The Brazilian Hotel Sector

The Danish Consulate General and the Embassy of Denmark

So Paulo, August 2010

Table of Contents
1 2 3
3.1 3.2 3.3 3.4

Executive Summary ...................................................................................................................... 3 Brazils Economical and political situation ..................................................................................... 4 The hotel sector ............................................................................................................................ 6
Regional trends .................................................................................................................................................. 8 Cruise ships and coast line development ........................................................................................................... 9 Cheap loans for the Brazilian hotel sector ....................................................................................................... 10 Operators in the Brazilian market .................................................................................................................... 12

4
4.1 4.2 4.3 4.4

Opportunities for Danish suppliers .............................................................................................. 15

Supplying the growing hospitality sector ......................................................................................................... 15 Demand for green technologies....................................................................................................................... 16 Cruise ships accommodation for the world cup .............................................................................................. 16 Owning and operation hotel chains ................................................................................................................. 16

5 6 7 8 9 10

How to enter the hotel market .................................................................................................... 17 The future of the market ............................................................................................................. 18 Final considerations .................................................................................................................... 19 Appendix A) Current industry events for 2010. All are yearly events............................................. 20 Appendix B) Government Stakeholders and branch organizations ................................................ 21 Appendix C) Introduction to Brazilian business culture ................................................................ 22

1 Executive Summary
Brazil is an emerging market with a proven growth potential. The tourism sector is growing and major upcoming events such as the 2014 FIFA World Cup and the 2016 Olympic Games will increase hotel demand significantly. The short term outlook is good, and coupled with a promising long term forecast the market presents promising opportunities for Danish suppliers. New market demand in general and government support has forced investments and changes in the market. Expectations about long term demand are firmly rooted in Brazils growing middle class and the after-effects of Brazils international exposure. The middle class can now to a higher degree afford domestic vacations, while international exposure end economic growth are likely to attract more overseas visitors. The hotel sector shows nationwide growth, but is mainly concentrated around the north east region, So Paulo and Rio de Janeiro. The north-eastern part of the country is currently receiving a large share of the capital invested in the Brazilian hotel sector. This part of the country remains underdeveloped for now. The markets in the south-east, Rio de Janeiro and So Paulo, are without comparison Brazil biggest economic centers. The common denominator is investments; new hotels are being build and old hotels are being refurbished. Even though they are short term events, the world cup and the Olympic has fueled a wave of new investments and widespread optimism. The government is spending billions of USD on infrastructure, and the government backed development bank BNDES is offering a USD 600 million line of credit to the hotel sector. Available capital in a sector undergoing structural changes provides opportunities for new suppliers. There is demand for all sorts of hotel inventory, building materials and knowhow. Setting up a presence in Brazil is a low cost investment and involves low risk compared to the gains of exposure to the Brazilian market. A growing environmental conscience could potentially benefit Danish suppliers that are likely to already have an environment friendly product portfolio at competitive prices. Green solutions have intrinsic value in being more cost-efficient, and growing concerns about the environment adds value from a marketing perspective. Whether having a particularly green or regular product portfolio, entering Brazil grants access to a growth market with long term potential reaching beyond the 2016 Olympics.

2 Brazils Economical and political situation

Traditionally, authorities have neglected the issue of tourism. The Ministry of Tourism was created in 2003, and it is only quite recently that the international tourism has started to pick up in Brazil. There are 5,2 million international tourists in Brazil per year, a number which is still well below the potential capacity. The tourism sector in Brazil focuses primarily on domestic tourism which is becoming more and more important 1. Applying a more general perspective, Brazilian firms are latecomers to the international arena, even when compared with other Latin American companies. Among the countrys largest corporations, few had outward foreign direct investment (FDI) activities before the early 1990s. There were however exceptions such as Petrobas (oil and gas) and Vale (mining). During the 1980s the country saw an increase in inward FDI with total investments surpassing USD 2 billion although still concentrated in a small number of companies and sectors such as the financial sector, oil and gas industry and a few from the manufacturing sector. The recent internationalization of Brazilian firms has a different characteristic, and is part of the worldwide trend of cross-border investments by firms from Third-World countries. In 2006, Brazil had its largest investment outflow ever with USD 28 billion. Along the economical growth Brazil has experienced a large expansion of their middleclass. The Brazilian population can be divided into segments depending on the monthly household income levels (table 2.1). Recent developments are shown in illustration 2.1. Table 2.1 Class A&B: Class C : Class D: Class E: Income segments in Brazil + 4808 R$ 1115 - 4808 R$ 768 - 1115 R$ Under 768 R$

