CHAIN REACTION:
The Stellar Rise of Hotel Chains in Chile

SANTIAGO – With its stunning geography and boundless natural wonders, sturdy economic development, stable democracy and the lowest crime rate in South America, (Chile may have visitors wondering why it has taken so long to expand its hotel industry.)

But when it rains, it pours, and the development of major hotel chains has seen an important boom in recent years.

by Jen Ross

Ten years ago, when she started working at the Eurotel Hotel, Teresa Santelices remembers there were only five large hotels in Santiago. Today, there are more than 20.

“The growth has been explosive!” says Santelices, Business Manager for the Eurotel chain, which has two four-star hotels in Santiago. “Chile is now a platform for congresses. Whereas Sao Paolo and Buenos Aires used to capture all that traffic, Chile is emerging as a hotspot for business travel.”

The first hotel chain, Honsa (which was run by the State), opened 30 years ago in Chile. But chains only really started making their presencefelt in the last six years, according to industry experts.

Gonzalo Davalos, Business Manager for the Panamericana Hotel chain, says that’s particularly true of Chilean-owned hotels like his, which has six establishments across the country. He attributes the recent growth in the hotel industry to Chile’s solid economic footing, steady growth, solid infrastructure and security.

Today, Chile boasts one of the region’ highest GDPs. Awash with record copper earnings, there are signs of progress and new money everywhere. Tourists get whisked into the country’s modern capital along superfast electronic-toll highways. Construction cranes dot the Santiago skyline and shiny skyscrapers reflect the pinkish hue of the sunset against the backdrop of the towering Andes mountains. After walking around the neighborhoods of Providencia and Las Condes for a few hours, tourists often ask why anyone would consider Chile “Third World”.

This relatively advanced developing nation now boasts a growing array of hotel chains, with inter-national big shots such as: the Holiday Inn (Crowne Plaza and Intercontinental), Sheraton, Hyatt, Marriott, Best Western, Melía and the Radisson. Chilean chains include: Diego de Almagro (with 15 hotels), Pana-mericana (6), Explora (5), Eurotel (2) and Director (2).

Mauro Magnani, President of the Chilean Hoteliers Asso-ciation, says the recent growth in the hotel industry is in line with Chile’s own economic expansion, and its coming of age as a destination for business travel.

Davalos believes the quality of Chilean hotels is now among the best in South America. The problem, he says, is that their rates are much lower than those of comparable class hotels in Argentina, Brazil or Colombia.

“Even in Peru you find the average rate for a night between US$100-150, while in Chile you can get a four or five-star hotel for $80,” says Davalos, adding that low prices have not provided an incentive for private investment in hotels.

He believes the lack of financing is the main obstacle that has stood in the way of more development of hotel chains.
“What we all look for is more support from banks,” says Davalos. “Most banks are private in Chile and until very recently they were very reluctant to lend to businesses involved in tourism and hospitality. So it has been hard to build new hotels because you had to have your own financing. Still, chains need to have bank financing.”

Davalos says the situation has improved in recent years, but there is still a ways to go.

Statistics confirm these observations, and reveal that investment is rising sharply. In December 2006, investments in Chile’s hotel and tourism industry reached US$2.1 billion – an increase of almost 13% over the US$1.8 billion registered in June of that year, and 4.7% higher than the investments made in December of 2005. When compared with three years ago, the results are even more striking, representing a 23.6% rise from the US$1.7 billion invested in December of 2003. This, according to the national Tourism and Housing Investment Registry, prepared by Chile’s National Chamber of Business, Services and Tourism (CNC), which includes projects both in execution and under study (for investments of US$3 million or more).

According to the CNC, the bulk of this recent investment is almost evenly split between new casinos (44%) and new hotel chains (42.7%).

Davalos says Chile will likely experience a boom in hotel investments for the next few years, something which has been helped by the passing of a recent casino law, which allows for the creation of up to three casinos per region (there are 15 regions in the country). The law obliges all new casino projects to include a five-star hotel in any area without sufficient accommodation in that class. Ten casinos and eight hotel concessions have already been approved and construction has started on such projects in cities across the country, including Antofagasta, Temuco and San Antonio.

Six of the eight new hotel chains registered as new investments in 2006 were located outside of Santiago, illustrating the importance of expanding into Chile’s regions, where hotel quality and availability is less consistent.

There are many smaller destinations where tourist demand is exceeding capacity. It’s not uncommon to find hotels booked solid months ahead in key destinations, particularly during the peak summer months of January and February. Small and remote locales like Easter Island, the Atacama Desert and Patagonia are luring increasing numbers of tourists, while more traditional southern cities such as Puerto Montt and Puerto Varas are finding themselves overwhelmed by the increase in cruise ship traffic.

