If you tried to book a hotel room in Bogotá over the past four months, chances are that it didn’t take too much searching around. Overall hotel occupancy in the Colombian capital was the lowest in five years during the first months of 2013 according to a report from Cotelco, the guild representing much of the nation’s hospitality industry.
For this year’s first trimester, hotel occupancy in Bogotá averaged about 54 percent, down almost five points from the same period last year and more than 20 points lower than national leader San Andrés, where a combination of tourism promotion, cheaper flights and ongoing controversy over nautical territory rights have boosted visits to the island.
While hotels were emptier throughout much of the country in early 2013, foreign tourism in Colombia continues to grow at an impressive rate according to Proexport, the government entity in charge of tourism and international commerce. Almost 1.7 million tourists passed through Colombian borders last year, an increase of seven percent over 2011. Average annual growth in foreign tourism from 2001 to 2011 surpassed 10 percent in Colombia, and was more than three times higher than the global average.
As of last year, Bogotá remained the nation’s most visited destination, receiving more than 900,000 foreign travelers. Given that the figure represented a five percent increase over the previous year, the overall decrease in hotel occupancy seems most likely due to a rise in the number of hotel rooms in the city. Some estimates suggest that as many as 2,500 new rooms will be opened in Bogotá in the next three years.
“The decrease in the percentage of occupied rooms in Bogotá has to do with two factors. The first is the considerable increase in new rooms, which has created a notable imbalance of supply and demand,” said Dr. Juan Leonardo Correa, president of Cotelco, who pointed out that the second issue behind the decrease in occupation is the rising popularity of an informal hospitality industry in the city.
A 2013 study by the organization found that some six percent of visitors to the city stayed in informal lodging between August 2012 and February 2013. Generally, the term “informal” applies to privately owned apartments or rooms rented out to visitors for less than 30 days, a popular option among business travelers who can find greater privacy at prices comparable to luxury hotels.
But, these informal arrangements are harmful, according to Cotelco, in that they decrease the tax revenue tourism generates for the city and endanger customers who have little or no recourse in an unregulated industry. To be sure, lost business also hurts the hotel industry directly, and Dr. Correa mentioned that Cotelco has taken “emphatic steps to assess the situation and take corresponding measures to avoid complicated situations like price wars that could dramatically affect the entire sector.”
As of September 2012, the average price of a night in a Bogotá hotel hovered around USD $124, a relatively high fee that nonetheless represented a 12 percent decrease over the previous year. Perhaps most importantly, the double digit drop in price was the largest decrease in the world during that period, as global average prices went up for the first time in five years in 2012. The city’s most expensive hotel, according to a study by Dinero magazine, is B.O.G. Hotel near the Zona T, where room prices go for $1 million pesos (approx. USD $522) per night. This hotel is followed by JW Marriott, 93 Luxury Suites and Hotel Charleston.
Investors seem to be taking the news in stride, however, as all trends point to more visitors, both foreign and national. The capital city draws a healthy combination of general tourism and business travel, and was recognized as the 42nd city in the world with the most business conferences and industry events in 2012 by the International Association of Congresses and Conventions (ICCA). Nationwide, the combination of explosive growth in tourism and highly competitive tax breaks has led to a boom in hotel construction over the past few years.
“At the national level, we expect the construction of approximately 8,000 new hotel rooms in the next three years. Cities such as Bogotá, Medellín and Cartagena will see the most growth,” said Correa. “The tendency will continue to be positive, at least until 2017 when tax benefits end.”
A 2002 law provides a 30-year tax exemption for all hotels built or substantially remodeled before 2018.
While action will be necessary in order to reverse the trend toward lower hotel occupancy in Bogotá, the fundamental basis for growth is already present. As Colombia continues to open itself up to foreign and national travelers, the nation’s hotel industry has nowhere to go but up.