NEW YORK — As the demand for luxury hotels continues to outpace the rest of the market, hotel owners and investors are looking beyond North America and Western Europe for potential development sites, according to panelists at New York University’s International Hospitality Industry Investment Conference here last week.
Since 2009, the luxury hotel market has seen a strong comeback from the recession, with demand increasing by 4.4% in the Americas, 3.7% in Europe, 4.9% in Asia-Pacific and 11.1% in the Middle East.
That rebound continues to be echoed within the U.S., where Smith Travel Research is forecasting that luxury hotels’ growth in revenue per available room will outpace all other sectors.
During a panel discussion on what hoteliers are doing to capitalize on the luxury segment as the economy continues to improve, executives were optimistic about demand to overseas luxury hotels but less so about getting the necessary financing to build them.
“There is a tremendous amount of liquidity around,” said Homi Vazifdar, managing director for Canyon Equity. “But to find financing is still extremely difficult. So yes, there is euphoria, but it is with realism that we realize we are not out of the recession until there is ground-up development.”
Financing notwithstanding, the executives agreed that the secret to successful, profitable “ground-up” hotel development ties back to geography. And, more specifically, geography of the developing world.
“As wealth is created ... those markets themselves are performing tremendously well, and investors in those markets are looking to invest in them globally,” said Scott Woroch, executive vice president of worldwide development for Four Seasons.
The panelists named Maldives, Colombia, India, Turkey, Africa and cities in western China as particular hot spots that up until recently were off the radar when it came to discussions about the global luxury market.
Mona Faraj, managing partner at Insights Management Consultancy, said in an email that it was important to remember that without “a strong portfolio of bed supply, a city would be generally unattractive to business investors.”
In Africa, several countries seem to be attracting investors, Faraj said. Namely, there has been interest in the North African countries of Morocco, Tunisia and Algeria.
“Backed by oil wealth, [these countries] have the opportunity to move their infrastructure forward more quickly than others,” Faraj wrote.
In Latin America, hotel development is booming for different reasons.
“Latin America is the fastest-growing region of the world in absolute figures and opportunities,” Daniel Feige of PhoCusWright wrote in an email. “It will continue to flourish mainly due to economic and political stability.”
But no matter the country, panelist Terry Stinson, Mandarin Oriental Hotel Group’s development director and president for the Americas, said he believes all must all have one thing in common: a large community of people.
Mainly, it’s “all the cities that you’ve never heard of that have a 15 million-plus population,” he said.
Vazifdar suggested that investors researching both brands and potential projects should look at locales that will, as he put it, “create demographics,” and he mentioned the Four Seasons Resort Costa Rica at Peninsula Papagayo as a prime example.
“The Four Seasons took this jungle and created one of the pre-eminent destinations in the Americas,” he said. “That’s creating demographics.”
Danny King contributed to this report.