Interview Larcio Roberto Lemos de Souza, Brazilian tourism ministry

Illustration 2.1: Recent development in income segments with 2014 forecast

56 %

49 %

37 % 28 % 27 % 16 % 11 % 8% 8% 24 % 20 %

E
D C
16 %

A/B

2003
Source: FGV, IBGE and LCA

2008

2014

Since 2003 more than 33 million people in this country of 198 million, have entered the middle class segment; 1115 - 4808 R$. The country is following what it calls the middle path. In short, the government is undertaking very active social policy schemes within a liberal free market framework. The forecast for 2014 shows continued growth. The middle class is still depending on cheap goods but it can afford domestic air travel 2. Brazil recorded a record number of domestic travelers during 2008 and 2009 in the middle of the worst financial crisis in decades3. Since 2002, a commodities boom has fuelled strong growth and lowered poverty across Latin America. Brazils progress is notable considering that it has far more poor people than any other South American country, and has long been one of the worlds most unequal countries in regards to income distribution. The foundation of todays success was laid during the Fernando Henrique Cardosogovernment (1995-2002). With Asias rising demand for soybeans, beef and iron ore, economic growth in Brazil averaged 4.2 percent annually from 2003 through 2008 in the same period foreign investments in the country experienced a 30% increase. The worldwide economic crisis caused a brief downturn during recent years, but forecasts shows that Brazil will post a 5% growth in 20104. Although Brazils industrial giants such as airplane maker Embraer and the mining company Vale, attract investors and headlines, the future optimism is also rooted in the increasing number of small and mediums sized businesses that continue to gain in strength and numbers.

2 3 4

BCG, DataPopular and LCA Propertybrazil.com International monetary fund 2010

3 The hotel sector

The hotel business in Brazil has become increasingly attractive to investors due to increased tourism and promising business growth rates. Indexes such as the REVPAR (revenue per available room), have increased year over year since 2005 in all Brazilian regions. The South, South-eastern and Mid-West regions had outstanding performance with more than 10% growth rates in the same period. However, Brazil still lacks a more consolidated hotel industry, and there are highly attractive markets for entrepreneurial projects in underdeveloped regions, particularly in the northeast. The more developed markets in the south provide good opportunities for niche concepts or more products that require more mature markets. Current investments in this industry in Brazil are primarily done through hotels, condo hotels (condominium based) and mixed-use properties, where the hotels or condo-hotels are developed together with residential, corporate towers and/or shopping malls. Brazil will in the near future host large international events; The Military Olympic Games 2011, Confederations Cup 2013, World Cup 2014 and the 2016 Olympics. These events are likely to stimulate demand for a larger hotel infrastructure than the present one. New facilities are being build while older worn down or outdated facilities will have to undertake refurbishment in order to live up to the required standards. All in all, in order to prepare for the two upcoming events, Brazil is planning on investing USD 11 billion in the hotel sector5. Brazil is not expected to face problems regarding the labor force (maids, waiters, receptionists). The difficulties concern hiring skilled professionals (general managers, financial controllers among others). A lack of infrastructure has held the sector back, but things are set to change as investment will increases over the coming years. Valor Especial, the market leader in Brazilian business news, is forecasting that the country will lack beds for the 2014 world cup in football. As shown in illustration 3.1 most cities do not provide sufficient capacity at current levels. Natal and Fortaleza in the north-east lacks the most beds.

