The South American hotel industry is experiencing a renaissance, with significant growth in both demand and new project developments. This uptrend is paving the way for increased investment opportunities and the expansion of highly profitable segments such as luxury and lifestyle hotels. A recent report by the global travel intelligence platform Mabrian, part of The Data Appeal Company, highlights these emerging opportunities, particularly in mature source markets like Europe and the United States.
A Deep Dive into the South American Hotel Market
The report “The Hotel Market in South America: Opportunities in mature inbound markets,” provides a comprehensive analysis of six key destinations: Argentina, Chile, Uruguay, Peru, Ecuador, and Colombia. According to official statistics and UN Tourism data, these countries accounted for approximately 65% of the total foreign visitors to South America in 2023.
Market Composition and Opportunities
Mabrian’s data reveals that the distribution of hotel categories is relatively uniform across the analyzed countries, with some notable exceptions in Argentina, Uruguay, and Peru. In Ecuador, Chile, and Colombia, 5-star hotels make up a small fraction (1-2%) of the market, while 4-star hotels account for 16-19%, and 3-star hotels dominate with 79-83%. Peru stands out with 3-star hotels constituting 93% of its market and 4-star hotels at just 6%.
Carlos Cendra, partner and director of Marketing and Communications at Mabrian, notes, “Chile, Colombia, and Ecuador have substantial potential for growth in the 4-star category. This can be achieved by upgrading existing facilities and adding new services to lower-category hotels or by developing new urban and lifestyle hotels.” The 5-star segment also presents significant opportunities for attracting visitors from mature markets like the U.S. and Europe.
The Case of Peru
Peru’s market composition suggests a gap in the mid-range hotel segment. Cendra points out, “There is a noticeable deficit in intermediate offerings, which presents a unique opportunity to expand and lay the groundwork for growth in other categories.” In contrast, the hotel distribution in Argentina and Uruguay aligns more closely with European standards, with 3-star hotels making up 69% and 64% of the market, respectively, and 4-star hotels representing 27% and 32%.
Disparities in Hotel Rates
Mabrian’s data also highlights significant disparities in hotel rates across all categories. High-end hotels can see average daily rates (ADRs) triple those of lower-tier accommodations. This pricing variation is particularly evident in Peru and Ecuador, attributed to the ‘Machu Picchu effect’ and ‘Galapagos effect,’ where these iconic destinations drive national average rates.
Cendra explains, “Hotel rates must be viewed from a multidimensional perspective. Limited availability in higher categories, strong international demand, misalignment between expectations and experiences, and the need for updating and expanding 3- and 4-star offerings all contribute to these disparities.”
Guest Satisfaction: A Mixed Bag
The report’s Hotel Satisfaction Index (HSI) reveals varying levels of guest satisfaction across the analyzed markets. Spanish and French travellers are the most demanding, particularly regarding 5-star accommodations. “5-star hotels often receive lower satisfaction scores compared to mid-range hotels, especially among American, Spanish, French, and British guests,” says Cendra. This reflects an imbalance between the expectations of mature markets and the available supply.
In contrast, the hotel experience in 3- and 4-star hotels in Chile, Argentina, Peru, and Ecuador is consistently satisfactory for the source markets analyzed. However, Colombia and Uruguay face challenges improving satisfaction among Spanish and French visitors.
Strategic Recommendations
Mabrian suggests several strategic initiatives to enhance the overall guest experience. “Maintaining high standards of facilities and services is crucial,” advises Cendra. “Converting existing assets, introducing new services, and partnering with leading hotels can significantly boost mid-category hotel appeal and attract more international travellers.”
The report underscores the importance of aligning new developments with market demands and expectations. By focusing on quality and strategic investments, South American destinations can enhance their attractiveness to high-spending visitors from mature markets.
Conclusion
The South American hotel industry is poised for a significant transformation. With focused investments and strategic upgrades, the region’s luxury and lifestyle hotel segments are poised to attract international visitors, boost the local economy, and set new standards in the global hospitality market.
Download the full report “The hotel market in South America: Opportunities in mature inbound markets” for a detailed analysis on Mabrian’s website.
Written by: Jill Walsh
