GLOBAL - Investors are eyeing Brazil's hotel market as the country's strong economic growth, supply shortage and the upcoming FIFA World Cup in 2014 and 2016 Summer Olympics are expected to boost hotel revenues in large cities, according to Jones Lang LaSalle Hotels (JLLH).
Brazil's RevPar - revenues per available room - is expected to grow by nearly 20% in 2011, after growing by a record 17.3% in 2010, the company said.
Clay Dickinson, executive vice-president at JLLH, said: "There has been an unprecedented uptick in the amount of international investors evaluating development opportunities in Brazil this year."
The company is advising US, European and Latin American private equity and institutional investors to invest in Brazil, he said, and "investors from the Middle East and Asia have Brazil on their radar as well".
In October last year, the company arranged the sale of JW Marriott Rio de Janeiro on CopaCabana Beach for $47.5m (€33m) in cash to US-based Host Hotels & Resorts.
Dickinson said, for long-term investors, Brazil is attractive because it is one of the few emerging markets that has economies of scale.
The medium-term story, however, is the combined effect of the FIFA Soccer World Cup in 2014 and the 2016 Summer Olympics on hotel demand, he said.
The development, Dickinson emphasised, is occurring in the "budget, economy and mid-scale end of the product spectrum", and in high -growth cities including those hosting the two events and in Rio de Janeiro as well.
One concern, however, is the shortage of mortgage financing, as the Brazilian market is still at a nascent stage.
To help the industry, the government is arranging subsidised long-term financing from banks in the run-up to the Soccer World Cup and Olympics.
Yet compared with the terms of financing in the developed capital markets, "even this is not considered a hugely attractive source of capital for most international investors", Dickinson said.
On the whole, the hotel sector so far has not been the most attractive sector as it vies for capital with commercial, industrial, office and retail development sectors, which are seen as lower risk due to their shorter time horizon.
Nonetheless, with the demand for hotels expected to increase in the next five years in the world's eighth-largest economy as it hosts the world's two largest sporting events within the space of two years, the pace of recovery in the hotel sector is expected to quicken, Dickinson said.