With 49 million inhabitants, Colombia is the largest country in South America after Brazil boasting the fourth largest economy on the continent. On my recent trip to Colombia I was surprised to discover a safe country, contrary to the repeated travel advisory warnings, especially from the U.S., Colombia’s largest trading partner and largest foreign investor. Colombia’s political stability has lead to 5% growth estimate in its GDP for 2011 and an surge in direct investment.
Probably one of the most important aspects to consider about Colombia’s economy is its self sufficiency, especially due to its own oil reserves and powerful agricultural sector. By 2015, Colombia is estimate that through increased investment in technology will reach the same oil output as its neighbour Venezuela. In recent months, the improved economic situation, combined with progress on key fiscal and labor reforms, has also led the three main rating agencies (Moody’s Fitch and S&P) to upgrade Colombia’s rating to investment grade.
Over half of the country’s population lives in urban areas, the largest cities being Bogota (capital city) with 9 million inhabitans followed by Medellin 3,3 million, Cali 2,8 million, Baranquilla 2 million and Cartagena 1,2 million. Similarly to Asian emerging markets, Colombia has a predominantly young population – In 2005 over 30% of the population was under 15 years old, compared to just 5.1% aged 65 and over.
I was impressed to observe a highly educated and sophisticated consumer, especially due to international exposure, through extensive travels, especially to the U.S., preferred destinations being Miami and New York (Miami is 2 hour flight from Bogota, with 5 daily flights). From a luxury point of view, Colombia’s potential is driven not only by the top wealthy individuals but also by the steadily growing upper class, mostly employees in large corporations, local and multi-national in top management positions, earning at least USD 60.000 per year.
The main driver of luxury spending is driven by the lifestyle of Colombians, daily outings at sophisticated restaurants, social gatherings and cultural events. It is probably the capital city in a major emerging market where I have encountered such a high number of premium and luxury restaurants, with the most diverse cuisines, from Italian, French to Japanese, Vietamese, Chinese as well as local and regional.
Besides popular culture events such as the Barranquilla Carnival, the Carnival of Blacks and Whites, Medellín’s Festival of the Flowers and Bogotá’s Ibero-American Theater Festival, opera, classical music and theatre play and important part in the lifestyle of the wealthy consumers. Over 25 theatres provide the most diverse offering throughout the year, with several festivals which host theatre companies from around the world. Teatro Mayor is among Colombia’s most prominent venues for classical music and ballet, staging performances of top international artists. Classical concerts and theatre performances draw equally the young and the more mature generations, Colombians showing utmost respect. These are the perfect occasions for wear the most sophisticated outfits, jewellery and watches.
Apart from football, Colombia’s national team being considered a national treasure with some top international players, golf and polo are among the favourite past time sports of the wealthy Colombians. Colombian Camilo Villegas, world class PGA Tour player has been an inspiration for the development of golf. Colombia is third in South America, after Argentina and Brazil, in number of golf courses and a true Latin American power in terms of results. At present, the Colombian Golf Federation (Fedegolf, by its Spanish acronym) has 49 certified golf courses in an equal number of clubs across the country. Twenty six of them are in the capital city of Bogotá. In the past decade equestrian sports, including polo have also been gaining ground in Colombia, many upscale residencial complexes outside the major cities having horse breeding facilities.
Most of Colombia’s luxury market sectors are under-developed, especially cars, hospitality, fashion and SPA. Suprisingly, unlike most other emerging markets, sales of luxury cars in Colombia remain very low, especially high end brands. One of the reasons is the fact that wealthy people avoid showing off their wealth through their cars for fear of attracting attention from mafia groups. The second reason is the price of luxury cars which by comparison with the U.S. can almost double in price in Colombia due to very high import taxes. The only two high end car brands represented officially in Colombia are Maserati and Ferrari, the dealership being open in 2010. However, their sales remain insignificant. According to the national association of car importers, a number of 5.100 luxury cars were imported in 2010, representing 2% of the total of cars sold in Colombia. Market leader BMW is followed by Mercedes Benz, Audi, Volvo, Range Rover / Jaguar and Porsche.
As for hospitality, only a handful of international chains are present in Colombia – Marriott, Hilton and Sofitel. Estelar is a local chain of hotels with a five star range of properties, however, with facilities and services below a five star international standard. Notable is local luxury boutique hotel developer and operator Charleston, which has impressive properties in Bogota and the prominent holiday destination of Cartagena.
The biggest opportunity for growth is represented by the capital city of Bogota where demand for international five star standard accommodation exceeds current offering. The major five star hotels are JW Marriott, Sofitel and the two boutique hotels Charleston, the preferred hotel for dignitaries and celebrities. Although recently opened with brand new facilities, Bogota’s JW Marriott which is considered the best, boasts an incosistent level of services, due to insufficient training of personel – the hotel is a franchise of Marriott and is not managed by Marriott. Hilton (franchise) is the only upcoming international chain five star opening in Bogota, due early 2012 in downtown location. Average occupancy at the five star international chain hotels exceeded 80% in the frst 6 months of 2011 and it is forcasted to maintain throughout 2011, especially due to corpoate traffic. Average nightly rates vary between USD 300 – USD 450 for a standard room. There is also a strong demand for corporate events at the international five star hotels, with many conventions, corporate company events, product and service launches etc.
More on Colombia’s luxury market (fashion, jewellery, watches, SPA, real estate and travel sectors) will be included in the second part of the analysis article which will be publish September 4th, 2011.
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