Brazil has long been a target for real estate development and investments in the hospitality sector. Indeed, the country ranks 5th worldwide for quality of certified real estate assets and the hotel market is set to grow by 70 properties and 15,044 rooms in the next two to five years.
Contributed by Lucas Fiuza, Apex-Brasil, the Brazilian Trade and Investment Promotion Agency, Asa Norte, Brazil
As a result, some of the world’s largest hotel chains – ranging from Hilton to Four Seasons Hotels and Resorts, Marriott International and Radisson Hotel Group – are all turning their attention to Brazil as a key area for business expansion.
Here’s what hospitality executives and investors need to know about Brazilian real estate heading into 2022:
An enhanced business environment is lowering barriers to investment: Over the past few years, Brazil has laid the foundation for a better business environment that is conducive to foreign direct investment (FDI) across a range of industries, including hospitality. These efforts have resulted in legislation reforms, reduction of bureaucratic red tape and the implementation of innovative business solutions to spur divestment in state-owned assets. For example, the “Incorpora Brasil” program will gradually liquidate the government’s real estate portfolio, worth approximately US$233.6 million, increasing the scale of real estate sales operations by offering investors large lots for development rather than individual properties through the “Federal Real Estate Investment Funds.”
Brazil’s real estate and tourism markets offer a wealth of long-term development opportunities, and the recent large concessions program has encouraged major airport operators to invest and enhance the country’s mobility infrastructure, a strategic pillar for hospitality. Furthermore, organizations promoting trade and investment in Brazil can assist investors by identifying advantageous opportunities.
Brazil has many opportunities for hotel investors to capitalize on: The current business environment and recently instated economic freedom agendas are attracting growing FDI to Brazil, and in 2021 (during which time I was the national secretary of investment attraction) the Ministry of Tourism launched the tourism investment portal. The portal serves as a collaborative platform to promote investments all over Brazil – as well as a marketplace to connect entrepreneurs and investors – that at its launch date already had about US$5 billion worth of registered projects in all regions of Brazil.
Additionally, currency exchange rates are favorable for foreign investors, making many prime assets affordable and providing the possibility to increase scale of investments and grow financial strength.
The outlook of Brazil’s real estate sector is on the rise: Against the backdrop of this enhanced legal environment and deep pipeline of investment opportunities, it’s no surprise that Brazil’s hospitality sector is expected to boom. The domestic market is thriving since Brazilians rediscovered many local destinations during the recent border closure and the currency exchange barrier to reach international destinations during the pandemic. Further, as sustainable investment grows in popularity, so too will the number of certified sustainable developments in Brazil: 641 buildings in the country are currently certified sustainable, with another 50 million square meters in the process of obtaining a LEED (Leadership in Energy and Environmental Design) seal. The sustainability agenda is being well received by local developers and customers.
In the public sector alone, the Brazilian government expects around US$18 billion in investments from the sale of federal properties by the end of 2022. Major sector entities such as BRAZTOA, ABAV and ABIH have also forecasted that 2022 revenue in the leisure hospitality sector will return to 2019 levels and business hospitality will reach about 75% of 2019 revenue levels. Some of the largest hospitality brands are capitalizing on this promising environment early – Hilton, for instance, doubled their presence in Brazil over the past five years and achieved a record-setting development year in 2020 – which is a trend we expect to continue in 2022.
In the year ahead, the Brazilian real estate market will offer lucrative opportunities for hospitality and real estate investors. Those interested in expanding their reach will find that Brazil is a hospitable large-scale market – one that is implementing updated legislation aimed to attract foreign investors and ease the business environment – and offers a positive business outlook. Brazil is no longer the country of the future – it is the market of today. We are open for business, and the entrepreneurs and investors that take their time to investigate the new Brazil will experience a wealth of opportunities.
