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Cranking Up The Engine On Brazilian Tourism, From Five Stars To Two

Brazil is expecting huge crowds when it hosts the 2014 World Cup and 2016 Olympic Games. In fact the country’s tourism industry is already heating up – especially in Rio, home to the soon-to-be refurbished Gloria Hotel, and more and more economic alternatives.

Article illustrative image Partner logo Cear, Brazil (Roberto Facenda)

Eike Batista recently shelled out $50 million for the legendary but crestfallen Gloria Hotel in Rio de Janeiro. In addition, the Brazilian tycoon took out a $91-million loan to give the grand old Gloria a much needed makeover.

Why? Because the oil and mining magnate, who is already worth an estimated $30 billion, sees a chance to make even more money – by investing in tourism.

Batista, South America’s richest man, is probably right. Brazil’s tourism industry is growing quickly and, according to analysts, is acting as a motor of growth for tourism in Latin America as whole, which received 60 million visitors last year compared to just 13 million a quarter-century ago. The upcoming World Cup and Olympic Games should only accelerate the growth further.

A study by the Forum of Brazilian Hotel Owners found that the average price for a hotel room in Brazil rose 22% in 2011 – to roughly $180 per night, well above the country’s overall inflation rate of 6%.

Hotels in Rio, in particular, are faring better than they have in decades. During some months of the year, average occupancy rates are now nearly 80%, a trend that is drawing tourism dollars back to the city center. The re-launch of the luxurious Gloria will help too, giving high-end tourists a downtown alternative to the southern beach areas of Ipanema and Leblon.

The Gloria Palace, as Batista has renamed it, first opened in 1922. During its glory years it hosted numerous heads of state, artists and other notables. Even Albert Einstein stayed there once, in 1925. Legend has it that he put the finishing touches on his photon theory of light while staying in one of the hotel’s fourth-floor suites.

Batista is planning a grand opening of the 231-room hotel in December of 2013 – in time for the World Cup (2014) and Olympic Games (2016).

Ready to match Mexico?

In order to prepare for the coming mega-events, Rio will need to expand its hotel capacity by 20%, according to Embratur, the Brazilian government’s tourism arm. During the month that Brazil welcomes the World Cup, the 12 host cities are expected to receive some 600,000 tourists. Overall, some 7.2 million foreigners are expected to visit Brazil in 2014.

The government has set a target of 10 million tourists by 2020. Embratur President Falvio Dino thinks Brazil will in fact meet that goal much sooner – by as early as 2016.

“The big phenomenon, besides corporate tourism, are ‘Class C’ tourists, who are filling the two and three-start hotels in [Brazil’s] small and medium-sized inland cities,” says economist Fernanda Garavini of the Brazilian Development Bank (BNDES).

Garavini thinks that at its current growth rate, Brazil could eventually catch up to Mexico, the tourism star of Latin America. The tourism industry accounts for roughly 9% of Mexico’s GDP and employs some 7.5 million people. Last year, Mexico – which boasts a rate of 3.7 hotel beds per 1,000 residents – received more than 22 million visitors.

Brazil may be booming, but it still has a ways to go. For now, the South American giant has just two hotel beds per 1,000 residents.

Read the original story in Spanish

Photo - Roberto Facenda

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America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

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