Motivated by the great prospects of the Brazilian Hotel Industry, many entrepreneurs are taken by the idea of establishing a lodging business in the country. This guide will provide the steps to open a hotel in the country, and give some general information about the sector.
The lodging industry in Brazil
It is no news that Brazil is a very coveted touristic destination for many travelers. The country offers its visitors a diverse range of options, highlighting its natural beauties and historic places. That’s the reason why the country’s tourism represents an ever growing and promising industry.
According to the Brazilian Association of Hotel Industries (ABIH), there are more than 28.000 means of accommodation in the country and the sector moves around USD 2 bi dollars per year, growing at a rate of 8 to 10% annually. The fact that Brazil is hosting the 2014 World Cup and the 2016 Olympic Games also contributes to attract investors to the sector, especially after the great incentives for foreigners established by the Brazilian government, in an attempt to supply the country’s future demand for accommodations.
Even though the hotel industry represents a good area to invest in Brazil, there will be some hard competition to deal with. Several large international hotel chains are operating throughout the country, sometimes making impossible for the small entrepreneurs to sustain their businesses in certain locations.
But although the hotel industry is quite developed in Brazil, there is a real shortage of supply in some areas. Out of the 12 host cities for the World Cup, for example, only Rio de Janeiro and São Paulo are currently capable to offer accommodations for all the visitors. Also, the Brazilian Hotel Industry suffers from a lack of luxury hotels as about 85% of its lodgings have medium and low qualifications.
Categories of lodgings in Brazil
According to the Brazilian law, are considered means of accommodation enterprises or institutions, despite of their form of constitution, intended to provide temporary accommodation services, offered in frequency units and individual guest's exclusive use, as well as other necessary services to users through the adoption of a contract and collection of a daily rate. They can be classified as:
Hotel: Establishment with service reception, temporary accommodation, with or without food, offered in individual units and exclusive use of guests, subject to payment of daily rate.
Resort: Hotel with leisure facilities and entertainment which has beauty services, physical activities, recreation, living with nature in their own facilities etc.
Hotel fazenda located in a rural environment, endowed with agricultural exploitation, offering entertainment and experience in the fields and with animals, such as horse riding.
Cama e café (bed and breakfast): Accommodation in a residence where the business owner lives, with a maximum of three housing units destined for tourists use, with breakfast in the morning and cleaning services.
Hotel histórico (historic hotel): it is a hotel installed in a building preserved in their original structure or restored, that has been the scene of historic events and cultural features of acknowledged importance.
Pousada: normally a horizontal construction composed of a maximum of 30 housing units and 90 beds, with reception services, food and accommodations. May be a single building with up to three floors or have cabins or bungalows. It has a familiar environment.
Flat/Apart-hotel: consists of housing units with a bedroom, bathroom, living room and kitchen in the building with integrated management, counting with reception service, cleaning and storage.
Albergue (hostel): means of accommodation consisting of dorms with beds or bunks, featuring mostly well as collective kitchens and bathrooms separated based on sex (male/female), and with some recreation services, such as swimming pools, game rooms, dancing floor, libraries etc.
As in many other countries, the accommodations in Brazil are evaluated with stars. According to the Brazilian System of Accommodation Classification (SBClass), hotels can get one up to five stars, resorts four up to five stars, hotéis fazenda, one up to five stars, Cama e café, one up to four stars, hotel historic, three up to five stars, pousadas, one up to five stars and flats, three up to five stars. Hostels were not well defined by the SBClass so they are not qualified with stars.
SBClass is a system made by the Brazilian Ministry of Tourism. The complete guides for what each category of lodging must have can be consulted here (Information only in Portuguese).
Opening a lodging business in Brazil
The rules for opening a lodging business in Brazil will depend on which of the categories listed above you are going to invest. The accommodations that require less capital to invest are the one star pousadas and hotels or hostels.
Step 1 - Extensive market research
Due to the competitiveness of the hotel industry in Brazil it is imperative to make a very large research when considering investing in this segment. The initial business plan should consider:
- Expenditures (initial investment, costs and expenses)
- Return on investment
- Location of the business
- Potential clients
- Services to be offered
- Price of the services rendered and products sold
Step 2 – Opening a company
In Brazil, only legal entities are allowed to offer accommodations in exchange for money. So, after the research was done to check the viability of the business, it is time to the company formation.
In order to run a lodging business, entrepreneurs can form an entity individually or in partnership, and register it at the Chamber of Commerce of its state of activity. You can check more about company formation here.
