Hard Rock to open hotels and maybe casinos in Brazil

RIO DE JANEIRO, BRAZIL – A regular in the main foreign tourist destinations, the Hard Rock chain of hotels, restaurants, and casinos is increasing its presence in Brazil. Besides the four Hard Rock Cafe units located in the cities of Gramado (Rio Grande do Sul), Curitiba (Paraná), Ribeirão Preto (São Paulo), and Fortaleza (Ceará), the chain is developing eight hotels and resorts in partnership with the construction company VCI.

The projects are located in São Paulo (São Paulo), Campos do Jordão (São Paulo), Fortaleza (Ceará), Jericoacoara (Ceará), Recife (Pernambuco), Natal (Rio Grande do Norte), Ilha do Sol (Paraná), and Foz do Iguaçu (Paraná). The investments, which total R$7 billion (US$1.3 billion), will be made until 2028, but the first hotels, in São Paulo, Fortaleza, and Ilha do Sol, should be inaugurated as early as 2023. The initial forecast was 2022, but the coronavirus pandemic delayed the plans.

In an interview with Exame, the CEO of VCI, Samuel Sicchierolli, spoke about the plans for the Hard Rock brand in Brazil. Besides the eight hotels, the executive tells that the brand may also have casinos on Brazilian soil in case the regulation of gambling is approved in Congress. The bill will be voted in the House this month.

“We are what the company calls an area developer. We have a contract to develop ten projects in Brazil. The first eight were focused on hotels, but the other two may have different profiles. They study the possibility of having casinos in Brazil, in case the regulation of gambling is approved in Congress”, explains Sicchierolli.

Check out the complete interview:

What are the Hard Rock banner’s plans for Brazil?

We have eight projects under development, some in the construction stage, others in a more initial stage. The planned developments’ general sales value is close to R$7 billion. Only in our two most advanced projects, Fortaleza and Ilha do Sol, there have already been R$1.2 billion in sales.

Hard Rock is present in 77 countries and 200 cities in four business divisions: restaurants and cafes, hotels, casinos, and shows and events. In Brazil, we are involved in hotel and events projects.

We are what the company calls an area developer, and we have a contract to develop ten projects in Brazil. The first eight were focused on hotel management, but the other two may have different profiles. They study the possibility of having casinos in Brazil in case the regulation of gambling is approved in Congress.

Why was Brazil chosen to receive this investment?

The Hard Rock brand went through a transformation after 2008 in the United States, and from then on, it started to make more significant investments in the hotel segment. Although it is a well-known brand, it is an expressive player that started to prioritize projects in this segment more recently.

The logic of bringing the Hard Rock hotels to Brazil has to do with the dynamics of the multi-property segment itself. Historically, these projects focus on C-class clients and are hotels with simpler services in destinations that were not necessarily the most sought after. Another important point is that until 2018, multi-property did not offer legal certainty. With the passage of a law, Brazilians had more security to acquire a quota. In the projects before 2018, we saw a high volume of judicialization because of the lack of individual registrations, which prevented the owner from selling, renting, or transferring these assets.

The approval of the law and the arrival of flagships such as the Hard Rock made the market go from R$2 billion in general sales value to more than R$20 billion in a short time.

Why is multi-property so strategic for the brand’s plans in Brazil?

We were the first company to have a multi-property with an international brand in Brazil. Besides, only 2% of the Brazilian population has access to a second vacation home. Having a vacation home requires investing in a property, furnishing, paying employees, etc. It is a very high acquisition and maintenance cost. Our multi-property projects have an average value of R$120,000, which can be paid in 60 installments. It is a very affordable plan.

Global research shows that people travel, on average, 17 days a year. Whoever buys one of our quotas has the possibility of doing exchanges in all Hard Rock units. It means that they can use their time at any one of our more than 4,300 hotels. If they do not want to travel, they can rent their unit.

What is this customer’s profile?

They are people who have already traveled abroad, know about the quality of our hotels, and know about all the security differentials. It is a public, mainly from the B+ and A+ classes, who did not feel served by the multi-property projects that existed. The average family income of those who buy a quota is R$15,000, and 10% of our clients earn more than R$45,000.

We have clients from 19 to 80 years old, but on average, we are talking about someone who is 38 years old, married, has two children, and has a family income of more than R$15,000. Concerning the use of the quota, this is much more varied: we have clients who like to travel and want a space for themselves and their families, and we have clients who don’t like to travel so much but want to make an income. These are distinct objectives.

Another important aspect is that we don’t force the sale; we don’t do the so-called “emotion sale”. The client who buys a quota, in general, does it spontaneously. That is, he came here and wanted to know the project. It means that our level of post-sale cancellations is only 15%, compared to cases that can reach 50% in the market.

What channels does the customer find to buy a quota?

Besides our concept stores, such as the one we have on Avenida Brasil, in São Paulo, and our stores in shopping centers, we also sell online. I have customers in more than 1,400 Brazilian cities, although the projects are in only eight cities. Many people search, do internet research, and buy online, clearing doubts by video call, for example. We receive more than 2,000 calls a day at the call center from people who want to get to know the projects.

What is the Hard Rock projects’ quota model?

We have 26 owners for each property. Each one is entitled to two weeks of use. The property deed determines which space the quota holder is entitled to (which apartment, unit size, and project) and which period they can use it. The weeks are determined when the quota is purchased because families usually already have a travel routine to enjoy their children’s vacations and organize their vacation days from work.

All members pay a condominium fee, which covers property tax (IPTU), water, energy, cable TV, internet, breakfast, hotel maintenance, and everything a traditional guest would have. The administration of the enterprise, inclusive, is done by the Hard Rock brand itself.

With information from Exame