High inflation drives up Argentina’s hotel rates in 2018 

2 February, 2018

Double digit inflation is driving up hotel rates in Argentina during 2018, but the country remains a bright spot for hoteliers as the country appears to be on a solid path to economic recovery.

American Express' Global Business Travel Forecast for 2018 shows room rates in Argentina should jump 18% year-on-year due inflation rates growing roughy 15%. (Inflation rate estimates are from news outlet Bloomberg as of late Dec-2017).

Prospects for hotel occupancy growth in Argentina looks bright. American Express stated economic reforms to spur new investment and accelerate domestic growth are being pushed by President Mauricio Macri.

"After years of poor economic results and socio-political upheaval, Argentina finally seems firmly on the path to recovery," American Express concluded. "Economic growth has been solid over the last year." The IMF has forecasted 2.5% economic growth for Argentina in 2018, according to Markets Insider.

Elsewhere in Latin America, American Express predicts room rates should fall in Brazil by 0.5% in 2018 driven by oversupply in key cities compounded by rapid development of new supply. According to the forecast, Brazil still represents over 25% of rooms in construction for Central and South America.

American Express' analysis shows tourism fell sharply in Brazil during 2017; however some of the decrease was offset somewhat by stronger business travel as Brazil's economy returned to positive growth.

But a certain level of uncertainty hovers over Brazil's hotel business in 2018 due to ongoing political tensions and potential changes in US trade policies, American Express stated. The country has a presidential election scheduled for Oct-2018, and the outcome is highly unpredictable.

The American Express forecast shows hotel rate increases in Mexico will be limited to 2% to 3% in 2018 due to overall soft demand and a strong pipeline of new hotel rooms. A strong manufacturing sector should help drive business travel, provided there are no changes to the North American Free Trade Agreement (NAFTA.

However, despite a weaker MXP, leisure demand remains depressed as US tourist remained concerned about security. In Aug-2017 the US State Department issued a a travel warning advising tourists to avoid certain popular destinations altogether, the report's authors concluded.

As Latin America emerges from a period of economic weakness, its overall hotel rates are forecast to grow 3% in 2018 compared with 18% growth for North America.