Mexico is welcoming a number of luxury brands and resorts to areas such as Riviera Maya, including The Rosewood Mayakoba, which opened in December. More than a dozen global luxury operators are now in various stages of development throughout the Latin America region.

On thing that has worked well for Marriott so far is putting its Courtyard product near tourism destinations for different customers, Fuller says.

Mid-scale product in general may be the ticket throughout the region, as it is “clearly the fastest growing and the most in demand,” says Alvaro Diago, area president for IHG in Latin America. “While the region still has many challenges, the evolution of the middle class continues, as does the parallel need for mid-scale products,” he says. “There is a shortage of these hotels in most secondary and tertiary cities in the region.”

The Rio Mar Beach Resort, a Wyndham Grand property in Puerto Rico. San Juan continues to attract development interest. Another example of Mexico’s luxury development is shown in this rendering of a guestroom at the new 120-key St. Regis Punta Mita, scheduled to open this fall. The resort will feature a large-scale spa and Punta Mita’s second Jack Nicklaus Signature golf course.

Mexico continues to be a leader in Latin America hotel development, as it has for many years, with more than 135 projects comprising more than 25,000 rooms in the pipeline as of the first quarter of this year, representing some 44% of the project total for the region (including the Caribbean and Central America) according to Portsmouth, New Hampshire-based Lodging Econometrics.

With Americans still favoring Mexico as a beach destination, business centers continuing to develop there, and a growing middle class spurring national tourism, the recipe is right for continued growth.

“Mexico is a large market, closely tied to the U.S., and a growing market economically,” Fuller says. “We see commercial growth throughout Mexico. Mexico is also the primary destination for foreign tourists within Latin America, and the domestic Mexican market accounts for nearly 40% of all our guests at our hotels (there).”

Marriott is set to nearly triple its Mexico presence over the next five years with 30 new hotels, including a multi-unit development agreement for several Courtyard properties.

Others, like IHG with its Holiday Inn and Holiday Inn Express brands, are making a push into secondary and tertiary cities as well.

And in beach destinations, while business may be hurting slightly right now because of extreme supply growth in places like Cancun and Riviera Maya, the booming domestic market—thanks to the recent rise of low-cost air carriers—is helping to augment foreign tourism, which continues to grow as well, says Alex Zozaya, president of Newtown Square, Pennsylvania-based AMResorts.

“We believe the number of Americans going to Mexico is still in diapers compared to what we’re going to see in the next three to five years,” he says. “The number of Americans going to the region has increased every year for the past 10 years.”

AMResorts is banking on this continued demand, with 70% of its business coming from the United States and a plan to open new resort properties in the next few years in destinations like Huatulco in Oaxaca and Punta Mita and Nuevo Vallarta in the developing Riviera Nayarit area.

Meanwhile, operators like Barcelo Hotels & Resorts and Riu Hotels & Resorts also are bullish on Mexico. “We are in full expansion mode in Mexico,” says Claudio Zboznovits, Barcelo’s vice president of sales and marketing director for the United States and Canada. Luxury brands, from Mandarin Oriental to St. Regis, continue to open new product in Riviera Maya and Riviera Nayarit.

Nikki Beach Hotels & Resorts, a lifestyle resort concept, is developing a property on the Honduras island of Roatan, an up-an-coming Central America destination. Honduras is currently in the midst of a major branding campaign to attract foreign investment, development and tourism.

The highest-growth destinations in the region include the Dominican Republic (which welcomed nearly 4 million tourists in 2007) and Puerto Rico, with the two accounting for more than a third of the rooms in the pipeline. Within those markets, Punta Cana and San Juan continue to attract interest.

AMResorts is one of the companies expanding in the Dominican Republic, with Secrets and Dreams-brand resorts planned for La Romana and Punta Cana. Barcelo Hotels & Resorts also plans to expand in Punta Cana, Zboznovits says.

But the biggest story in the region may be Cuba, which could emerge in the near future as a major development hub in the Caribbean. Cuba’s Tourism Ministry recently announced a two-year plan to build 30 hotels with 10,000 new rooms through a series of joint ventures with companies from Spain and China.

“Cuba is an explosion waiting to happen—an interesting one that will see Cuba become the fastest-growing country in the Western Hemisphere, and that will affect the region in a huge way,” says David McMillan, president of Axis Hospitality International, Montréal.

The explosion could be even bigger if the dollar stays weak against the euro, which is driving European travel to the Caribbean.

In general, however, some hotel companies find the Caribbean less attractive than Central or South America because of the cost of developing and doing business there.

“In terms of cost, South and Central America are a bargain when compared to the Caribbean,” says Felix Madera, international vice president for Sonesta International Hotels. “Due to limitations of access in terms of product—everything has to be flown or shipped in—it becomes more expensive to create concepts.”

That said, Madera still sees “tremendous potential for the Caribbean,” especially St. Maarten, which “has magnificent beaches” and is now “booming with development.”

Costa Rica, where Hilton has opened three managed properties, may be a more mature destination, but it has room for much more development, especially with eco-resorts and mid-market hotels near airports.

Outside the capital, eco- and beach resort development continue to be attractive thanks to Costa Rica’s positioning and familiarity among Americans, not to mention the country’s proximity to southern U.S. cities.

Both Riu Hotels and Resorts and Sonesta Collection have major projects planned (in the popular Guanacaste region and Jaco, respectively), and Zozaya, AMResorts’ president, sees Costa Rica as the next most important destination for his largely American customer base after Mexico. He even talks of launching or growing a higher-end, eco-friendly fourth brand there.