Santelices says Chile’s regions are the areas most lacking in hotel infrastructure, many with low-quality hotels and few with chains. “It’s not cheap to travel to Chile, so when people come here they want to know they’ve received good service. If they don’t, that doesn’t encourage tourism,” she says.
Santelices argues that more investment is needed in hotels located in distant areas. That would spur tourism and divert some business clientele and large conferences away from the capital.

Promoting all of Chile is one of the main goals for Antonio Irarrazaval, principal partner of the hotel management, development and consulting firm Protel, which has five projects in the works across the country. Protel brought Melía (Spain’s largest hotel chain) to Puerto Varas, in Chile’s southern Lakes region. The consultancy’s new projects include two in Chile’s south, one in Santiago, and two for high-end markets in the exotic locations of Chile’s Atacama Desert and Easter Island. The latter will involve a US$15-million investment in a 95-room hotel near the island’s airport – a deal about to be cemented with one of the world’s largest hotel chains that is not yet present in Chile. For the Atacama Desert, Protel has developed a project to build a 50-room hotel, with rates at US$450/night. To include the first golf course in a desert, the US$30-million investment would be divvied up between Chilean and foreign investors, and would be operated by another large hotel chain not yet present here.

“We need to publicize our country, internationally,” says Ira-rrazaval. “Chile is a new destination that has not been tapped
because it is far away and unknown internationally.”
He says Chile has a long way to go when it comes to developing its hospitality industry, when compared with Argentina, Mexico and Brazil. “But we see enormous potential.”

In its six years, Protel has capitalized on the increased interest in Chile. Irarrazaval says more Chileans are interested in investing in tourism.

Magnani concurs, adding that the bulk of new hotel development has been financed by Chilean funds, even if the hotel is a foreign chain, because investors often pool funds to open foreign fran-chises here.

Colin Turner is the General Manager for Radisson Chile, which currently has five hotels across the country. The first Radisson franchise opened 12 years ago in Santiago. They began expanding six years ago. Two of their new hotels in the northern cities of Antofagasta and Iquique (bought from Chile’s Carrera Hotel chain) demonstrated impressive results within months. When they were purchased, they had an occupancy rate of only 30%, a percentage which grew to 50% in 2005, and to an impressive 70% by 2006. Turner attributes these stellar results to Radisson’s name recognition, as well as improved commercial and opera-tional management.

Their newest hotel is the Radisson Aqua, opened last year in Con Con (Viña del Mar) with 50 rooms. During peak season in January-February, occupancy rates hit 90%, and they’re able to maintain a steady flow of recreational and business visitors throughout the rest of the year, with a 65% occupancy rate posted in April.

But home-grown Chilean-owned and financed hotel chains have also become more visible. The Panamericana Hotel boasts six establishments across Chile (in the cities of Antofagasta, Arica, Ancud, Santiago, Temuco and Viña del Mar) and it has plans o expand further. Davalos, Panamericana’s Business Manager, estimates that his chain represents around 30% of the market share of domestic chains.

He says Panamericana has been able to compete with larger foreign chains that have international name recognition because it provides excellent service, constant training for its staff and promotion. Ever since it began expanding six years ago, Panamericana began attending global tourism fairs to promote the chain.

“Fortunately, this has shown great results for us,” says Davalos. “We’ve also been successful because of the excellent promotion we get from larger Chilean tour operators.”

The Eurotel hotel chain, which has two four-star hotels in Santiago, opened its first hotel in the Providencia area in 1993, with 30 rooms. In 1998, they bought the neighbouring building and expanded to 60 rooms. In 2004, Eurotel began the process of opening a second hotel, on Avenida Bosque Norte (with 40 rooms), hence becoming a chain.

“If you have a product that sells, why look for a different name that you might not know?” says Santelices, Eurotel’s Business Manager. “We decided to expand into a chain to provide the same, trusted name and services, because we know we offer a good, tried and tested product.”

With 100 rooms and two hotels, Santelices knows Eurotel’s market share is small, something around 2% she believes. She says they have no current plans to expand beyond Santiago, but they are looking at expanding their newest hotel.
Still, there are hotels that pride themselves on being small.
“Hotel chains have advantages in that they support one another, but the disadvantages are that they all have to have the same standards,” says Diana Borchard, general manager for Apart Hotel Lafayette. “Moreover, in our hotels, the service is much more personalized than in a chain, for example. Our guests have names – they aren’t a room number. If they want a special type of yogurt, we’ll go out and buy it for them.”
Borchard has watched new hotels rise around the city since she moved to Santiago from Germany in 1989.

“When I arrived in Chile, the hotel industry was not very developed,” says Borchard. “Today, there are more big and beautiful hotels, and more chains, but they aren’t necessarily well-managed. Many workers don’t speak English, which is a must in this industry. In Chile, there is still a lack of professionals in the hotel industry.”