www.brasil.gov.br

Illustration 3.1: Hotel beds, forecasts for the World Cup

Source: Valor Especial, June 2010

This survey linked to illustration 3.1 is not taking the 2016 Olympics into account. For the year 2010, there is a genuine optimistic atmosphere within the Brazilian hotel market. The reason for this, is the expectation of a strong GDP (+5,35%) on a yearly basis, a stable exchange rate (1 US$ = 1 R$ 1,80 at years end), and an increase in the SELIC rate6 (11% at the years end). FDI for 2010 is projected to be the second highest in history (at US$ 37.5 billion)7. According to an analysis made by the Brazilian Tourist Ministry, the Brazilian hotel industry is undergoing a very positive development. The hotel supply in Brazil has substantially increased in the last few years, but it still remains below the countrys potential. Currently, the number of existing hotels in Brazil is more or less 25 thousand8.

6 7 8

The SELIC rate is the Banco Central do Brasil's overnight lending rate. HVS Brazilian Hotel Market Overview 2009/2010 Interview Larcio Roberto Lemos de Souza, Brazilian tourism ministry

3.1 Regional trends

Brazil is experiencing investments in the hotel sector in all regions as shown in illustration 3.2 Illustration 3.2 - Hotel investment projects begun in 2008-2011

Source: Valor Especial: Turismo - June 2010

According to Valor Especial the future of the hotel investments will primarily focus on the North-eastern part of Brazil. As seen in illustration 3.2, the north-east region already accounts for 48,2% of new investment projects and 83,3 % of the invested capital. The north east remains underdeveloped for now Around 46.000 rooms are being constructed and it is hard to tell when the market is saturated. From 2003 2007, 52% of the 35.848 new companies that started in this region were in the business of establishing resorts. Illustration 3.3 FIFA World Cup 2014 host cities

Source: http://www.fifa.com/worldcup/brazil2014/destination/cities/index.html

The hosting location of the FIFA 2014 world cup can be seen in illustration 3.3 above. The city of Rio de Janeiro has attracted extra attention because it is hosting the Olympic Games in 2016. There is a growing perception that there will be a large volume of public and private investment in the city, and an increase in hotel demand. This perception is based on the following facts: The co-hosting of the World Cup 2014 The hosting of the Olympic Games 2016

Expected investments in the Naval,- petrochemical,- transportation and international commerce sectors The implementation of the 3.5bn-real Porto Maravilha Project renewing Rios port area.

It is estimated that Rio will need 40.000 thousand more rooms to satisfy the demand during the Olympic Games9. So Paulo will also be one of the hosting cities for the World Cup 2014. In 2010, the expectations are that the demand for hotels will begin to increase, once again reaching 2008 levels. So Paulos current market situation is favorable for investors and owners of hotel units in the city. The secondary market of condo-hotel rooms is growing and can prove to be a lucrative way to invest in the citys industry during the next few years.

3.2 Cruise ships and coast line development

Seven Brazilian harbors will be expanded to accommodate cruise-ships turned into hotels. For example, for the Manaus harbor, the current capacity is expected to be doubled by 2014, with the expansion of two floating piers that will house six cruise ships. With these vessels the city will have an additional 12.000 beds during the World Cup. The Special Secretary of Ports presented specific projects for harbors in Salvador, Recife, Natal, Mucuripe, Santos and Rio de Janeiro, requiring investments of USD 375 million. However, the world cup coincides with the lucrative season regular cruise travel which could drive prices up. At its current valuation, the Brazilian Real is relatively expensive for overseas travelers. This strongly benefits dollarized products. In this light foreign cruise ship anchoring at the Brazilian coast could gain market shares from the domestic hotel market. Due to growth in the Brazilian leisure tourism market, there are opportunities for domestic tourism products to tap into the demand that is currently served almost exclusively by the cruise and resort market. The development of leisure located along Brazils attractive coast line is an interesting option. As shown in illustration 3.4, there is an untapped market high attractiveness and relatively low costs.

