The renowned Castillo Rojo Hotel Boutique in Bellavista opened its doors in 2013. Installed in a heritage house from 1923, in Plaza Camilo Mori, it was inaugurated as a foreign-oriented 19-room property. “It seemed like an ideal place to us because it is in the middle of a tourist neighborhood,” said one of its owners, Álvaro Jaime, at the time. It is now for sale. According to the registry of the real estate management firm Property Partners, its value is 176,390 UF (about $5,900 million) for its 1,053 square meters. “What a hotel shop of this type is available responds to the effects that the pandemic and social outbreak had both in commerce and in the hotel sector”, interprets the director of Property Partners, Ferencz Delarze.
The traditional Torremayor, by Ricardo Lyon, which has some 91 rooms, is listed in Colliers for 370,000 UF ($12.4 billion), as is the Radisson in Curicó, or the Ultramar in Valparaíso, which is listed at 18,000 UF in Sotheby’s Properties … And so it goes on. In the Association of Hoteliers of Chile they calculate that there are at least 53 hotels in the same situation at the national level, an unprecedented figure. Industry sources assure that the number falls short… it would be more than 100.
“They did everything humanly possible to survive, but the situation is still complicated, so the owners have decided to go out and sell,” says the president of the hoteliers and controller of the NOI, Alberto Pirola.
They have been one of the items hardest hit by the pandemic. They accuse that the main problem has been the lack of foreign tourists, given the restrictions that still continue, such as the homologation of vaccines. Today -they estimate- the arrivals of foreigners border on 23%, when traditionally they were more than 60% of the occupants.
“We contributed 3.7% of the GDP, today I think we are not even 1%”, emphasizes Pirola. And he cries out: “Help us, please, we’re drowning.”
The managing partner of Engel & Völkers Commercial, Felipe Weil, says that since 2010 a series of boutique hotels began to emerge, especially in the districts of Santiago and Providencia. They coincided with businessmen or families -he points out- who wanted to have a hobby and replicate installations that they had seen in Europe or the US “Generally they took heritage properties or outstanding properties”, he underlines. All highly volume dependent. The social outbreak involved closing the doors of several, waiting for the social crisis to subside. When in the summer of 2020 they began to rebound, the pandemic came. Some were converting to health residences, which helped them pay the costs, but after that the income fell again. “If it was already difficult to make a profit before the pandemic, with this it became unsustainable,” says Weil. “Now they prefer to sell.”
If Engel & Völkers traditionally had around 2 to 3 hotels for sale, today they exceed ten. At Property Partners they have a portfolio of 30 available.
Although domestic tourism has sustained demand, it is abroad that ‘moves the needle’, they say in the sector. Fitzroy CEO Hernán Passalacqua puts it this way: If before the pandemic the foreigners who arrived were around 400,000 on average per month and spent more than US$1,000 each, in these eight months it has been an average of 90,000; more than 300,000 fewer tourists and, therefore, a decrease of more than US$300 million per month.
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Fitzroy today maintains The Aubrey Boutique Hotel for sale, on Constitución street, Providencia. Passalacqua acknowledges that he has been interested, but stresses “nobody is going to do anything until the plebiscite.” After that, a greater movement should come: “2022-2023 is going to be a year of transactions. Many people are tired, there is exhaustion, so I think there will be changes of hands and consolidation of the industry”, he predicts.
Today, places like the Hotel Windsor, in Victoria Subercaseux, and even – say industry sources – the renowned Luciano K, in Barrio Lastarria, which was once the tallest skyscraper in the country, are looking for buyers… now, they continue to operate because -the hoteliers agree- the cost of keeping them closed in terms of maintenance is even greater than having them open.
The director of the hotel consultancy company, Horetur, Pedro Lewin calculates that hoteliers start to earn when occupancy is above 60%. And today it is far from that.
According to the balance sheet of A3 Property Investments -operators of the Pullman, Novotel, Mercure brands-, in the first quarter, the occupation of the sector in Santiago reached 51% versus 31% a year ago. The rate is 10% lower than before the pandemic.
The hotels managed by the LarrainVial Hotel Investment Fund -Sheraton, Ritz-Carlton Santiago, Intercontinental Santiago, Crowne Plaza- have an average occupancy rate of 40%. Since April 2021 the Ritz hotel is for sale.
