Executives from top international travel and hospitality companies discussed “Latin America’s Rise and its Impact on Tourism and Travel” at the eleventh edition of the Dean’s Leadership Series, presented by the Cornell University School of Hotel Administration (SHA). The panel event was held February 13, 2013, at The Ritz-Carlton South Beach in Miami Beach, Florida.
“Latin America is one of the fastest-growing regions at 6.5 percent GDP, behind only Asia at 6.7 percent,” said Michael D. Johnson, dean and E. M. Statler Professor at the SHA, who moderated the discussion. “Driving this growth is a 5.2 percent increase in capital investment in travel and tourism in Latin America– the highest growth outside Asia – and a 6.1 percent growth in visitor exports. The recent growth in this region has many implications for the travel and tourism industries, and the number of tourists and business leaders visiting the United States from Latin America has continued to increase.”
Three trends are spurring growth in Latin America, explained Isabelle Claver ’97, director of PwC. First, young people entering the job market are driving the future of these countries and changing their economies. Second, the economies of these countries are diversifying as businesses shift to meet demand for domestic goods. Finally, developments in consumer demand and domestic consumption in this region are driving the need for more capital. Stronger economies, higher credit ratings, and growing foreign investment have increased access to capital for both businesses and consumers.
Perhaps the most dramatic growth in the region is occurring in Brazil. “Brazil’s economy is now the sixth largest economy in the world, and you’re talking about an economy of 2.4 trillion USD, which represents 38 percent of the entire Latin American/Caribbean GDP,” said Paul Sistare, founder, president, and CEO of Atlantica Hotels International. The growth of Brazil’s economy is driving investment decisions in the region, and Brazil is able to provide rates of return that are dramatically different from those available in the United States.
“I’m seeing people investing more heavily into Brazil. I’ve seen people who went to the United States now turn around and come back,” continued Sistare. “For example, I was looking today at the CDs that I’ve invested here in the United States. I’m getting one percent per year. In Brazil we’re getting that a month.”
While the growth in Latin America provides many opportunities for investors in terms of greater returns, panelists agreed there may also be greater risks associated with investing in the region. According to Claver, since Latin America is seen as an emerging market, investors are expecting higher returns because of the higher risks.
The general volatility of many Latin American economies poses additional risks for investors. “I would say one of the differences between Latin America and the States is that the States are much more stable,” said Pablo Azcarraga MPS ’85, chairman and member of the board for Grupo Posadas. “Our countries, they always have something going on. Either you have inflation or you have a recession, or you have both or something else.” This greater stability and a strong national currency are some of the most significant advantages for Latin American investors in the United States.
“I think we’re going to find more and more Latin American investors who say, ‘We’ve made certain levels of money at home. How can we bring that capital up north and take advantage of partnerships that we’ll have with the stateside markets?’” said Kenny Blatt ’81, principal at Caribbean Property Group, LLC.
The appeal of Miami has been significant for both Latin American investors and tourists. Wendy Kallergis, president of the Greater Miami and the Beaches Hotel Association, spoke to the recovery of the South Florida real estate sector in the wake of the 2008-09 economic slump and credited Latin Americans who invested in property there: “It was like people came home. Miami is definitely Latin America’s second home. It was a very comfortable situation for these investors, it was secure.”
Miami and South Florida continue to attract Latin American customers, and in many ways Miami serves as the “gateway city” for Latin American travelers. Speaking to Miami’s importance in attracting tourism to the region, Kallergis said, “We had 4.4 million visitors in 2011 which was a 9.2 percent increase compared to 2010. South America contributed to this with 3.2 million visitors. Brazil, Argentina, Colombia, Venezuela, and Chile have increased 14 percent from last year. Over fifty percent come for vacation, and they range from age 25 to 35 years old.”
Despite the industry’s efforts to attract Latin American travelers to Miami and South Florida through marketing strategies and visa waivers, panelists agreed that infrastructure issues have been responsible for restraining some of the growth in this area. “A lot of people don’t realize that the U.S. lost 30 percent of its global tourism dollar market share over a ten-year period. They gained about five percent of that back, but there were so many restrictions on travel,” said Johnson. Many international travelers still face long lines at U.S. borders, and panelists agreed that joint efforts between government and industry leaders will continue to be essential to facilitate Latin American tourism to the United States.
The Dean’s Leadership Series was established in 2007 as a platform for industry leaders to discuss the most important topics facing hospitality and travel today. The Ritz-Carlton South Beach was the title sponsor of the eleventh edition, and USA TODAY was exclusive media partner. Other corporate sponsors were Banfi Vintners, Crescent Heights, Flag Luxury, France 24, Hospitality Design, Hotel Business, Hsyndicate, InterContinental Hotels Group, Lionstone Development, PhoCusWright, Inc., PwC, Questex Hospitality Group, and Schelling Point.