Business

Latin America hotel industry lures venture capital to a mix of new and old-fashioned operations

Startups operating bricks and mortar facilities are raising money; some analysts fret about the model sustainability

Ayenda was founded in 2018 and already is the biggest hotel chain in Colombia. Photo: Ayenda
  • Ayenda, Colombia’s largest hotel chain, has raised $8.7 million in a recent round of funding;
  • Latin America is now its Indian Oyo’s third largest market, with around 16,000 rooms, behind South Asia and East Asia.

The arrival of Oyo, a tech-based hotel company from India, may be inspiring a rush of Latin American venture capitalists to invest in hotel chains. The latest news comes from Colombia, where Ayenda, the country’s largest hotel chain, has raised $8.7 million in a recent round of funding. 

According to an article on TechCruch, the raised money came from Kaszek Ventures, a big venture-capital firm based in Argentina, among others, and will back the expansion of Ayenda in Colombia and other countries. The hotel operator has 150 hotels operating under its flag in Colombia and has recently expanded to Peru. 

Ayenda was founded less than two years ago and already has more than 4,500 rooms under its brand in Colombia and has become the biggest hotel chain in the country.

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Oyo, on the other hand, entered Mexico last September, after making inroads across Brazil. The Indian hospitality startup has an eye for emerging economies and Latin America is now its third largest market, with around 16,000 rooms, behind South Asia and East Asia.

But SoftBank-backed Oyo is also a cautionary tale, with some analysts already singling out the company as the next WeWork. Oyo’s consolidated loss ballooned to around $335 million in 2018-19 from $44 million in the previous fiscal year.

While the hotel industry in developed markets is being disrupted by almost exclusively digital platfoms such as Airbnb, investment in brick and mortar chains by venture-capital funds are frequent  in emerging markets. Besides Oyo, Tencent, Sequoia China, Baidu Capital and Goldman Sachs, invested “several hundred million dollars” in LvYue Group late last year, according to a company statement.

“We’re seeking to invest in companies that are redefining the big industries and we found Ayenda, a team that is changing the hotel’s industry in an unprecedented way for the region”, said Nicolas Berman, Kaszek Ventures partner.

In a system not dissimilar from Oyo’s, Ayenda works with independent hotels through a franchise system to help them increase their occupancy and services. The hotels have to apply to be part of the chain and go through an up to 30-day inspection process before they’re approved to open for business.