|Hotel investor sentiment survey: Latin America.|
Friday, 27th September 2013
Source : Jones Lang LaSalle
Hotel investors have a positive outlook for hotel performance across the majority of Latin American markets as the region’s strong macro-economy is leading to healthy hotel demand.
Jones Lang LaSalle computed the net balance of investors’ responses to measure respondents’ sentiment with regard to the outlook for hotel performance, as defined by revenue per available room (RevPAR).
Net balance methodology defined
Jones Lang LaSalle surveyed respondents on whether they have a positive, negative or neutral outlook for RevPAR cross 18 Latin American hotel markets. Responses that indicated a “positive” outlook were given a score of 100; responses indicating a “negative” outlook were assigned a score of -100; and responses expecting “no change” in hotel RevPAR were provided a score of zero. The scores were then added together to compute a net balance. A higher net balance figure implies a more optimistic investor outlook whereas a negative net balance indicates that more investors expect performance to decline than to increase during the given time period.
Responses show that, among countries in Latin America, investors have the most optimistic performance outlook for Mexico over both the next six month and two years.
Additionally, Mexico has witnessed the highest increase in both the short and medium-term investment outlook from the previous survey figures. The results are underpinned by Mexico’s stable economic growth: the country it is set to grow by 4.0 percent in 2014.
Peru has a very positive investment outlook, especially for the two-year horizon. Such optimism is attributable to high economic growth projections Latin America Hotel Investor Sentiment Survey for the country; the Peruvian economy is expected to grow by 5.8 percent in 2013. Furthermore, Standard & Poor’s has upgraded both Peru’s long-term local and foreign currency ratings.
Chile also boasts positive investor sentiment, though the responses are less optimistic than in the past survey. The country is one of the most advanced economies in South America, driven by its stable democratic government and vast network of free-trade agreements.
Brazil ranked fourth-highest in hotel investor sentiment both for the next six months and two-year time frames. This is in part driven by robust business demand and upcoming events such as the 2014 FIFA Soccer World Cup and 2016 Summer Olympics.
Colombia recorded an increase in short-term sentiment but a slight decrease in medium-term sentiment primarily due to investors’ ongoing concerns over new supply pressures in a number of markets.
Despite the decrease, responses still indicated a positive hotel performance outlook for hotels in Colombia, but the positioning is currently less favorable when
compared to several other major economies in South America.
That said, demand fundamentals remain strong and the new rooms are expected to get absorbed over the next several years.
Investors’ responses for Argentina were the most negative of the markets in the survey. The net balance of investor sentiment for the next two years was -21.7 percent, meaning that a greater share of respondents expects RevPAR to decline than to increase.
Nonetheless, while investor sentiment is negative, the medium-term outlook is an improvement over the short-term outlook. This implies that investors expect to see improvement in the future.
Some of the most notable highlights include:
Read the full report HERE
- Investor sentiment for markets in Latin America is at one of the highest levels of all regions globally, though it has softened slightly from the last survey. This is attributable to a slowdown in economic growth in key regional economies such as Brazil. Sentiment for Mexico, on the other hand, increased and now leads the markets in the survey.
- Surveyed target cap rates remained steady at 10.0 percent; unleveraged IRR averaged 16.5 percent.
- ‘Buy’ intentions increased slightly, indicating ongoing strong investor interest.
- Barriers to investment are largely unchanged from our last survey, thoughinvestors are increasingly citing concern over new supply in the gateway cities as a constraint.