HVS Brazilian Hotel Market Overview 2009/2010

Illustration 3.4 Business opportunity in the cruise segment

Source: Diogo Canteras, Hotel Investing in Brazil - Hospitality Net.

3.3 Cheap loans for the Brazilian hotel sector

Since its establishment in 1952, the government backed development bank BNDES has financed large-scale industrial and infrastructure projects, and has played a significant role in the support of investments in agriculture, commerce and the service industry as well as in small and medium-sized private businesses. BNDES is firmly committed to the principles of sustainable development. The firm conviction of BNDES, in regards to execution of its credit policy, is to take into account ethical and environmental principles. BNDES does unfortunately not provide loans for international companies. If an international company intends to obtain financing for a project from BNDES, this company must have an established presence in Brazil. Local presence can be obtained by either creating a subsidiary or by entering into a joint venture with a Brazilian company, but it is important to note that BNDES will only provide financing for projects with at least 60% of local content. The rule of local content applies not only to the finished project, but to any part of the project. In effect this means that Brazilian contractors many times will be inclined to choose national sub-contractors over international ones. The parameters to determine whether national content has been met are among others: Nationality of employees as well as weight, price and volume of materials and so forth. The only situation where the rule of local content does not apply is if an equivalent product does not exist in the Brazilian market. To determine whether an equivalent product can be found in the national market is a matter of assessment. BNDES Tourism Program: BNDES has opened a line of credit with attractive interest rates and terms (starting at 6.9% in up to 18 years) to Brazilian firms in the hospitality sector. The estimated USD 600 million is earmarked for renovation and expansion of the hotel supply. The goal of this action is to finance the construction, reform, expansion and modernization of hotels in order to increase

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the capacity and quality of accommodation for the 2014 World Cup. The program offers funding to tourism projects throughout Brazil, but will now have extra funds to benefit all 12 host cities for the 2014 World cup. The program offers special financing conditions for hotel projects certified for sustainability or energy efficiency. The BNDES ProCopa Turismo offers financial support through subprograms divided according to hotel certification. The scheme operates with the concepts of Standard Hotel, Energy Efficient Hotel and Sustainable Hotel. Different rules apply for each category. Conditions for eligibility: In order to gain access to credit, companies have to be headquartered and administered in Brazil. Beneficiaries should be enrolled in the Ministry of Tourisms Brazilian database for tourist services (CADASTUR) and provide evidence that their project is enlisted in the Hotel Classification System in effect at the Ministry of Tourism. In order to obtain the maximum term of loan expansion (12 or 18 years) bidders should submit sustainable construction certification which, besides energy efficiency also incorporates rationalization of water and waste management. As of mid august 2010 ProCopa Tourism is considering 63 projects. Clients applying for the BNDES fund have to submit their applications by the 31 st of December, 2012. http://inter.bndes.gov.br/english/procopa_turismo_in.asp

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3.4 Operators in the Brazilian market

Hotel Accor

Current market position Accor is the main international operator and the 2nd largest hotel chain globally. It currently operates 144 outlets throughout Brazil with 22,809 rooms. The hotels are under the brands: Ibis, Sofitel, Formule 1, Merure, Novotel, among others. www.accorservice.com www.grsa.com.br

Investment strategy The company is planning to build 85 new hotels in Brazil in the period up to 2015, (around 5000 rooms) with an investment of more than USD 250 million. This will be achieved through the expansion of their 20 Formule 1 and Ibis hotels. Furthermore the chain is remodeling 31 of their 65 Mecure hotels and eight of their 51 Ibis hotels, which are targeted at economy class tourists. The company is planning to build 28 additional hotels.

