Market Report Brazil

HVS Market Report - Trends and Opportunities Brazil: 4th Quarter Preview of 2014 - By Pedro Cypriano and Rebecca Ribeiro

Against the expectations of the third quarter preview of Trends and Opportunities Brazil, in the fourth and last quarter of 2014 the overall performance of the subject hospitality markets analyzed decreased.

HVS Against the expectations of the third quarter preview of Trends and Opportunities Brazil, in the fourth and last quarter of 2014 the overall performance of the subject hospitality markets analyzed decreased. Historically, periods of presidential elections may cause some trouble to the corporate hospitality demand. Especially this year, uncertainties about the election result and its reflex in the economy slowed down the corporate market in the period. These factors allied to the expressive supply growth in some cities, resulted in negatives variations of RevPAR in all cities but São Paulo.

The fourth quarter of 2014, if compared to the same period of 2013, presented growth in demand (5.5%), but the growth in supply was even bigger (13.4%), which made the occupancy decrease (7.0%). The average room rate also decreased (2.5%), which led to the biggest RevPAR drop since the beginning of the quarterly analysis (9.3%).

Graph - Fluctuation for the Brazilian Hospitality Industry Q4 2014

For the first quarter since the beginning of the analysis, all hospitality performance indicators of Rio de Janeiro declined. As seen in the analyzed sample, even with the growth in hospitality demand (10.3%) the supply1increased stronger (18.5%), which led to a drop in occupancy (6.9%) and in room rates (2.2%). Therefore, the city’s RevPAR showed a retraction of 8.9%.

As seen in the third quarter, São Paulo’s hospitality demand grew (2.0%). The supply varied only 0.7%, which led to an increase in all performance indicators – the occupancy grew 1.3%, the room rate 0.3% and the RevPAR 1.6%. When compared to the other cities, São Paulo’s performance showed better results, mainly because of the supply stability and the recovery of the corporate market by the end of the World Cup.

Breaking the sequel of growth seen since the last quarter of 2013, the RevPAR of the analyzed sample of Salvador decreased 7.2%, because a decrease of 5.5% in occupancy and 1.8% in room rate. These results are due to the recession in demand (0.9%) and to the expressive growth in supply2 (4.9%).

Beside the positive results showed by the hospitality market of Curitiba in August and September, most performance indicators in the fourth quarter of 2014 decreased, as a result of the supply growth3 (6.8%) and of the demand decrease (6.9%). This scenario affected the occupancy, which fell 12.9%. The room rate showed a little increase (3.9%), resulting in the biggest RevPAR decrease since the beginning of the quarterly analysis (-9.5%).

The hospitality demand in Porto Alegre presented an expressive positive variation (13.1%), but the supply4 grew even more (23.4%), which led to a significant decrease in occupancy (8.3%). Due to this decrease in occupancy, hoteliers were not capable to increase the room rate, which decreased 2.0% and also led to a decrease in RevPAR (10.1%).

In Belo Horizonte, the openings of new hotels keep on damaging its hospitality performance. The analyzed supply5 grew 58.2% when compared to the same quarter of 2013. Therefore, even with a huge increase in demand (21.8%), the occupancy strongly decreased (23.0%), as did the room rate (16.7%). Due to the supply expansion, this sample’s RevPAR decreased 35.8%. Nevertheless, it’s important to highlight that this analyzed sample’s new supply comprises mainly of hotels of the economy market, which also led to the big decrease seen in room rate.

Beside the recovery seen in the third quarter of 2014, in the last months of the year all cities were affected by the economy and political uncertainty in the country. For the next quarter, due to the low demand pressure in the analyzed markets, it’s expected that the room rates will keep on falling. In the markets that have been showing an excessive increase in supply the scenario should be more damaging.

1 Considering all qualified rooms in Rio de Janeiro, the new hotel supply represents an increase of 1.8% in the analyzed period. 
2 Considering all qualified rooms in Salvador, the new hotel supply represents an increase of 1.0% in the analyzed period. Part of this new supply is not considered in the analyzed sample.
3 Considering all qualified rooms in Curitiba, the new hotel supply represents an increase of 1.3% in the analyzed period. Part of this new supply is not considered in the analyzed sample.
4 Considering all qualified rooms in Porto Alegre, the new hotel supply represents an increase of 7.1% in the analyzed period. Part of this new supply is not considered in the analyzed sample.
5 Considering all qualified rooms in Belo Horizonte, the new hotel supply represents an increase of 17.5% in the analyzed period. Part of this new supply is not considered in the analyzed sample.

About Pedro Cypriano

Pedro Cypriano

Pedro Cypriano is a Consulting Manager with HVS Sao Paulo having extensive knowledge of the Brazilian hotel market, as well as relevant experience in international projects in countries such as Angola, Kazakhstan, Colombia, Spain, Greece and Portugal. He has excellent analytical and communicative skills, and has previously worked with global hospitality and tourism consultancies, and distinguished research institutes. In recent years, Cypriano has been involved in about 200 projects

About Rebecca Ribeiro

Rebecca Ribeiro

Rebecca Ribeiro works as a Consulting and Valuation Assistant for HVS São Paulo. She has been a consultant since 2012 supporting strategic studies and conducting market research for hotels across different categories in Brazil. Prior to joining the HVS team, Ribeiro worked at Kontik Franstur, one of Brazil’s leading corporate travel agencies.

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