Resorts industry revs up for higher demand

Greater interest by foreign and Brazilian tourists for destinations in the country is heating up demand for resorts, which are investing in modernizing and expanding current capacity. Rio Quente Resorts, Tauá, and Pratagy, three of the most traditional brands in the industry, plan to spend close to R$1 billion until 2020.

“The industry scenario is highly favorable, with two-digit revenue growth,” says Luigi Rotunno, the president of trade group Brasil Resorts, which gathers the top 50 companies in the industry. He forecasts 15% growth in revenue this year from 2015.

He says demand growth is concentrated on leisure resorts. “We have some growth exceptions from corporate resorts because the convention segment, for instance, has been falling 35% this year,” Mr. Rotunno says.

According to Hotelaria em Números, a study conducted by consultancy JLL Hotels & Hospitality, the occupation rate of Brazilian resorts rose seven percentage points last year from 2014 to 57%, and average revenue increased 4%.

The executive downplays the thesis that higher demand this year is ephemeral and dependent on the retreat of Brazilian tourism abroad. “If Disney was the consumption dream, this kind of tourist would not replace Orlando with a resort. We really are seeing a higher number of resorts trips by Brazilians,” Mr. Rotunno says.

The positive cycle is fueling investments. Tauá Resorts, which operates three ventures with a total capacity of nearly 1,000 rooms and had R$125 million in revenue last year, plans to invest close to R$200 million in the next five years to triple supply until 2021. “We will open another resort in São Paulo and open our first unit in Brasília,” says the group’s managing director, Daniel Ribeiro, who is also a member of the founding family.

“We plan to use the company’s cash flow but also seek financing from the BNDES [Brazilian Development Bank] and tourism development loans,” the executive says. Tauá operates the Araxá and Caeté resorts in Minas Gerais – hospitality complexes that include water parks and event centers totaling 633 rooms. The company also owns a resort in Atibaia, São Paulo, with 340 apartments.

The company is investing R$75 million to expand the Atibaia resort, building 400 new rooms until 2021. “The first lot of rooms, with 200 units, will be ready by 2018. The other in 2021,” Mr. Ribeiro says. A second Tauá venture in São Paulo also will begin construction in 2018, the executive says. The Federal District unit, located 70km from the Pilot Plan, as the original project of Brasília is called, will start construction next year. Tauá expects to end 2016 with revenue up 15%.

Rio Quente Resorts, controlled by Algar and Gebepar, also forecasts higher revenue this year and new investments. The company launched in late 2014 a R$640 million five-year plan, funded with its own cash.

Ana Luiz Masagão, Rio Quente’s marketing and sales director, says the company, which operates a resort, hotels and water parks in Goiás, will increase revenue by 20% this year from the R$304.5 million of 2015. She expects the company to reach 1.5 million guests this year, from 1.3 million last year.

She cites a R$26 million completed investment in Hotel Cristal, the higher-end unit, which built another 89 apartments as well as new restaurants and entertainment areas scheduled to open by December. Another R$12 million were spent renovating 133 rooms and leisure areas of Hotel Flat Um, and another R$12.7 million went into expanding and renovating the water park.

Grupo Pratagy, the biggest resort group in Alagoas, with resorts, hotels, and bed-and-breakfasts, studies new funding sources to invest R$80 million from next year. It plans to double capacity by building a new resorts and luxury bed-and-breakfast in the same coastal area of its existing complex.

The project would be the second investment wave of Pratagy, which spent R$25 million last year renovating 75% of its rooms and opening new entertainment and dining areas.

“The prospects are good because domestic tourism has really picked up. The exchange rate is still favorable,” Grupo Pratagy’s president Bernardo Amorim says. He says foreign demand this year has been driven by Argentine tourists and by Italians since last year. “The Argentine alone will fill 30% of our capacity this year,” he says.

The company expects to end 2016 with revenue of R$36 million, about 20% higher than in 2015. “The economic issue allowed us to raise the average price while the occupation rate rose 20%,” Mr. Amorim says.

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