Why George Soros Likes Latin America's Hotel Sector

George Soros Latin America

The investment firm of billionaire George Soros has agreed to spend up to US $300 million in Fën Hotels, an Argentinian hotel chain, in a vote of confidence in a region that has been affected by slow economic growth and waning investor interest.

Soros's investment will help fund up to 5,000 new hotel rooms in Peru, Chile, Ecuador, Argentina and other South American countries in the next three years, according to Patricio Fuks, president of Fën hotels. The hotel company based in Buenos Aires will manage the properties.

Fuks believes that by focusing on Latin America, may generate greater returns on investment for its partner than in other parts of the world. The acquisition and construction of hotels in major cities in the United States is increasingly competitive and expensive, he says, "but you can still build for a reasonable price in the capital cities of Latin America."

Property costs are lower in the region for a reason. Their economies have lost momentum as the slowdown in demand from China has put an end to the boom in commodity prices. At the same time, foreign investment capital has withdrawn from these countries. Brazil, the largest economy in Latin America, has been particularly hard hit.

Economists have been lowering their projections for growth in the short run for most countries in the region, a pessimistic signal for region's travel industry. However, Soros' commitment to the development of thousands of hotel rooms in the next three years in South America suggests that some experienced investors rely on a future recovery of these countries.

Other Latin American hotel brands are also beginning to expand beyond its borders. Grupo Posadas SAB de CV, the largest chain in Mexico, announced in June an association with the US private equity firm Bighorn Capital Inc. to open as many as 10 luxury properties in USA over the next five years. Fasano, a luxury brand chain in Brazil, is preparing to take over as operator of the famous Shore Club in Miami Beach, his first project outside South America

Fen Hoteles also seeks to establish a presence in the US, with its Dazzler brand in Brooklyn and other hotels which it already operates or has under development in Florida (The Tides South Beach and Splendor Bay Harbor, Miami, and Bonaventure Resort & Spa in Weston) and Los Angeles (Clark Dazzler and Splendor Trinity).