Hyatt Hotels is banking on a growing number of travelers in Mexico, Central America and South America, with a strategy of expanding its limited-service Hyatt Place and Hyatt House properties through much of Latin America.
Hyatt's recent activity south of the border started in December, when Mexico's first Hyatt Place opened in Los Cabos.
In April, Hyatt reached agreements for the first Hyatt Place properties in Nicaragua and Honduras, both to open in 2015, and for the first Hyatt Place hotels to open in Brazil, Guatemala and El Salvador, all in 2016.
The hotel company, whose first Hyatt Place in Latin America debuted in Costa Rica in 2012, also said in April that Mexico's first property under the Hyatt House brand would open in Mexico City in 2016. Hyatt Place was launched in the U.S. in 2006, while Hyatt House debuted stateside two years ago.
Carlos Alonso, managing director for PKF Latin America, said that while the travel characteristics differ from country to country in Latin America, Hyatt's focus on Mexico and Brazil makes sense because of both the relative maturity of those economies and the population growth in urban areas such as Mexico City and Sao Paulo.
"Both of these countries have a large amount of secondary and tertiary cities with over 1 million habitants that are the spokes in the economical wheel of the country," Alonso said.
With as much as 80% of Brazil's hotel market driven by the domestic business sector, more of these travelers will choose select-service over full-service during the upcoming years, he added.
Granted, Hyatt isn't the only hotelier targeting Latin America for growth. The hotel development pipeline for the Mexico/Caribbean region in May widened 22% from a year earlier, to almost 29,000 rooms, while Central/South America's pipeline totaled almost 66,000 rooms as of last month, according to STR.
Both Brazil's and Panama's development pipeline widened by more than 20% from a year earlier.
With Mexico, however, Hyatt appears to be taking a bifurcated approach to brand expansion, as the company is complementing its select-service expansion with its entry into the all-inclusive sector via its new Hyatt Zilara adults-only resorts and Hyatt Ziva family-oriented properties. Both brands debuted in Mexico last November.
Focusing on select-service expansion enables Hyatt to broaden its brand presence in Latin America by giving its owner-partners a chance to match the revenue growth rate of its full-service properties while making a smaller development investment because of the hotels' smaller size and smaller public-space requirements.
While the average room rate at Hyatt's select-service properties in the Americas region was about 40% less than the average $179-per-night rate at full-service hotels, revenue per available room (RevPAR) growth was basically on par: Select-service hotels rose 5.2% from a year earlier, compared with a 5.9% growth rate in RevPAR for full-service hotels.
Pat McCudden, senior vice president of real estate and development for Hyatt's Latin America and Caribbean operations, said the company has a good chance of exceeding that revenue growth rate in a Latin America market, which he said is under-served in the select-service segment.
"Further, the economic development that is occurring in the region's secondary cities, particularly in countries such as Mexico and Brazil, create a very positive scenario for the development of our Hyatt Place hotels," McCudden said. "Central and South America are key emerging markets where we believe all of our brands, including our select-service products, have tremendous potential."