But perhaps soon to overtake Costa Rica as the hottest development market in Central America is Panama, which Marriott’s Ed Fuller says is growing equally as fast as Mexico. The company has a Residence Inn under construction in Panama, and also recently announced two Courtyard projects and a Renaissance project there. Madera agrees completely, saying, “My god, the development in Panama is tremendous!” Lodging Econometrics reports 18 projects with 3,312 rooms in development as of the first quarter of 2008.

IHG’s Diago says Panama City—where most of those projects are located—offers the perfect combination of business and leisure activities. Zozaya, meanwhile, likes Panama’s infrastructure, the availability of local financing and the overall potential, but says the country’s positioning as a vacation destination remains well behind Costa Rica, for example. The same can be said for some other Central America countries like Honduras, which is working hard to promote foreign investment, but is only just beginning to appear on North Americans’ radar.

“Costa Rica has done a tremendous job promoting itself in the United States for the past 25 years,” says Thierry de Pierrefeu Midence, Honduras’ former minister of tourism and now president of El Grupo Midence Soto-Pierrefeu. “They have much better positioning than we do. Honduras has only been doing this for six years, so there’s a 20-year lag. To promote Honduras to the U.S. must be a country project—there’s still quite a bit of work to do.”

Even so, operators like Marriott, which has been in the Honduran capital of Tegucigalpa, and IHG, which is prominent in the financial center of San Pedro Sula, are looking for other projects as the country develops and continues to promote tourism.

Aiding in tourism growth for countries like Honduras and Guatemala is the growth of intra-regional travel and Latin America airlines like Taca and Copa. But major U.S. airlines cutting direct routes this fall may cancel that out, to some extent.

“Tourism will have a short-term adjustment but will return in the longer term, as it always does,” Fuller believes. That may simply mean working with wholesalers and tour operators in the short term to find different ways to get customers to destinations, he says.

Brazil’s strong, mature economy and investment-grade status is attracting significant foreign investment, which in turn should drive large-scale hotel development across this vast country—from gateway and secondary cities to coastal resort areas.

Appetite for a presence in the country is strong, despite the relatively high costs of doing business, with Brazil operating performance achieving record results over the past several years, thanks to continuing demand growth. Average daily rate in Brazil has grown 35% since 2004, according to Jones Lang LaSalle Hotels.

That said, with a large and growing domestic travel market and a number of industrial centers, the most significant opportunity lies in developing the underserved mid-market and budget market in secondary Brazilian cities, industry consultants say. Part of the attraction here lies with the Brazilian government’s commitment to invest heavily in infrastructure improvements.

IHG’s Diago says, “More and more, Brazilian secondary cities, such as Salvador, Recife, Curitiba and Porto Alegre have been making their mark as great destinations for corporate meetings and mid-sized conventions.”

IHG will look to capitalize on this with its Holiday Inn and Holiday Inn Express brands, in some cases even doing multiple properties of the same brand within a city, Diago says.

Also attractive is the resort development opportunity in the Northeast, Diago says, but growth in that region has been slower than expected over the last few years because of obstacles like a lack of international flights and a well-trained workforce, says Jose Ernesto Marino Neto, president of BSH International, São Paulo. He sees perhaps more opportunity in Southeastern Brazil—where Marriott is working diligently—for suburban conference resorts near major cities.

Finally, São Paulo, Brazil’s largest city, continues to offer great opportunity, with rising demand and year-to-date RevPAR up 17%. Atlantica Hotels International, which operates more than a dozen hotels in the São Paulo market, believes there still is room for another 10 mid-market branded properties in the city.

While Marriott has a business presence with this hotel in Lima, other companies like Sonesta see Peru as a major tourism opportunity, attracting both North Americans and Europeans with its cultrual and historical sites.

“Sonesta’s expansion in South America will begin with hotels in Bogotá, Cartagena and Barranquilla (Colombia) that will open in early 2010. We expect to announce the first Sonesta property in Ecuador shortly.”

Because these are all new-construction projects, they are still a few years out, but Sonesta has no worries. “We feel that our growth in terms of South America has been very positive and that the time is now,” Madera says. “There are tremendous opportunities there.” He mentions the diverse market segments that populate Sonesta’s hotels in the region, from business travelers to regional and European tourists, the number of whom visiting Peru is “quite substantial.”

Marriott’s Fuller agrees that Colombia is a place of interest. “Colombia has been very strong,” he says. We have three hotels announced there.”

Cartgena, Columbia, where Sonesta is developing this property, is hot right now, with many brands adding new product or additional capacity. Bogotá also offers opportunites

Then, of course, there is Argentina, “a sought-after country by several high-end investors, mainly for the development of projects somehow connected to leisure activities such as golf, boating or horse-riding,” says IHG’s Diago. “San Eliseo and the Delta area have been attracting much attention due to the leisure potential and proximity to Buenos Aires,” he says.

In Buenos Aires, where there is growing demand, hotels have recovered their rates (US$300 to US$350 for luxury hotels) and high occupancy (nearly 80%), generating a multitude of new projects, according to Arturo Garcia Rosa, senior partner HVS Buenos Aires.

Hilton Hotels & Resorts, already in Buenos Aires, continues to grow in other parts of Argentina. Hilton plans to add two managed properties in 2009, one in Ushuaia, the world’s southernmost city, and one in Puerto Iguazu, a key tourism destination.

Madera, meanwhile, notes that Sonesta, too, is looking at Argentina, but that “nothing of relevance has developed yet.”

Direct comments to: derek.gale@reedbusiness.com