Pirola assures that growing costs are added to low occupancy. Contributions alone are up 30%. It exemplifies that there are hotels, for example, in San Pedro de Atacama, that used to pay $6 million a month for energy, today the bill is $22 million. “There are taxes that have been declared, but they have not been able to pay them because they do not have the flow to catch up,” he highlights.
Two weeks ago, The government announced a subsidy of up to $4 million per company to help SMEs in the sector. Then, the Hoteliers Association met with the Undersecretary of Tourism, Verónica Kunze. “I told him that the level of debt and spending is much greater and that, in reality, the best help that can come to this area is the release of the homologation, because there is interest in coming; we open the borders and reserves begin to grow rapidly”, says Pirola, who compares: in the US, without restrictions, the demand is already higher than in the pre-pandemic.
The owner of the NOI has met with two banks that have wanted to understand what is happening with the sector. This is because – he acknowledges – there are already hotels behind in the payment of Fogape fees for Covid-19, a state guarantee program granted in the pandemic to facilitate access to credit. “There are overdue quotas that have not been canceled and there is already a considerable number of hoteliers with this issue,” he underlines.
Passalacqua specifies that the financial sector has provided facilities. Pedro Lewin remembers that recently a hotel in Puerto Montt went bankrupt and the bank finally took it away… but after three years. “The same bank said, if I take it from you, what do I do with it? So, many times they have chosen to reach an agreement: I leave it to you and do not charge you for a while. “For the banks it is a problem to validate the guarantee and award the property. Better to stay with a warehouse than with a hotel”, adds Pirola.
In the sector they recognize that despite all the movement, it is a complex moment to sell, given the situation of the item. In fact, Ferencz Delarze, from Property Partners, explains that they have been selling the Castillo Rojo hotel for more than a year. “We hope to successfully complete the sale process this year,” he underlines. But given that the sector has been hit, they have offered it to real estate investors for residential rentals, higher education institutions and even canvassed it with political advisers to be the presidential residence, which did not work out. President Boric stayed with the former Damero B&B hotel, in the Yungay neighborhood.
In the item they say that the right to operate the hotel is no longer sold, but the asset as a building. Felipe Weil, from Engel & Völkers, points out that traditionally the price of a hotel was calculated by putting a value per room: today that formula, in general, does not apply, it is only UF per square meter. “There is no longer an added value that is the key rights. What is being sold is only real estate and, depending on the area, it may have a higher level of discount; at zone zero the value can drop 20% or 25%”, he says. In fact, in real estate portals, hotels are offered as dependencies multi-family or residential.
This scenario has led several operators to choose to convert properties or lease them. “There is a hotel in the heart of Providencia that is leased entirely to a mining company for the people who send it here,” confides Pedro Lewin. The property is managed by the company. The director of Horetur has two other requests along the same lines: one from a large hotel chain that is looking for two or three properties to rent, and another from a firm that is also looking for a property.
The problem is that they do not always want in the sectors where there is the greatest supply. “Lastarria is a neighborhood where you don’t want to be, it’s on the investors’ blacklist. I have them for sale and when people see the place, they tell me ‘no, no, I want something in Vitacura, Las Condes, I don’t want to be bothered,’” he says.
The other alternative is to convert the hotel. Initially, what has already been done is that operators of apartment hotel They have been converted into long-stay apartments, since they occupy the same structure… without major modifications. Or in spaces coliving, where rooms are rented for long stays and common spaces are shared. That is the case of the hotel shop Your Mercy, in the center.
More isolated cases are those that have requested a permit from the respective Works Directorate to introduce kitchens to the floors, join rooms and enable them as apartments. “There are two hotels that are in the Plaza Italia sector that are evaluating the possibility of converting to long-stay apartments, as well as multi-family”, emphasizes Lewin.
Today there is the example of Andes Hostel, in Monjitas, which will be converted for residential rental.
Alberto Pirola assures that they only need two good years for the sector to recover all the losses. “We calculate that it will be in the middle of 2025. There are two and a half years left and it has already been the same bad time. It is exhausting to spend five years working to survive, ”he highlights.