The Hotel Market in South America: Opportunities in Mature Inbound Markets, Luxury and Lifestyle, the Most Promising Segments for the Hotel Market in South America

This report, developed by Mabrian, focuses on a region that represents 65% of international arrivals in South America, and analyses the segments that can contribute to increasing the demand, stays and spending of these travellers, from the perspective of mature source markets in Europe and the United States.

 

Barcelona, Spain, July 31st, 2024.- The South American hotel industry is in great shape and on the rise, both from demand and new projects’ development perspectives, which translates into opportunities to increase and reconvert assets, and expand the offer in very profitable segments, such as concept hotels and lifestyle, or in categories with a consolidated demand from mature markets, such as urban and vacation luxury. This is the main conclusion of the report “The hotel market in South America: Opportunities in mature inbound markets”, prepared by the global travel intelligence platform, Mabrian, part of The Data Appeal Company.

 

For this report, Mabrian has focused on Argentina, Chile, Uruguay, Peru, Ecuador and Colombia, six destinations in South America that represent around 65% of the total number of foreign visitors received by this region in 2023, according to official statistics and figures from UN Tourism on arrivals of foreign travellers.

 

The data dives deep into the hotel market (3-, 4- and 5- stars accommodations) from the six destinations above mentioned, including distribution per category, average rates per night (ADR) and the Hotel Satisfaction Index, both from international travellers, and for five key source markets for South America: the United States, Spain, France, Germany, Italy and the United Kingdom.

 

The luxury and lifestyle market: an opportunity for hotel expansion according to Mabrian data, the distribution of categories is very similar in all the countries analysed, except in Argentina, Uruguay and Peru. In Ecuador, Chile and Colombia, only between 1% and 2% of hotels are marketed in the 5-star category, between 16% and 19% are 4-star establishments and between 79% and 83% are 3-star hotels. In the case of Peru, the proportion of 3- and 4-star hotels varies; in fact, 3-star hotels represent 93% of its market, and 4-star hotels 6%.

 

“Chile, Colombia, and Ecuador have great potential to grow in the 4-star category, either by updating facilities and including new services in lower-category hotels, or by building new hotels, especially in the urban and lifestyle ranges,” explains Carlos Cendra, partner and director of Marketing and Communications at Mabrian. Expanding the 5-star offer, both urban and holiday, is also a great opportunity to attract visitors from very mature source markets, such as the United States and Europe. The case of Peru is striking as the figures show a possible deficit of intermediate offer, “which can be a very interesting formula to penetrate and expand in this well-known destination, and lay the foundations for growth in other categories.”

 

On the other hand, the distribution of hotel categories in Argentina and Uruguay is very similar, and is more similar to the average for European destinations. 3-star hotels represent 69% of the hotel offer available in Argentina and 64% in Uruguay, 4-star hotels represent 27% and 32%, respectively; while 4% of the accommodations in both countries are 5-star hotels.

 

Disparity in rates, a symptom of the heterogeneity of the offer mabrian’s data on hotel rates show two different price levels in all the lodging categories analysed, one at the top tier, and the other, with lower prices. In the case of higher category hotels, ADRs can, in fact, triple the lowest fares.

 

The average nightly rates for 5-star accommodations in Peru and Ecuador reflect what we call the ‘Machu Pichu effect’ or ‘Galapagos effect’, sub-destinations in these countries that have a particularly high average nightly rate, which affects the national average.

 

Cendra explains that the behaviour of hotel rates “can be read from a multidimensional perspective: a limited offer in higher categories, in markets with notable international demand, such as Peru or Chile; a misalignment between expectations and experience, which pushes prices down; and the need to update and expand the 3- and 4- star hotel offering, to compete on better terms, not only regionally, but also internationally.”

 

Addressing demand and satisfaction challenges by target markets guest satisfaction with their stay is a factor that must be addressed by markets and segments, since, as reflected in the Hotel Satisfaction Index (HSI) for accommodation in each of these destinations, the demand scenarios are diverse.

 

Overall, Spaniards and French are the most demanding travellers with the hotel experience in the destinations analysed. The key lies in 5-star accommodation, which, as Cendra explains, “overall, receive lower scores than mid-range accommodation, a trend that is more pronounced in the American, Spanish, French and British markets”. The imbalance between the expectations of mature markets and the available supply explains these results, which must be addressed “considering the available accommodation and the strategy of new openings”, says Cendra.

 

Mabrian’s data shows that the hotel experience in 3- and 4-star hotels in Chile, Argentina, Peru, and Ecuador (a market with very strong HSIs in this segment) is consistently very satisfactory for the source markets analysed. As per Colombia and Uruguay, both have the challenge of increasing satisfaction with the experience in certain source markets, especially among Spaniards and French.

 

“Maintaining the standards of facilities and services in this segment contributes to increasing overall satisfaction with the experience in these South American destinations,” recalls the Mabrian spokesperson. “The conversion of assets, the introduction of new services, and agreements to operate these accommodations with leading brands are factors that can be introduced into the long-term strategy for mid-categories, which will contribute to attracting more travellers from international markets.”

 

About Mabrian

 

Mabrian Technologies (Mabrian) is a company specialized in providing travel intelligence services worldwide. Founded in 2013, Mabrian is part of The Data Appeal company since 2023.

 

They combine big data analysis and artificial intelligence (AI) techniques with a deep knowledge of the tourism sector, thanks to their team of consultants. The company offers a visual data dashboard that provides a holistic observatory related to everything that affects a tourist destination: air connectivity, hotels, holiday rentals, travellers’ sentiment and demand, spending, mobility, and sustainability. The analysis of over 30 global data sources allows Mabrian to identify and predict tourism dynamics.

 

Present in 40 countries, Mabrian provides services to tourist destinations at any level (countries, regions, cities), as well as companies in the hotel and transport sector, or tourism-related consultancies (marketing, promotion, strategy, investment, etc.) to help them make decisions based on updated data and the evolution of the context.