Step 3 – Checking standards common to all lodging facilities
Of course, the more equipped the accommodations are, the higher the business will be evaluated in stars. However, EMBRATUR establishes some minimal standards to be followed by all lodging companies. Without complying the following minimum conditions, the lodging will not obtain authorization to operate.
Some legal conditions:
- Company licensed by the competent authorities to provide hosting services, including the environmental protection agencies.
- The businesses must be managed only by hotel companies.
- Lodgings must provide temporary accommodation for guests upon adoption of a contract specifying the collection of daily rates of the room.
- Lodgings must follow the requirements of Labor Laws, especially as regards the changing rooms, toilets and meals of local officials and Commissions for the Prevention of Accidents - CIPA.
- Buildings constructed or adapted specifically for the activity.
- Areas for the accommodation service, concierge/reception, circulation, food service, recreation and common usage, and other services for the convenience of the guest independent from one another and separated from staff.
- Sound protection, in accordance with the rules of the Brazilian Association of Technical Standards (ABNT).
- Rooms and bedrooms of housing must provide openings to the outside for light and ventilation.
- All bathrooms featuring natural ventilation, with direct opening to the outside or ducts.
- Basic services of water supply that do not affect the local community, as well as electricity, health network, wastewater treatment and solid waste collection, with appropriate destination.
- Facilities made for the specific use of people with special needs.
Installations and infrastructure:
- Electrical and hydraulic installations in accordance with the rules of the Brazilian Association of Technical Standards (ABNT).
- Installation of emergency lights for common areas and to operate equipment essential to the safety of guests.
- Mandatory presence of lifts for passengers and cargo for buildings with four or more floors.
- Fire safety equipment installed and trained personnel to operate it in accordance with rules established by the local Fire Department.
- Bedrooms minimally furnished, counting with bed, equipment for the storage of clothing and personal items, bedside table and chair.
Services and management:
- Entrance/reception permitting the check in and check out of the guests during the 24 hours of the day.
- Mandatory registration of the guests upon their arrival at the establishment, through the completion of National Registration Card Guest - FNRH approved by EMBRATUR.
- Daily housekeeping, supply and exchange of bed linen and bath as well as common items of personal hygiene, provided on account of the establishment.
- Telephone services available to guests in accordance with the internal regulations of the establishments, the standards and procedures adopted by utilities services, or by the grantor.
- Pest control against insects and rodents.
- The proper amount of skilled workers to maintain the perfect functioning of the means of accommodation.
- Staff permanently uniformed and/or properly dressed, according to the functions they exercise.
- Channels of communication with guests searching their opinions and complaints in order to solve them.
- Compliance with other rules and conditions necessary for the safety, health/hygiene and maintenance of means of accommodation for customer service.
Step 4 – Getting permits and licenses
The hotel segment is supervised by the EMBRATUR, an autarchy from the Ministry of Tourism. The segment is also closely watched by the Brazilian Association of the Hotel Industry (ABHI) and other several state institutions. The main permits and licenses necessary to run this kind of business are:
- Registration at the Ministry of Tourism
- Habite-se (Authorization from the municipality)
- Alvará de localização e funcionamento (Location and operation authorization from the municipality)
- Authorization from the local Fire Department
- Authorization from Anvisa
- Authorization from environmental agencies
The Brazilian cities most visited by tourists
Down below, you can check a list of the ten most sought Brazilian cities for touristic activities. Although those cities are the ones with the largest hotel competition, they are the locations where entrepreneurs will face lower risks.
As it is almost impossible to defeat the large hotel corporations present in those cities, opening small lodgings and hostels (good and cheap hostels are missing in Brazil) offering familiar environment and low prices is one of the best and safer options for small investors.
2) Foz do Iguaçu-PA
3) São Paulo-SP
The 20 largest hotel chains operating in Brazil
Out of curiosity, here comes a list of the 20 top players operating in the hotel industry in Brazil:
1) Accor: 23.569 rooms e 142 hotels
2) Choice: 9.374/62
3) Louvre Hotels: 5.278/27
4) Blue Tree: 4.172/25
5) Nacional Inn: 3.985/35
7) IHG: 3.124/13
8) Windham: 3.090/15
9) Windsor: 2.819/10
10) Slaviero: 2.772/20
11) Bourbon: 2.673/11
12) Othon: 2.594/19
13) Carlson: 2.253/9
15) Vila Galé: 2.055/6
16) Bristol Hotelaria: 2.043/17
17) Estanplaza: 1.755/12
18) Best Western: 1.725/17
19) Starwood: 1.647/6
20) Travel Inn: 1.589/22