The Wall Street Journal / September 20, 1996
By Larry Luxner
SANTIAGO -- The skyline of Chile's capital city is rapidly changing as new office towers, hotels and condominiums jostle for space in Santiago's booming suburbs.
Office construction in the metro area of 5.5 million has jumped by 21.3% a year over the last three years, according to Diego Durruty, general manager of Property International Exchange Chile. And the office vacancy rate is only 5%. That's even lower than Boston -- the lowest in the United States -- with 12%.
"We had a strong economic restructuring in the 1980s that led to an average 7% economic growth, and we had a lot of demand for international office space," said Durruty, who estimates current office rental rates at between $17.30 and $23.60 per square meter. "Ten years ago, we were just like Peru, which has nothing. All the bases were established for construction development."
Like office towers and condominiums, hotels are booming as well. At the moment, Santiagoo has 14 five-star properties with a total capacity of 3,671 beds, of which 40% are in the eastern suburbs of Providencia, Vitacura and Las Condes.
Just this year, the supply of rooms in five-star hotels has jumped 9.3%, according to James Hughes, marketing manager of the Hyatt Regency Santiago. That hotel, which opened four years ago, has 310 rooms and charges an average $165 per room per night, the highest in Chile. Other large properties include the Sheraton (with 383 rooms, and another 140 opening in November 1997); the Holiday Inn Crowne Plaza (293 rooms); Santiago Park Plaza (104); Plaza San Francisco (156); Carrera (322), Sonesta (103), Radisson (160) and the Regal Pacific (104).
"There's a lot of foreign investment that has already matured in the sense that, in the beginning, when a foreign company invests in a business, you get a lot of visitors who come to set up," said Hughes. "Once the investment is made and things are running smoothly, the tendency is for travel to drop off. We're sort of seeing that now, although tourism is increasing incredibly."
Some 51% of the Hyatt's guests are business executives, while another 20% are individual leisure travelers, 9% are in tour groups and 12% are conventioneers. They come from the United States (45%), Argentina and other Latin American countries (36%), Europe (16%) and Asia (3%).
Last year, Radisson Hotels Worldwide inaugurated its first hotel in Chile, a 160-room, five-star property within the new World Trade Center in Santiago's new commercial and business center. "The combination of the hotel's location, design and technology positions it as a national gathering point for Chileans to host global business," says general manager Colin Turner, general manager of the $24 million Royal Santiago Hotel.
Not to be outdone, Marriott International will build a five-star property in Santiago, in a $110 million joint venture with Chilean real-estate firm Nueva de Lyon, which built the Radisson.
The mammoth project, located on Avenida Kennedy past the Parque Arauco shopping mall, includes one large 42-story building and two smaller office towers, all of which are expected to be completed by August 1998. This project constitutes the first direct Chile investment for Marriott, which is also building a hotel in Quito, and is involved in negotiations for luxury hotels in Bogotá, Caracas and São Paulo.
The sudden increase in visitors to Chile is causing growing pains at Santiago's Arturo Merino Benítez International Airport. Focus of a $60 million expansion project inaugurated in March 1994, the airport can no longer keep up with the crush of air travelers, already estimated at three million passengers a year.
"Only two years after its construction, airport capacity has already been surpassed, as the amount of passengers using the airport at present had not been expected for two more years," says the U.S. Embassy in Santiago. Completing the expansion project's second stage will require another $40 million, plus an undetermined amount to rehabilitate airport cargo. When operating at full capacity by 2010, Chile's leading airport should be able to handle nine million travelers a year.