Rio's Moment Nears Without Top New Hotels

RIO DE JANEIRO (TheStreet) -- The endless parties and fireworks of New Year's Eve in Rio de Janeiro were to mark the beginning of a 'Golden Decade' for Brazil's second-largest city, which will host the 2014 World Cup and 2016 Summer Olympics.

Contrary to the media coverage of endless urban violence, Rio is benefiting from a booming economy and stronger police control of its more than 100 favelas, impoverished neighborhoods notorious for their drug lords and rampant gang violence. Along the streets of Leblon and Ipanema, two of the city's chicest neighborhoods, an improved economy is seen in the city workers sweeping sidewalks and maintaining one of the cleanest cities you'll see in South America -- or anywhere.

But while most of Rio seems to be sizzling, its hospitality industry seems to be on more of a simmer, with few hotel projects on the horizon even with so much going in its favor.

Ipanema Beach in Rio, Brazil's second-largest city.

Rio de Janeiro's hotel landscape continues to be dominated by behemoth high-rise relics that are decades old, or by lackluster American and European chains that don't always live up to their luxury moniker. Perhaps the most famous of Rio's hotels, Copacabana Palace, is owned and operated by Orient Express, which maintains an impeccable luxury property at the edge of Copacabana Beach that's been the city's most prestigious address for almost a century.

Opened in 1923 and inspired by the hotel palaces of the Cote d'Azur, an opulent resort of sprawling swimming pool, outpost of Cipriani Restaurant and hot new nightclub called Bar du Copa make it one of the fancier destinations for Rio visitors. The hotel is also host to an array of be-seen VIP events, such as an annual New Year's Eve fete and Grand Carnaval Ball where guests dress in couture costumes and black tie. This year's Carnaval event will feature a "Leopard" theme for its March 5 masquerade event, for which tickets will cost upward of $750.

On the downside, the Copacabana location of Rio's poshest address has evolved into one of the city's more touristy neighborhoods. Visitors to the hotel tend to stay close to the property, preferring to frequent the in-house beach club, where security hovers over your belongings as you take a dip.

Those looking for a more youthful and sexy hotel alternative to Copacabana find few true luxury options on the beach in Rio. In fact, only Fasano Rio de Janeiro fits the bill on the far edge of Ipanema, in a midrise property with rooftop pool and, recently, a roster of celebrity clients including Beyonce and Madonna.

Those willing to sacrifice a beachfront location in Rio find the area of Santa Teresa brimming with chic eateries and boutique hotels. Hotel Santa Teresa, operated by Relais & Chateaux and owned by a team of French investors that includes Francois Delort, is the neighborhood's top hotel. The former coffee plantation has been remade into one of South America's most impressive design hotels, with a highly sophisticated palette of midcentury antiquities, primitive artwork and rustic architecture decorated by Delort himself.

Hotel Santa Teresa occupies a promontory overlooking the Rio skyline with a zen-inspired pool surrounded in teak loungers and a grassy yard occupied by fashionistas and luxury revelers. Despite the culinary treasures found in this boho neighborhood, the true standout is the hotel's own French eatery, Tereze, led by former Alain Ducasse protege Damien Montecer. The resurgence of Santa Teresa into one of Rio's trendiest neighborhood offers a glimpse of what many of the city's grittier neighborhoods could become in the future.

One would expect that in anticipation of the World Cup and Olympics, hoteliers would be lining up to open Four Seasons and Ritz-Carlton outlets. But only Hyatt Hotels ( H) has emerged with solid plans for a 470-room property under its middle-range Grand Hyatt brand in Barra da Tijuca, a northern suburb of Rio where most of the Olympic events will be held. The property will feature two restaurants, a fitness center, destination lounge and pool bar.

As for other hoteliers scouting Rio, Ian Schrager recently mentioned the city for an outpost of Schrager Hotels, the group he formed following the recent sale of his stake in New York's Gramercy Park Hotel. His plans include a series of owner-operated properties funded in part with Morgan Stanley ( MS) and just the type of cool, luxury hotel infusion needed here.

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Michael Martin is the managing editor of JetSetReport.com, a luxury travel and lifestyle guide based in Los Angeles and London. His work has appeared in InStyle, Blackbook, Elle, U.K.'s Red magazine and on ITV and the BBC.

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