Atlantica

The hotel chain currently operates 72 hotels in Brazil http://www.atlanticahotels.com/ This Spanish hotel chain currently owns 14 hotels in Brazil; nine in So Paulo, three in Brasilia and two others in Campinas and Angra dos Reis. http://www.solmelia.com

Sol Meli

No openly announced plans

Hyatt

Grand Hyatt Sao Paulo is a 5-star hotel located on Avenida das Naes Unidas, in Sao Paulo. There are currently 466 rooms and suites. http://www.hyatt.com

Hyatt will focus their expansion efforts on under-penetrated markets such as Brazil. They see their presence in Brazil as a potential platform for future growth.

Hilton

There are two Hilton Hotel & Resorts. One in So Paulo and one in Belem. http://www1.hilton.com

One project in the pipeline for Salvador.

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Marriott

Currently Marriott International offers four hotels in Brazil; two in So Paulo, one in Rio and Marriott Executive Apartments in So Paulo which has 114 apartments. Marriott International Inc. has recently opened a development office in So Paulo, as a part of an overall global restructuring to focus on growth in emerging markets. http://www.marriott.com

In addition to its hotel portfolio, Marriott International recently announced its partnership with the state of Amazonas in Brazil, helping to protect 1.4 million acres (589,000 hectares) of endangered rainforest in the Juma Sustainable Development Reserve.

Blue Tree

Blue Tree Hotels has 22 hotels and resorts in operation: So Paulo (9 hotels), Recife, Porto Alegre, Florianpolis, Curitiba, Joinville, Braslia, the beach resort Blue Tree Park Cabo de Santo Agostinho (in Pernambuco), the beach and mountain resort Blue Tree Park Angra dos Reis (in Rio de Janeiro) and the Blue Tree Park Braslia. http://www.bluetree.com.br

So far Blue Tree has 6 hotels in the pipeline located different places in Brazil, all to open within 2012.

Hoteis Othon

The Othon Hotel group offers more than 5,000 rooms in more than 40 properties. http://www.hoteis-othon.com.br

No openly announced plans

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Pestana

Pestena operates seven hotels in Brazil: 5 star Rio Atlantica Hotel Angra Hotel( 30 luxury individual bungalows), Natal (5-star), Salvador (5-star), Salvador da Bahia (5-star), Curitiba (4-star business hotel), Pestana So Paulo Hotel & Conference Center So Luis de Maranho http://www.pestana.com/

Portugals Pestana Group is a likely candidate for credit lines issued by BNDES, as it manages nine hotels in six of the 12 World Cup 2014 host cities

Orient Express

Orient-Express is a hotel and travel company, focused on the luxury end of the leisure market. Its units are; Copacabana Palace, located in Rio de Janeiro and Hotel Cataratas in Iguazu Falls, which was reopened in 2009. www.orient-express.com

No openly announced plans

BHG S.A.

Brazil Hospitality Group is one of the largest hotel groups in Brazil. They manage 31 hotels; (15 owned by BHG) Operation properties in the three, four and five-star categories. http://www.investtur.com/

BHG invests mainly in large urban centers oriented towards business tourism. The Company plans to take advantage of the cultural diversification in the country and in South America as a way to attract all types of business tourists and to reduce the seasonality risks. There are six new projects in pipeline; two Holiday Inn hotels and four new Holiday Inn Express hotels

InterContinental Group

The Brazilian subsidiary of the Intercontinental Hotel Group is holding a number of recognized brands in the Brazilian hotel industry. The group operates 12 hotels across Brazil; among the brands are: InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express and Staybridge Suites. www.ichotelsgroup.com www.ihgplc.com

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4 Opportunities for Danish suppliers

