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Despite the turmoil, Bass sees glimmer of hope in Colombia
Seis Continentes / Summer 2001

By Larry Luxner

Bass Hotels & Resorts -- the only worldwide hospitality chain with a significant presence in Colombia -- is enduring perhaps its worst performance since the Hotel Inter-Continental Tequendama was inaugurated in Bogotá over 50 years ago. Despite the hard times, however, managers of Bass properties throughout the country tell us the most difficult period is probably over, and that the fragile Colombian economy is beginning to recover.

"Tourism has suffered because of our bad image abroad," says Raymundo Angulo, a tourism consultant and former general manager of state-owned Corporación Colombiana de Turismo. "Nobody wants to visit a country at war. Logically, this affects international tourism, and as a consequence, foreign exchange."

Unfortunately for the tourist industry, Colombia's problems are well-known throughout the world. Continuous fighting between government forces, leftist guerrillas and drug traffickers have made Colombia one of the world's most violent countries, while a rash of kidnappings has scared away foreign investors and forced many wealthy Colombians to emigrate to the United States.

Between October 1999 and May 2000, some 220,000 cruise-ship passengers visited Cartagena, Colombia's scenic port on the Caribbean. This season, the number will likely hit 240,000.

"Apart from this, there is no international tourism," Angulo told Seis Continentes. "In the 1970s, we were getting a million tourists a year. Lots of properties were built in the last decade, but most of them are timeshares or apart-hotels. Very few real hotels have been constructed."

Here's a look at how Bass properties are faring in Colombia's three largest cities -- Bogotá, Medellín and Cali:

BOGOTÁ: With nearly seven million inhabitants, Santafé de Bogotá is Colombia's capital and the fourth-largest city in South America after São Paulo, Buenos Aires and Rio de Janeiro.

Likewise, the Inter-Continental Tequendama is Colombia's largest and best-known luxury hotel. Established in 1948, the hotel was the second Inter-Continental in the world (the first was the Inter-Continental in Belem, Brazil). It began life with nearly 800 rooms, a number that's been reduced to 499 over the years through renovations and upgrades.

The property is 95% owned by the Fondo de la Caja de Retiro de las Fuerzas Militares, an army pension fund, and 5% by private investors.

From 1948 to 1968, the Tequendama was operated directly by Inter-Continental. Since then, it has been managed through a franchise. Like the current general manager, Gabriel Pontón Laverde, all of its GMs have been military men. Before taking the helm of the Tequendama 10 years ago, Pontón, 64, was in charge of various programs at the University of Bogotá's school of business administration.

Perhaps the first thing visitors notice about the Tequendama are the half-dozen uniformed MPs guarding its perimeter with machine guns. Pontón says this is a necessary evil.

"Security in Bogotá is a critical element. We've become a fortress," he said. "Foreigners are bothered by the guns, but Colombian guests feel more secure. We have the advantage that our clients are loyal, and that they understand the situation."

Pontón said that economic and political situation has had a devastating effect on the Tequendama, whose occupancy rate rarely climbed out of the 30s during 2000. Room rates are currently averaging only $55, far below what they should be.

"Colombia and this hotel have survived various crises at the same time," said Pontón. "The political crisis was resolved in 1999 with the change in government [from President Ernesto Samper, who was blacklisted by the Clinton administration, to Andrés Pastrana, who is seen as a partner in the war on drugs]. Economically speaking, even though things improved last year, Colombia has still not yet emerged from the crisis. Many companies are going bankrupt.

"The security crisis, caused by the guerrillas, has obviously had an impact on the hotel, as well as drug trafficking," he explained. "In concrete terms, until a few years ago more than 80% of our guests were foreigners. In 1998, this dropped to 5% as a consequence of the U.S. decertification. It has since risen to 20%."

This has particularly hurt the hotel because foreigners generally pay significantly higher room rates than do locals.

Last year, said Pontón, the Tequendama's revenues came to around 17 billion pesos ($8.5 million), with profits of 170 million pesos ($850,000). He said the hotel's guests are mainly Colombian executives from Medellín, Cali and Barranquilla.

The hotel's biggest competition for guests is the Casa Dann Carlton and the Hotel Capital, and for convention business the Centro de Convenciones Gonzalo Jiménez de Quesada. Within the last 12 months, the Tequendama has hosted conferences for doctors, mayors and religious groups including the Mormons.

What's really hurting the Tequendama, aside from Colombia's miserable economic situation, is the hotel's location in downtown Bogotá. At one time, this was the capital city's only hotel of any importance, and even though visiting heads of state still stay at the Tequendama, the focus of business and nightlife has gradually moved to north Bogotá over the years.

"Twenty years ago, the Tequendama was the hotel in Colombia," said Guillermo Valencia, GM of the Hotel Inter-Continental Medellín and regional director of operations/Colombia for Bass Hotels & Resorts. "But companies started moving north. There's nothing we can do about it."

Said Pontón: "We did a study concerning the hotel's location, and arrived at the conclusion that businesses are gradually returning to the center of the city. I hope that within three or four years, we'll see results. I'm an optimist. I think things will continue to get better, slowly."

