013, China is likely to surpass France, Italy and UK in the number of high-earning households. In 2008 - 36,766 Chinese arrived in Brazil by air. In August 2009 Singapore and Peru signed an open skies agreement, Singapore also expanded its bi-lateral agreements with Colombia and Ecuador.

A large number of Latin American hotels, airlines and travel retailers will seek to embrace luxury tourism practices, boost overall competition and enhance service levels. The region will benefit from “eco-luxe” where the desire for the natural overlaps with the desire for luxury. Ecological regions such as the Amazon and Patagonia will stand out to environment-friendly luxury travellers, increased air links with Asia Pacific and the Middle East will be crucial to demand for luxury, given their growing levels of disposable income and affluence. Brazil’s hosting of the 2014 Football World Cup and the 2016 Olympic Games will be a key growth catalyst.

Future outlook

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