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Patagonian Palace.

The Llao Llao Hotel emerges from a tragic history as an elite hideaway on the edge of the Andean Mountains.

LEGEND HAS IT THAT WHEN U.S. PRESIDENT BILL CLINTON last visited Argentina in 1997, it wasn't economic issues that topped his agenda. Rather, it was golf at the Llao Llao Hotel, the country's most exclusive resort and spa.

"His aides had planned for him to play a few holes in the afternoon, but when he took a look at the golf course, he canceled some meetings and a horse ride with Hillary so that he could play a full 18," recalls Guillermo Lavallen, the hotel's general manager. "I guess he was very satisfied because friends and acquaintances of his still arrive who only want to play on the course that he told them so much about."

Of course, there are more than just 18 reasons to visit the Llao Llao (pronounced "jow jow"). About two hours by plane from Buenos Aires and 20 miles outside of Bariloche, Patagonia's most developed tourist center, the hotel sits at the hilly junction where the barren Patagonian desert meets the towering Andean mountains.

The mammoth lodge sits upon a natural slope overlooking the entrance to Nahuel Huapi National Park, Argentina's oldest and most treasured. Surrounded by snow-capped peaks, crystal blue lakes and dense forests of all colors, the hotel holds some of the most superb alpine views that Patagonia offers. Indeed, the pleasant scenery and once strong European influence over the areas architecture and culture has won the Bariloche area the reputation as Argentina's Switzerland.

The hotel itself is the ideal base from which to explore the area's pristine wilderness. Among the highlights is a boat trip to Isla Victoria, a large island settled by an early immigrant family and that now hosts a nature reserve and park ranger school. Looking at the robust trunks that overrun the island, one would never suspect that these seemingly ageless sequoia trees were brought over as seedlings from California as part of a government-run experimental nursery in the 1920s.

For those staying at the hotel, there is a first-class spa, an indoor swimming pool facing the mountains and two restaurants that feature regional delicacies such as Patagonian lamb and fresh river trout. There's also, of course, those undulating fairways and magical surroundings that should keep most golfers--Tiger Woods was one recently--busy during the day.

Development double bogey. Adding to the hotel's mystique, however, is its tragic history, which twice resulted in its collapse, first physically then financially.

Within a year of the government's 1938 inauguration of the hotel, it was almost destroyed by a fire. In 1940, it was reopened with its original exterior woodwork replaced by a safer, stucco finishing. Over the next three-and-a-half decades, the hotel's rustic salons, with their wide-open hunting lodge fireplaces and cypress wood paneling, were host to Argentina's aristocracy and diplomats.

But in 1976, the hotel was closed again because the government, in the midst of a military junta, could no longer afford to maintain its world-class standards given the financial strains of the era.

After a 15-year hiatus in which the hotel was exposed to vandalism, robbery and overall neglect, the Llao Llao resumed operations in 1993 under the guidance of CEI Citicorp Holdings, a U.S. investment group that was awarded the hotel in payment for its government junk bonds. Unfamiliar with the hotel business, CEI sold the hotel in 1997 for US$13 million to IRSA, a Buenos Aires real estate concern that counts Hungarian-American financier George Soros as one of its principal investors.

Since then, IRSA has poured millions of dollars to modernize the hotel's facilities, improve service and add luxury. To accomplish that goal, IRSA contracted out the hotel's management to the Sutton Group, long-time managers and part owners of Buenos Aires' ritziest hotel, the Alvear Palace.

Like the Alvear Palace, the Llao Llao is a historic monument and, as such, its managers have had to respect its original design as much as possible. One consequence of this is that rooms and bathrooms tend to be smaller than one might expect from a luxury hotel. But such minor inconveniences are more than compensated for by a sharp attention to detail. For example, objects such as original china, and furniture held for years in storage from the hotel's belle [acute{e}]poque, are constantly being refurbished and rolled out as decorative elements in the hotel's many suites.

High-class losses. But even such well-intentioned efforts haven't been enough to fully restore the Llao Llao's former prominence among those with the pockets deep enough to visit it. The hotel has yet to turn a profit and its occupancy rate--75% during the high summer season and 55% the rest of the year--is well below industry standards for a hotel of its caliber.

That's OK, says Daniel Silbermann, head of IRSA's hotel division. "The most important thing we've learned since acquiring Llao Llao is that it can't be evaluated on the same basis as other hotels." he explains. "Even if this hotel never turns a profit, its strategic value will always remain important because of its status as Argentina's most emblematic hotel."

The fact that the hotel is sometimes featured in the government's own tourist brochures is evidence of the powerful marketing benefits ownership has, Silbermann says. Indeed, despite having received a number of unsolicited offers for the property, including a much-publicized one from Starwood Hotels, owners of the Sheraton chain, he claims that IRSA has no plans to sell its remaining 50% stake in the hotel any time soon. In April, the Sutton Group exercised its right to acquire 50% of the hotel for $7.5 million as stipulated in its original operating agreement with IRSA.

Instead, IRSA and Sutton hope to prove wrong the pundits who say the hotel can never be profitable. "It's a real passion of ours as hotel operators to make the Llao Llao Hotel turn a profit and I think we can do it in the next two years," says Lavallen, who is also the caretaker for Sutton's investment in the hotel.

Fueling such optimism is the hotel's shift away from its traditional dependence on more frugal Argentine tourists as its main source of revenue. Over the last two years, 63% of the hotel's clients were Argentine while the remaining 37% came from other countries, mainly Brazil and the United States. According to Lavallen, however, those numbers are expected to reverse in the coming year as the hotel's popularity in foreign markets continues to rise.

Facilitating that process is Llao Llao's recently bestowed status as member of the exclusive Leading Hotels of the World, an organization that represents 340 of the world's most luxurious hotels that meet its own rigorous standards. "Being a member of Leading Hotels of the World allows us to tap a whole new audience of wealthy travelers that will in turn allow us to increase the hotel's average room rate," Lavallen says.

Average room rates have risen steadily from $145 in 1996 to $189 last year, but reached a new peak this past summer of $220 as a result of the hotel's incorporation into the global travel network, Silbermann says. Depending on the accommodations, listed rates during the summer and winter high seasons range between $324 and $809 and dip to between $233 and $583 in less-visited times of the year.

Of course, there are better-valued alternatives for those looking for a Patagonian vacation or just a weekend getaway from the bustling Buenos Aires. But as the hotel's owners and guests are well aware, few offer the opportunity to straddle nature up close while eavesdropping on a bit of history. "If only these walls could talk, they'd reveal a number of secrets," Lavallen says. With its current renaissance afoot, they hopefully will for years to come.
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Publication:Latin Trade
Date:Jul 1, 2000
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