MEDELLÍN: Not long ago, Medellín was known more for drug-trafficking than anything else. With the death of cocaine kingpin Pablo Escobar in 1993, things quieted down, though not before scarring the local tourism industry permanently.

Nevertheless, not all is gloom and doom, says Valencia.

"It's been very hard, but things are improving now," he told Seis Continentes. "Unfortunately, we depend a lot on security. If the peace process were successful, business would be booming. The worst is over, primarily because the economic situation has been improving. Exports are increasing, and inflation is very low. Three years ago, the exchange rate was 1,000 pesos to the dollar. Today, it's 2,230 to the dollar, so this makes our exports more competitive."

Valencia, 46, was born in Manizales and has worked for Inter-Continental for 21 years -- including stints in Venezuela, Spain and Miami.

The hotelier, who managed the Inter-Continental in Cali for three years before being transferred here last November, in effect oversees 1,250 rooms throughout Colombia including the 300-room Hotel Inter-Continental Medellín, for which he is directly responsible.

"Occupancy here is 40%, which is bad. We have lots of supply and very low demand," he conceded. "The problem is that five years ago, there were only two five-star hotels in Medellín. Now we have eight. Everyone was building hotels, but the bad press we have abroad has hurt us."

Of the hotel's guests, 65% are Colombians (mainly from Bogotá), and the rest are Americans, Mexicans, Venezuelans and Panamanians. Revenues in 2000 came to around $6 million, he saide.

"We're selling rooms for an average $65-70 a night, when we should be getting $150. The country just doesn't have the purchasing power to pay room rates in that range." On the other hand, he said, "Colombia has become a very reasonable country in terms of shopping and dining."

Valencia said despite the difficulties, the hotel is still the focus of Medellín social life. In December, internationally renowned artist Fernando Botero, a Medellín native, stayed at the Inter-Continental for a week, during which time the hotel hosted a dinner in his honor to mark Botero's substantial donation of paintings and sculptures to the newly inaugurated Museo de Antioquía.

Meanwhile, Valencia says he's spending $5 million to renovate the venerable hotel.

"We've done 100 rooms and have 200 more rooms to go. Then we need to do the lobby," he said. "This is like the fifth renovation. You have to do renovations every eight to 10 years."

At the 146-room Crowne Plaza Las Lomas in Rionegro -- which like the Inter-Continental Medellín is owned by Promotora de Hoteles S.A. -- sales came to $4 million last year. That number is projected to rise by 37% in 2001, while occupancy is slated to climb to 38% from last year's 34%.

About 80% of the guests are Colombian, mainly from Bogotá, with the remainder coming from Panama (10%); Venezuela (5%) and Americans and other nationalities (5%). The average room tariff is $85.

The hotel, managed by newly appointed GM William Rodríguez, offers many weekend activities such as horseback riding, natural parks, fishing in nearby lagoons and mountain climbing, as well as therapeutic treatments. Since the property is located only five minutes from José María Córdova International Airport, room rates include free transportation to and from the airport.

CALI: Like elsewhere in Colombia, the tourism sector is suffering in Cali, with two million inhabitants the country's third-largest city.

Olmedo Herrera, general manager of the 301-room Hotel Inter-Continental Cali, says his main market is internal -- Colombians from Bogotá -- with a number of Americans as well as guests from Venezuela, Panama, Peru and Brazil. Annual hotel revenues last year came to around $7 million.

"The economic crisis definitely affected tourism more than any other sector," said Herrera, who started his career at the Crowne Plaza Las Lomas in Rionegro in 1989, when that property was still under construction. "Not only foreigners but also Colombians were afraid to travel. At the beginning of last year, when peace talks began, there was a climate of uncertainty. But now, the economy has been reactivated a little."

Herrera, 50, is originally from Cali but was raised in Medellín. He says that "here, the hotel business is better than in other cities. There's money for promotion, and thanks to Cotelvalle, the Feria del Cali in December attracts many people -- up to 15,000 at a time."

The Feria del Cali, Colombia's oldest traditional fair, has been running for 43 years, and the Inter-Continental Cali generally serves as the fair's communications center. In addition, the hotel hosts fashion shows by the best Colombian designers every last Thursday of the month.

The hotel was inaugurated in July 1971 and is owned by Hoteles Estelar de Colombia S.A., which itself is majority-owned by Corporación Financiera del Valle, a Cali-based company that ranks as one of Colombia's top financial institutions. The Inter-Continental's main competitors are the Dann Carlton Cali and the Hotel Pacifico Royal.

"The advantage we have in Cali, compared to Medellín, is that American Airlines flies here directly from Miami," said Herrera, noting that American frequently sends its airline crews to the hotel, where they get special rates. Other leading corporate clients include Cartones Colombia, Johnson & Johnson and Nordiska.

Another less-known but equally important client is Latin Connection -- a Texas-based travel agency which sells package tours to American men looking for Colombian women to take back home.

"These guys aren't afraid of anything," says Herrera, estimating that Latin Connection's clients account for 25% of the U.S. guests at the Inter-Continental Cali at any given time.

"Latin Connection functions as if it were an adoption agency. But instead of adopting children, they adopt wives," said the GM. "Although it's not an ideal market for our hotel, the fact is these people speak highly of Cali, so it's a good form of promotion for us."

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