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Lodging in Latin America: Trends and challenges for 2016

Now is an opportune time for travel managers and buyers to review current supplier portfolios and ongoing negotiations in order to seek more favorable rates and traveler amenities.


Despite strong economic growth in recent years, driven mainly by Brazil, Chile, and Mexico, the economic outlook for 2016 and 2017 in Latin America is not very favorable. A variety of political and macroeconomic factors, including the rapid decline in the price of crude oil, are directly influencing the economic growth outlooks in major Latin American economies like Argentina, Brazil, and Venezuela.

According to the most recent World Economic Outlook update published by the International Monetary Fund in January, 2016, Latin American economies are projected to contract by 0.3 percent in 2016 and grow 1.6 percent in 2017, after growth of 1.3 percent in 2014 and a contraction of 0.3 percent in 20151.

Latin America Lodging Price Expectations Vary

In the context of this challenging macroeconomic environment, inflation expectations also vary widely among Latin American countries, directly impacting the outlook for prices in major travel categories like lodging. Recent data from the Global Business Travel Association (GBTA) shows how widely price outlooks vary country-by-country. For Latin America as a whole, prices are expected to increase by 3.8 percent. Price increases are lower in countries like Chile and Mexico (1.1 and 1.6 percent, respectively) due to lower demand, while prices in Venezuela are expected to spike by more than 15 percent as a result of high inflation and economic instability2.

Brazil’s Unique Market
Brazil should be analyzed separately, because in addition to a recent period of high inflation, the 2016 Summer Olympic Games will be held in Rio de Janeiro, representing a significant demand-side driver. The question is how Brazil’s economy will respond when the Olympic Games are over. Will hotel demand and average airline ticket prices quickly fall to normal levels, or will there be a halo effect from the influx of tourist revenue from international travelers? In the context of the broader trends in Brazil, it is not likely that demand will be sustained. Brazil is working through several political and economic crises, and downgrades from credit ratings agencies has had a negative effect on new investment. Tourist and business travel to major Brazilian cities fell in 2015 and the downward trend in occupancy rates (currently approximately 65 percent) is likely to continue3.

Opportunities and Recommendations

On the whole, now is an opportune time for travel managers and buyers to review current supplier portfolios and ongoing negotiations in order to seek more favorable rates and traveler amenities, especially with hotel chains that have increased capacity at the same time that demand growth appears to be slowing. Not only does the demand picture make the market more favorable for buyers, but there is also a strong competitive environment among suppliers aiming to maintain stable occupancy rates to support profitability and maintain market share.

Key Actions

To capitalize on the current environment, we recommend several strategies to our clients. Some of these strategies reflect traditional sourcing best practices (consolidate travel spend volume and reduce the number of suppliers, potentially buy-down a product tier). We also advise clients to leverage internal benchmarking to develop a more precise view of the current market. Hotel price rates are not increasing at the same rate as the headline rate of inflation, and market-by-market knowledge is critical to successful negotiations. For truly multinational organizations, travel executives may need to consider different strategies for different markets. For example, in lower inflation markets, tactics may not need to be as aggressive, but in higher inflation markets, more aggressive strategies may be required. On the supply side, lodging chains are seeking to differentiate their brands with complementary services like executive transport services from airport to hotel or other destinations, and bonuses tied to loyalty programs. This willingness to be competitive is another factor to integrate into negotiation strategies.


Sources & References:

1 – International Monetary Fund, World Economic Update, “Subdued Demand, Diminished Prospects,” January 19, 2016. Retrieved from:

2 – GBTA, 2016 Global Travel Price Outlook. Retrieved from:

3 – Relatórios de Mercado, Hotelaria em Números. Retrieved from: