Latin America's tourism sector remains surprisingly strong

21-03-24

Facing macroeconomic challenges similar to those in the United States, such as elevated interest rates affecting real estate transactions and ongoing inflation, Latin America's travel sector remains surprisingly robust. Reinier Schliesser, a principal economist at CAF, the Development Bank of Latin America and the Caribbean, highlighted during the SAHIC Latin America & the Caribbean Hotel & Tourism Investment Forum that the region is also navigating its unique economic and political hurdles impacting travel and tourism development.

Schliesser emphasized the significance of geopolitical and climate-related risks for the region, noting their influence on global trade and international relations. He pointed out the previous year's droughts that limited shipping through the Panama Canal and the potential for similar challenges this year, depending on water levels. Additionally, political instability across various Latin American countries adds to the volatility and risks affecting monetary policy.

Despite these challenges, Schliesser, alongside other economists, believes in the region's long-term growth potential and its ongoing GDP expansion, even though short-term macroeconomic policies may not stimulate immediate economic growth.

Travel trends in Latin America have demonstrated resilience. Patricia Boo, senior area director of Latin America for STR, a CoStar hospitality analytics firm, reported a normalization in hotel occupancy levels in 2024 after a surge last year. The year 2023 saw remarkable occupancy growth, with levels nearing or exceeding those of 2019 across all regions. Occupancy rates in Central and South America increased by 8% and 2%, respectively, over 2022, ending the year at around 60% total occupancy. While rate growth begins to slow, the region's hotel development pipeline presents new opportunities, with 57,000 rooms, or 5% of the existing supply, currently in development, particularly within the luxury segment.

Brazil's robust hotel construction pipeline and rate increases across major cities underscore the strength of domestic travel, driven partly by visa challenges and exchange rate fluctuations. Boo also pointed out shifts in travel trends, including the rising demand from business travelers, which may balance the expected moderation in leisure travel growth. She urged industry professionals to stay informed about the impacts of election years and significant events, like Taylor Swift's Eras Tour, on hotel demand.

In essence, Latin America's travel industry is adapting to both global and regional challenges, finding growth opportunities amid economic and political uncertainties.

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