Bloomberg News

Batista’s Hotel Gloria Runs Into Two-Year Delay Amid Rio Boom

July 06, 2011

July 6 (Bloomberg) -- Brazilian billionaire Eike Batista’s renovation of the historic Hotel Gloria in Rio de Janeiro has run into a two-year delay, pushing the projected completion date to five months before the country hosts the World Cup in 2014.

The hotel, which opened in 1922 and hosted several Brazilian heads of state and Albert Einstein, was originally scheduled to open this year. EBX Group Co. Ltd., Batista’s holding company, said in a e-mailed statement it now needs until December 2013 to finish the project after adjusting its blueprints because of engineering difficulties. EBX bought the hotel in 2008 for 80 million reais ($50 million).

The delay comes as Rio’s hotels are filling up at a record pace after the fastest economic growth in two decades last year and increased business travel. In April, 79 percent of rooms in 91 Rio hotels were booked, a record occupancy for the month, according to survey going back to 2001 by the state of Rio’s hotel association and the city’s service industry union. Besides the World Cup, the city will host the 2016 Summer Olympics.

“Today if you go to Rio it may be quite hard to find a place to sleep,” said Rafael Guaspari, vice president for Barueiri, Brazil-based Atlantica Hotels International, the nation’s second-biggest hospitality chain, with 76 hotels. “Hotel rooms in Rio and Sao Paulo have gotten extremely expensive.”

Sweeping View

When Batista bought the Hotel Gloria, mustiness and mildew had taken hold over its once-glamorous salons, and Rio’s more- fashionable hotels, like its wealthier residents, had moved farther south to beachside neighborhoods like Ipanema and Leblon. What little magic remained from the downtown landmark’s heyday in the 1920s was its sweeping view of Guanabara Bay and Sugar Loaf mountain. Einstein, in 1925, completed his theory of photons in a fourth-floor suite.

When it reopens as the Gloria Palace, it will have about 231 rooms, two restaurants and a conference center, according to the Rio-based EBX. As part of the 200 million reais renovation, the hotel’s Art Deco façade will be restored to its original color and design.

A former powerboat racer, Batista also plans to expand and modernize the Marina da Gloria adjacent to his hotel to make it ready to host nautical competitions during the Olympics. In 2008 he created a real estate company called REX to scout for properties to develop in Rio and elsewhere.

Flood of Tourists

To absorb the influx of tourists just for the World Cup, Rio needs to add 2,430 hotel units to the 19,413 units it had on offer in 2009, according to a study by the Sao Paulo-based Brazilian Forum of Hotel Operators and the local unit of hospitality consultancy firm HVS International, which is based in Mineola, New York.

Even as Rio gears up to host the sporting events, the bulk of demand today comes from business travelers drawn to the city’s booming economy, said Guaspari. Brazil’s economy expanded 7.5 percent last year, and Rio’s growing oil, mining and asset- management industries were a magnet for a record $48.5 billion in foreign direct investment in 2010.

The average price for a hotel room in Brazil rose 22 percent in the past year to 317 reais a night in April, according to the service union survey. Consumer prices over the same period rose 6.51 percent. About 66 percent of the travelers to Rio came from within Brazil.

Batista’s Companies

Batista, 54, has played a role in the city’s renaissance. A resident of Rio, he climbed to the rank of the world’s eighth- richest person on the Forbes magazine billionaires list by taking public mining and energy start-ups. Each company ends in the letter X to signify the multiplication of wealth.

Shares in his shipbuilder OSX Brasil SA and iron-ore miner MMX Mineracao & Metalicos SA have tumbled 8.9 percent and 23.1 percent respectively this year, while his power-plant operator, MPX Energia SA, has rallied 61.6 percent. The benchmark Bovespa index has declined 9 percent this year.

“There is a lot of money that will be invested in the city for the Olympics,” said Batista in an April 2010 interview with Bloomberg TV from his office overlooking the bay in Rio. “A lot has to be done and planned.”

Even as demand for hotels in Rio surges, construction of Batista’s project is halted. Scaffolding covers the building’s facade, while cement and brick support walls are stripped of plaster on the ground floor, leaving a skeleton where Batista envisions one of the most modern hotels in Latin America.

A third revision of the project’s original blueprints did not meet landmark preservation guidelines set in 2009, said Washington Fajardo, the sub-secretary of culture for Rio’s city government. EBX said that a solid rock hill abutting the hotel has also created unforeseen engineering obstacles to a planned expansion.

“There’s obviously a lack of coordination between the government and the developers,” said Christopher Gaffney, an architect and a visiting professor of urbanism at the Federal Fluminense University in Rio. “What you’d want is for the developer to figure out how to get approval from the government as fast as possible, so the hotel can get up and running and they can make money.”

--Editors: Harry Maurer, Joshua Goodman

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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