Brazil will grow ahead of World Cup, Olympics: STR

With the London 2012 Olympics over, the spotlight has started to shift to Brazil, which will be hosting the 2014 FIFA World Cup and the 2016 Summer Olympic and Paralympic Games.

Brazil reported increases of 9.9% in RevPAR for the first seven months year-to-date, led by 14.5% increase in ADR in local currency, according to STR Global.

“With the attention set for the next four years toward Brazil as it prepares to host the largest sporting events in the world, we anticipate to see supply growth taking place across the country,” said Elizabeth Randall Winkle, managing director at STR Global. “However, we are expecting to see lower growth levels in well-established destinations such as Rio de Janeiro and São Paulo, which account for almost 30% of the room inventory of branded hotels in the country.”

Rio de Janeiro has benefited from low supply growth combined with steady demand improvements of 0.4% and 7.2%, respectively, between 2009 and 2011 on an annual compound basis. During the first seven months of 2012, the room inventory declined slightly as demand growth slowed to 3.4% year-to-date. Despite the tougher economic conditions, Rio de Janeiro boosted its ADR by 29.1% in local currency to 450.06 reais (US$222.96), or 10.5% in U.S. dollar terms) during the first seven months this year. Furthermore, the exchange rates against major currencies became more favorable for international visitors, and large events such as famous Carnival, held annually in February, and the Earth Summit Rio +20 in June 2012 have helped sustain RevPAR growth.

Rio de Janeiro’s luxury and upper upscale hotels reported average room rates of 658.85 reais (US$326.40), up 38.0% in local currency, supported by occupancy reaching 74.1% year-to-date. During the same period, upscale and upper midscale hotels, benefiting from continuous high occupancy levels of more than 83.0%, saw year-to-date ADR increase from 277.40 reais (US$137.43) in 2011 to 342.71 reais (US$169.78), up 23.5% in 2012.

Leading up to the sporting events, a significant number of infrastructure projects are underway across Rio and the rest of the country. With limited hotel supply available in Rio, there is an emphasis on expanding the room offering. The city and the region are expected to add an additional 6.4% in the current room inventory until 2014. Beyond 2014 and leading up to the Olympic Games, hotel inventory is expected to increase by 8.8%.

Other cities across Brazil also will benefit from both events, such as São Paulo and Manaus. In São Paulo, hotel supply is expected to remain practically unchanged, releasing pressure on hoteliers from possible new supply growth. However, in Manaus, with a fraction of São Paulo’s room inventory, the football tournament will bring a boost in hotel supply with inventory expected to grow by 20.2% by 2014.