4.1 Supplying the growing hospitality sector

The hotel sector in Brazil is currently growing at a fast pace. The world cup in 2014 and the 2016 Olympic Games are events that will generate short term demand for the hotel industry. The current hotel supply is too low to accommodate for World Cup travelers and many hotels need to be upgraded in order to live up to FIFA standards and expectations from overseas travelers. In the short term, new construction and refurbishments causes a spike in demand for industry grade furniture, fixtures and equipment. In a long term perspective, the domestic tourism market is growing, while the publicity generated from the upcoming events is likely to boost Brazils international reputation as a tourist and investment destination. New construction and refurbishments not only require big orders, but it is also provides hotels with the opportunity to find a new supplier that meet the exact requirements of their business. If Danish suppliers can provide sustainable solutions for the Brazilian hotel sector, the structural changes imposed by the World Cup and the Olympic Games provide a good opportunity to enter the market. Suppliers that successfully enter the Brazilian market are in a good position to capture some of the current demand and position themselves in a promising growth market. As previously mentioned BNDES provides an estimated USD 600 million line of credit to the hotel sector under favorable terms. This easy access to credit gives the hotel sector an incentive to expand and renew. The biggest group in Brazil, Accor, has announced plans to build or develop 85 hotels an USD 250 million investment. The Hyatt group currently only has one hotel located in So Paulo, but see their presence in Brazil and emerging markets as a growth platform. Looking beyond the World Cup, the middle class is growing in numbers and can afford domestic travel as mentioned. Forecasts show a 77% rise from 2008 to 2014 in the amount of domestic air travelers10. Coupled with a positive economic outlook, suppliers can therefore expect a steady demand in the long run. Setting up a presence in Brazil is a long term investment that goes beyond the world cup and the Olympic Games. The domestic market is growing and the publicity generated from the upcoming events is likely to boost international tourism to Brazil. Engaging in export or setting up local production will allow Danish exporters to capture growth well beyond 2016. This in all provides a positive outlook on the market opportunities for Danish suppliers.

10

Nain & co., BCG, LCA and Roland Berger

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4.2 Demand for green technologies

Denmark is known for green solutions. Danish exporters are likely to have a product portfolio that focuses on being energy efficient and to have expertise in providing green solutions. Almost half of the Brazilian landmass is covered by the Amazon and the public is becoming increasingly aware of the environment. Green policies are becoming more and more popular. Apart for the obvious cost savings, going green is also valuable from a marketing perspective. Marriott International recently announced its partnership with the state of Amazonas in Brazil, helping to protect 1.4 million acres (589,000 hectares) of endangered rainforest in the Juma Sustainable Development Reserve. Other Brazilian operators have schemes similar to the one of Mariott. The world cup and the Olympic Games have forced changes in the hotel sector. The BNDES ProCopa Turismo favors green investments and operates with the concepts of Standard Hotel, Energy Efficient Hotel and Sustainable Hotel. With new construction and refurbishments, hotels require complete solution for their properties. Overhauling whole properties grants the operator with the choice to install new fixtures, better insulation, intelligent lightning etc. Danish suppliers could potentially tap into, or create markets, for the construction of energy efficient buildings, green refurbishment solutions, improved insulation materials etc. The Brazilian awareness of the environment precedes the world cup, but the structural changes caused by the event help to expose the market to new ideas, technologies and suppliers.

4.3 Cruise ships accommodation for the world cup

As shown in sector 3.2, seven Brazilian harbors are planning to expand capacity in order to accommodate for cruise ships during the world cup. Danish suppliers can potentially win bids to provide some of the hospitality structure needed in order for the ship to function as hotels. Brazilian authorities have projected investments of USD375 million in this area. Following this lead, there are also opportunities for companies willing to provide onshore accommodations catering for the same segment.

4.4 Owning and operation hotel chains

The Brazilian hotel market is growing and is showing signs of long term sustainability. Owning and/or operating hotel chains can prove lucrative but it is not without risk. Investments are pouring into the hotel sector and the internal competition is likely to increase, which might result in an industry consolidation. The industry already accommodates a lot of big domestic and foreign chains seeking to expand market share. This could mean tough competition for new entrants. On the other hand, the demand for hotel rooms is likely to grow in the future.

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5 How to enter the hotel market

WAY ADVANTAGES DISADVANTAGES EMBASSY/ GENERAL CONSULAT E ROLE Assisting with the setup of a local office / Advice on contracting/ Finding potential clients

SUPPLYING THE BRAZILIAN HOSPITALITY SECTOR

Set up Brazilian office to supply furniture, fixtures and equipment / Subcontracting to new construction and refurbishments.

