Brazil Bouncing Back Following Financial Crisis
<B> Brazil Bouncing Back Following Financial Crisis</B>
By Robert Selwitz
Rebounding strongly after its January currency devaluation, Brazilian business, and the hotels that cater to it, are once again thinking of expansion, particularly in São Paulo, Brazil's economic capital and the third largest city in the world.
The currency drop was a severe shock to Brazil's economic system, and has left a number of lingering aftershocks of which incoming business travelers should be aware. For instance, according to hospitality consultant Ron White, "the devaluation was much more severe than predicted. Therefore, hotel operators greatly underestimated potential devaluation impact when they wrote their 1999 budgets."
As a result, "the surprisingly stark occupancy drop forced São Paulo hoteliers to scramble for every bit of revenue--other than room rates--they could generate. That's why today, prices of food and beverage and other hotel services have almost doubled in most leading properties."
When business began to fall earlier this year, the opportunities for onsite bargaining for room nights paid in cash also increased. "Particularly in three- to four-star hotels, walk-in travelers can now cut their rates by up to one-third by offering to pay for their rooms in Brazilian reals," White said.
While this "off-the-books" transaction is still a bargain for travelers willing to do a bit of shopping, it "wreaks havoc with hotel occupancy statistics, which never reflect that considerable portion of business. There is an old saying that while Brazilian hotels never make money, their owners always do!"
Nevertheless, he cautioned, "you do want to choose an absolutely top-notch property." At hotels such as the luxury Inter-Continental or Sheraton Monferrej, or the new group of condominiums available for nightly rental at Paulista Plaza, "you're not just buying comfort and good location--you're also buying greatly increased security."
At these properties, for example, the concierge will order your transportation from a safe taxi company, which is critical, White said, because "our crime rate is much higher than in major U.S. cities."
Taxi drivers hired off the street in Brazil have been known to target international passengers for theft, and since many cab drivers are not adept at navigating the vast city, staff members at Brazil's top hotels know with whom to work to get business visitors to their destinations safely and efficiently.
If you are away from your hotel and need a cab, White suggested walking to an upscale hotel and asking the concierge for help. If you aren't near a quality property, he recommended Radiocab, a safe and honest company.
White also noted that one surprising transportation option--the São Paulo Metro--has four lines that are clean, safe and virtually crime free. And they connect with many of the areas business travelers most likely need to reach, including the heart of the financial district.
Furthermore, when road traffic grinds to a halt--as typically occurs for hours almost every business day--"the Metro can become a great means of keeping your business appointments."
White also said that given the city's sclerotic traffic, the first decision any incoming business traveler should make is where in the city he or she needs to reach. Since many of the city's key banks have headquarters on or near Paulista Avenue, staying nearby likely will slice in half the amount of time you are stuck in traffic.
However, if you are attending a meeting or a convention at the World Trade Center, a wise choice might be the 300-room Gran Melia São Paulo. Four years old, this top-of-the-line product of the Spanish hotel company Melia is located in a complex including the WTC and the city's most modern meeting facility for moderate-size groups. "We are in the midst of São Paulo's newest business district," said director of sales and marketing Elizabeth Wada. "A number of international firms either have offices in the WTC or are merely five minutes away by cab."
If you're seeking a more moderate rate--and need to visit other city sectors--Wada said, "our Sol Pamplona in the Paulista area is quite near IBM and Citibank. And our Sol Bienal is very near Colgate and Honda." Also, while rates at the Gran Melia run about US$300 (off a US$440 rack rate), the Sol properties cost between US$100 and US$120.
Wada said these lower-price properties are increasingly popular since many firms, in reaction to the devaluation, have lowered the lodging price line that their traveling employees are allowed to spend. For example, "in January, the local office of General Motors stipulated that employees were no longer allowed to book five-star hotels. That not only affected Brazilian travelers, but also international visitors, since their local office usually makes such bookings."
Despite such challenges, Melia has plans to open two more São Paulo five-star properties this year, as well as some additional four-star properties.
"If increasing numbers of travelers are going to seek out less-than-luxury hotels, we'd rather build new properties than lose that business to other companies," said Wada.
In Rio de Janeiro, Copacabana Palace general manager Philip Carruthers said that "one of the recent remarkable trends is how little long-term impact the devaluation actually had. Though occupancies were down during March and April between 8 and 10 percent, we've been able to weather the problem remarkably well."
Though the value of the real dropped from US$1.23 to US$2.25 between January and February, the currency now trades in the US$1.65 range.
Also pertinent was the fact that December through February is Brazil's summer season, as well as Carnival. But beyond the calendar, Brazil coped well because "this economy is primarily driven by domestic trade. Unlike many Asian nations that were clobbered when their export markets collapsed, Brazil hardly lives or dies on its exchange rate. Therefore, Brazil is a whole different kettle of fish, much better equipped to deal with international crises," Carruthers said.
Since Brazil now is less expensive for foreign business travelers, he added, "there should be little further slippage in occupancy or room rates. In fact, I'm confident we'll pick up additional traffic from those who've long wanted to visit but, until now, simply found Brazil to be too expensive."
Located directly across from the beach in the heart of Copacabana, the 226-room Palace draws three-quarters of its patrons from outside Brazil, and "we expect business traffic to grow, since Brazil's performance in this most recent crisis should also bode well for the future," said Carruthers. "It's what didn't happen that really counts."
Brazil didn't "regress to the 1994 scenario, when inflation was around 3,000 percent and no one changed money except for what they needed for the next few hours. No sane person would invest in such a climate, and--not surprisingly--few did," Carruthers noted.
Today, Brazil's inflation rate is 7 percent, two points below the 9 percent the IMF mandated in March, and interest rates are falling steadily. "It's clear people in the States are taking notice of this good news, and greater business interest and travel will follow," he predicted.
The Copacabana Palace is a Rio favorite, arguably among the city's most prestigious properties. Other top Copacabana choices include the 400-room Sofitel Rio Palace and the 496-room Le Meridien. A new 300-room Marriott also is expected to open before the end of next year.
In the adjoining beach sector of Ipanema, the 221-room Caesar Park is another highly regarded hotel. Sheraton and Inter-Continental also have superior properties, but they are located further away from the areas most business travelers need to reach.