Magnani concedes that the industry has its problems, such as poor customer service, particularly in restaurants – so his Association has created special training courses for garçons, maître d's and other service personnel. He says the quality of Chile’s gastronomy is improving and there are new college programs in the hospitality area which illustrate both the demand and the drive to professionalize further.

Still, industry experts concur that what would most help the development of Chile’s hotel industry is improved international promotion of the country as a tourist destination.
“Our country needs to invest in developing its hotels and tourism industry because this provides so much direct and indirect employment,” says Irarrazaval. “Up until now, the funds for tourism promotion have been scarce.”

To this end, the Chilean government is committing new funds in an effort to promote tourism and encourage the development of new infrastructure, particularly in ecotourism. The ultimate goal is to expand Chile’s current tourist traffic from 2 to 3 million visitors a year by 2010. As part of this goal, Chile’s National Service for Tourism is currently negotiating a plan with the Interamerican Development Bank (IDB) to provide $40,000 loans for projects to improve Chile’s tourism infras-tructure.

	Interview Colin Turner, Radisson's General Manager in Chile
	How does Radisson operate in Chile? Is it a franchise or a direct operation? As a company, Radisson Chile was crea-ted more than 10 years ago as a local outfit to operate our Radisson Plaza hotel in Santiago. Nowadays it’s a group owned by 12 shareholders, both Chilean and foreign, which runs 6 hotels under an umbrella franchise from Radisson for the Chilean market. What are your main niches? It depends on the destination. Obviously Santiago, Antofagasta and Iquique are rather business oriented, the travel aspect is not as important. Nevertheless, Iquique is an interesting case, given that it is known mainly as a tourist destination. But when you analyze the occupation levels of all its hotels, you find that leisure travel accounts for only 20% of all its traffic, with the rest being effectively attributable to business travel. What can you tell us about Radisson Hotels outside of Santiago? Our Antofagasta and Iquique hotels are doing quite well. In 2006, their second year of operations, occupancy levels exceeded 70%, with considerable increases in rates from one period to the other. On the other hand, Radisson Cuidad Empresarial will see a boost in demand with the coming opening of the Cerro San Cristóbal tunnel, which will connect it with he main districts in Santiago in just 4 minutes. And, finally, occupancy levels in our Con Cón hotel have been excellent this year: 90% in the summer peak season, and in excess of 65% in March and April, with highly attractive rates. Demand is composed of leisure travelers and spa users on weekends, with a very important component of business tourism and meetings the rest of the week. That’s our core segment. How much of your business origina-tes internationally and locally? Here at Santiago’s Radisson Plaza Hotel 95% of our occupancy is generated by international passengers, with 30% of those reserves being done through our booking system. This accounts for approximately 36 to 37% of our income, and all those sales come from foreign passengers, both travelers and business people. How would you describe the “Radi-sson client”? It depends on the city and the product. But in general terms, our clients know what they want and are very loyal, provided their requirements are met. They also expect permanent innovation, and I think one of our trademarks in Chile is to always look for ways to deliver better service and innovative products. Our Con Cón and Cuidad Empresarial hotels are proof that if you have the right product, exotic locations and the right marketing, you can be very successful. What are Radisson’s differentiating factors? Among other things, our management, booking systems, commercial and sales offices are housed in the same place. This enables us to completely standardize our service. The product is exactly the same from one hotel to the other. Secondly, our client management is one throughout the chain. We know if someone is a client from another city or country, because they are already in our system. And finally, the average rate in all our hotels is US$ 80, which makes us very attractive and competitive. That’s why we think there is room for growth in Chile. Speaking of that, what does the future hold for Radisson Chile? Isn’t the market saturated? There is room to grow outside of Santiago. We are quite satisfied with our products in this city, Radisson Plaza and Radisson Cuidad Empresarial, and looking forward to developing the lecture halls/convention centers segment in the country. On the other hand, it’s true that the par-ticular area in which Radisson Plaza is located is one the most concentrated in terms of room supply in the city, but I think that gives us a competitive edge. So rather than being of fearful of any new com-petition, we welcome it and think it benefits both the industry and the customers.