A low level of fixed assets equals low risk / Spike in demand leading up to the world cup / An established presence can lead to more orders in the future. Danish companies are likely to have a competitive advantage in green technologies.

Language barriers often include the need to hiring local personnel, which can slow down the set-up process.

CAPITALIZE ON THE DEMAND FOR GREEN PRODUCTS

Subcontract to big chains / Provide green solutions for new construction or refurbishment projects. Make a competitive proposal to port authorities that meets the requirements Joint-venture with suitable partner or Greenfield investment

Inefficient and expensive customs system / Need for compliance with Brazilian standards.

Finding suitable partners / Assisting with contracting and standard compliance. Monitoring the competitive biddings

SUPPLYING CRUISE SHIP INFRASTRUCTURE

Ownership over the process / Specific contracts.

Bureaucratic process, Political decisions may change / Inefficient and expensive customs system. Cultural differences / High level of fixed assets equals high risk.

OWNING AND/OR OPERATION HOTEL CHAINS

Obtain a presence in a growing market, full ownership over process.

Finding suitable partners and contractors / Market research.

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6 The future of the market

There is a risk of overestimating the Olympic Games impact on tourism. A burst of demand for hotel rooms related to the Olympic Games often leads to the construction of excess capacity. This may create an oversupply of hotel rooms after the Olympics. However, in the long run demand is expected to rise again due to increased awareness of the city or region. According to recent studies made by Research Team Olympia11 the Olympic tourism legacy is largely positive. Many of the incoming tourists change their perception of the host country. In the long run, such an image change could boost international tourism in Brazil. The anticipated image change and improved infrastructure after the Games are projected to lead to an increase in incoming tourists, which has positive effects for employment, generated income and tax revenues. Excess investments driven by the world cup 2014, along with general economic optimism and great expectation about the Olympic Games, can potentially result in disappointing off-season occupancy rates. But with Brazils growing middle class and its economys positive track record there is a justified optimism in the tourist sector that reaches past 2014 and 2016. Brazil was the first of the mayor BRIC countries to emerge from the global recession, and real estate has shown appreciation despite the anxiety generated by the global economic meltdown. Brazil is showing strong currency forecasts for 2010 and the GDP expected to grow by 5% in 2010. Demand for hotels and accommodation is expected to be consistent and high. Applying an international perspective, the worlds largest hotel-chain Intercontinental Hotels Group (IHG) have faith in the Brazilian market. So far IHG operates two Holiday Inn hotels in Brazil; in Manaus (the Amazon region) and in So Luis in the Northeast. The goal is to administrate 50 hotels in Brazil in 2020, mainly under the brand name Holiday Inn, a relatively cheap-end hotel chain. IHG aims to offer affordable luxury for Brazilian and foreign tourists. Since 2008, seven large international hotel chains, including three of the worlds four largest, have set up projects in Brazil.

11

Preuss, Holger Aspects of Olympic Games Tourism Johannes Gutenberg-University Mainz.

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7 Final considerations
This study has been done by the Commercial Department of the Danish Consulate General in So Paulo in cooperation with the Danish Embassy in Brasilia. As Brazil will be the host-country of both FIFA World Cup 2014 and the Olympic Games 2016, Danish suppliers will have an excellent opportunity to enter the hotel industry. The great expectations for the Olympic Games and the world cup do not only concern the hotel and tourism sector. Suppliers of furniture, electronic equipment and textiles such as towels, fridges, televisions and other items will be affected by the increased demand caused by both the Olympic Games and the FIFA World Cup. With substantial amounts of governmental and private investments pouring in to the hospitality sector, there will be demand for foreign suppliers of goods and know-how. The North-east, Rio de Janeiro and So Paulo are the main international gateway markets. These areas can support new investments from branded budget to luxury properties. The mid-market segment is underserved and provides significant opportunities for foreign investors. Even though the WC and the OL are limited to a relatively short period of time, they play an important role in putting Brazil on the world map. The widespread optimism in Brazil and the hotels sector in particular provide a good opportunity for Danish firms to establish and expand positions in a market that is likely to grow. Establishing a presence in Brazil has long term potential that reaches far beyond the end of the Olympics in 2016. For further information, as well as for commercial assistance, please contact: Consulate General of Denmark in So Paulo Jimmy Olsen Phone: +55 11 2127 0750 E-mail: jimols@um.dk

