Mandarin Oriental hits South America amid push to open new hotels

Santiago, Chile

MANDARIN Oriental is opting for the safe bet over the big bet in South America. The luxury hotel operator is bypassing Sao Paulo, the region's cultural and financial hub, in favour of the relatively sedate Santiago.

The Chilean capital may not have the glitzy appeal of the Brazilian metropolis - and the rich travellers that go with it - but it also doesn't have the crime.

Santiago's calm was the biggest factor when Mandarin Oriental International looked to Latin America, country manager Ignacio Rodriguez said in an interview.

Now, the Hong Kong-based hotel chain is working at full speed to refurbish a hotel previously operated by Hyatt for an early 2019 launch. The property, which has 310 guest rooms and 23 suites, will be rebranded as a Mandarin Oriental.

The company plans to open its second location in the country in 2020 in the coastal city of Vina del Mar.

It's part of the strategy set by the group's chief executive officer James Riley, who plans to double the number of locations around the world for the group's properties.

Latin America is an obvious region for growth, he said.

In the year to date, Mandarin's shares are up 3 per cent, outperforming a 5 per cent loss in the same period for the FTSE Straits Times Consumer Services Index.

Chile is becoming an ever-more attractive location for the region's luxury market as disposable incomes grow.

A case in point: Rolls-Royce Cars has only two dealerships in South America. One is in Sao Paulo, and the other, in Santiago.

Chile's association of luxury goods, which includes brands such as automakers Bentley, BMW and Infiniti, cruise company Crystal Cruises, watchmaker Omega and shoe brand Salvatore Ferragamo under it, reported that sales grew 9 per cent last year to US$654 million, the La Tercera newspaper reported.

Chile also has low crime levels in its favour, with a murder rate of 3.5 per 100,000 inhabitants, the lowest in South America to Venezuela's 56 and Brazil's 30, according to data from the United Nations Office on Drugs and Crime.

The hotel industry is booming in Chile. Occupancy rates went up to 68 per cent last year, the highest in the region, said Deloitte.

Buenos Aires has an occupancy rate of 59 per cent. By country, Brazil has 53 per cent, Peru is at 64 per cent and Colombia at 57 per cent.

Prices in Santiago have trended lower, thanks to online services such as Airbnb, but with those high occupancy rates above 60 per cent in the last four years, the industry is betting on more growth.

Deloitte said 22 new hotels are under construction in Santiago, adding more than 4,000 new beds by 2022.

Mandarin is betting on its brand recognition and attention to service to attract clients, Mr Rodriguez said.

"Fewer hotels are offering something as simple as leaving your shoes out of the room and having them polished by the next day for free, or sending a shirt to ironing and if staff notice a missing button, having it immediately fixed," he added. BLOOMBERG