	Interview Mr. Wilfredo Fleming, CEO of Villarrica Park Lake Hotel
	Starting from the beginning, could you explain to us why you chose the road between Villarrica and Pucón as the location for the VILLARRICA PARK LAKE HOTEL? Because it’s a unique spot in a privileged setting. It boasts natural beuty: lakes, rivers, national parks, waterfalls. It’s an area with vast potential because it’s only ninety minutes by plane from Santiago, only 69 kilometres from Argentina in a crossing one can do by land or on boat, and it has the greatest number of thermal baths in the country. Seasonal changes have been a key factor in establishing VILLARRICA PARK LAKE HOTEL’s success. You offer some price alternatives in the low season compared to the peak period. What is the percent difference between a rate in the high and low season? The rates in low seasons are 25% cheaper. In addition, we offer great group rates for tourists and businesses that want to hold meetings, training sessions, product launches or incentive programs at the hotel. What attractions does the hotel offer its guests? A privileged view of the Villarrica lake from every room and public areas. A 1,700-square-metre SPA with facilities on par with the best in Europe. Avant-garde dining in our Aguas Verdes Restaurant and in our Equilibrium and Vértigo Bars, plus excellent and personalised service so our guests can enjoy an unforgettable experience during their stay. What is the makeup of your target public? Chileans and foreigners who appreciate luxury and top-notch service in a unique setting that is ideal for relaxing and recharging your batteries. Currently half of our guests are foreign and half Chilean. We’re talking about high-level tourists. What are the ranges of your rates? Very reasonable considering the level of accommodations at the hotel. These start out at just US$100 plus tax per person in a double room. This includes a complete buffet of American-style breakfast food and unlimited access to our Aquarius SPA. It’s an opportunity that nobody should miss. IS VILLARRICA PARK LAKE HOTEL part of a hotel group? Have you studied other investments of this type? For now, no. We are focused on developing this project to the peak of its potential. This includes developing terrain that boasts a heliport and beach section, and continuing to position Villarrica Park Lake Hotel as the best SPA Resort in Chile. In many cases, the tourist does not have a reference for hotels beyond the advice of his or her travel agent and some pictures from a catalogue. What should the client know before choosing a hotel? Location, ranking, category, ensuring it has the accommodations he or she is seeking, whether it be in terms of SPA equipment or restaurants or recreation centres. It must meet their technical needs in terms of Internet and WIFI connections, and room size is very important as well. It must offer a range of outdoor activities and shuttling services to areas of interest. It’s also important to know if the hotel has won awards or recognition from international organizations or certificates of quality. This last point is especially important in the five-star market. What advantages does your hotel offer? There’s a lot and they’re very big. First a unique location with an exclusive view of the marvellous natural surroundings. First-class luxury acco-mmodations. Superior rooms with 48 square metres of space, a balcony and a view of the lake plus a world-class SPA. It also boasts three ample and comfortable meeting rooms that are completely furnished with state-of-the-art technology and total connectivity with wideband connection in every room and WIFI in meeting rooms and public areas. All this plus excellent service and fine dining make Villarrica Park Lake Hotel the best option for work-related trips or for rest and relaxation. What is your plan for increasing occupancy and attracting a greater number of guests? We will continue our work of positioning ourselves in international markets. This is a long-term project that already is bearing fruit. We must continue promoting the hotel and letting people know about Villarrica Pucón in Europe, especially England, Germany, Spain, France and Italy. In the Americas, we focus on Brazil, Argentina, Colombia, Peru and Mexico plus the US and Canada. It’s very important to work at segmenting the incentives because we believe the hotel and destination are ideal for receiving groups of this nature. Do you think the area of Villarrica-Pucón is prepared in terms of infrastructure and service quality to receive domestic and international tourists? Absolutely. The destination has got it all. Nature, adventure sports, restaurants, a casino, excellent access by plane and highways in addition to an interesting range of hotels in all categories. As an expert in the hotel industry, what is your view of legislation on hotel rankings? There are new plans to make ranking more demanding and that seems very positive to us. It should be very clear which hotels are five stars, which are five-star luxury hotels, which are four stars and so on. Currently the ranking does not always reflect the true status of the hotel. What’s your view on the current hotel market in Chile? It’s growing and enjoying fine health. It’s in clear expansion. The development that started at the beginning of the 90s in Santiago has moved on to other regions in the country, showing that the country is on the road toward becoming a major tourist destination. This is very healthy as tourism is an ecological industry that does not pollute and creates jobs for a lot of people. What is your take on the competition in this market? It exists and we think it is healthy that way, as the more places there are the more people can know the different locations. Once the destination has been consolidated, generally there is enough in the market so everyone can participate in the business. Greetings We offer our greetings to readers of Trip Chile “Chile in English” and invite them to get to know the hospitality and marvels that the Villarrica and Pucón area has to offer from the privileged location at Villarrica Park Lake Hotel to our magnificent accommodations. Enjoy our fine dining, relax in our Aquarius SPA and put yourself in the hands of one of our professionals and experience some of the relaxing body treatments that we offer. All this in addition to staying in some of the best rooms in the country. It all comes with the highest level of service to satisfy the most seasoned and demanding travellers. We guarantee it will be an unforgettable experience.