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8 Appendix A) Current industry events for 2010. All are yearly events.

September 13 - 16, 2010 International Trade Show of Equipment, Products, Services, Food and Beverage to Hotels, Motels, Flat Services, Restaurants, Bars, Snack Bar, Fast Food Restaurants, Food Service Industry and Laundries. Equipotel is an annual event.

September 27-28, 2010. A South American Hotel & Tourism Investment Conference held in the city of Cartagena de Indias Colombia. SAHIC is a meeting place for private and public authorities, investors and developers from the most important hotel chains expounded on the opportunities of the region as regards hospitality and tourism. SAHIC is an annual event.

August 17-19. 2010 Conotel is a conference on the hospitality business. The conference attracts major players in the Brazilian hospitality industry and participants come from all over South America. Conotel is an annual event.

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9 Appendix B) Government Stakeholders and branch organizations

BNDES: The Brazilian Development Bank (Banco Nacional de Desenvolvimento Econmico e Social BNDES) is a federal public company associated with the Ministry of Development, Industry and Foreign Trade. The objective of BNDES is to provide long-term financing for projects which contribute to the development of the country. Ministry of Tourism (MTur): The Ministry of Tourism was established in 2003. Its aim is to make the Brazilian tourist sector economically sustainable. The tourist sector provides Brazil with jobs for people with a low level of education and brings in foreign currency. Associao Brasileira da Indstria de Hotis (ABIH): The Brazilian Association of Hotels is a non-profit branch organization. Embratur (Instituto Brasileiro de Turismo): Embratur is also known as the Brazilian Tourist Board. It is a federal state owned agency reporting to the Brazilian Ministry of Tourism. It works exclusively on the promotion, marketing and supporting to the trading of services, products, and tourists destination of Brazil abroad. By fostering tourism activity Embratur is making feasible the conditions for the generation of jobs, income and development throughout the country. Federao Nacional dos Hotis, Bares e Similares (FNHBS): Founded on 23 September 1955, the National Federation of Hotels, Restaurants, Bars and Similar. SEBRAE: The Brazilian Service to Support Micro and Small Enterprises. Sebrae was created in 1972 as result of a pioneer initiative of institutions that encouraged entrepreneurship in the country. Sebrae is partnering with Brazilian entrepreneurs with insufficient cash to start up their own business.

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10 Appendix C) Introduction to Brazilian business culture

Brazil is a big country home to a variety of different cultures. However, when doing business in Brazil a few general rules of thumb apply: Be prepared to commit long term resources (both in time and money) toward establishing strong relationships in Brazil. This is the key to business success. Make appointments at least two weeks in advance. Avoid improvised calls to business or government offices. Some regions have casualness about both time and work. In So Paulo and Rio De Janeiro business meetings tend to start on time, though minor delays are accepted. Business meetings normally begin with casual chatting. Let the host decide when it is time to talk business. In Brazil, restaurant entertainment prevails over home entertainment. Giving a gift is not required at a first business meeting; instead, buy lunch or dinner. Handshaking, often for a long time, is common. Shake hands for hello and goodbye; use good eye contact; when leaving a small group, be sure to shake hands with everyone present. When women meet, they exchange kisses by placing their cheeks together and kissing the air. First names used often, but titles are important. Music and long, animated conversation are favorite Brazilian habits. When conversing, interruptions viewed as enthusiasm. Brazilians enjoy joking, informality, and friendships.

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