Wall Street journal: The Soho of Buenos Aires

DestinationsThe SoHo of Buenos Aires
How hip, deal-seeking tourists are transforming a once-sleepy area
By IAN MOUNT SPECIAL TO THE WALL STREET JOURNALOctober 14, 2006; Page P4

BUENOS AIRES -- The french-style mansion in the neighborhood of Palermo that was once the family home and office of Dr. Raúl Matera, a private doctor to former President Juan Perón, had become a shambling, abandoned mess. The stained-glass scenes of country living were battered, the marble floors cracked, the door-high molding beaten and cut.
But in 2004, two locals did something drastic: They gutted the house and turned it into a 10-room hotel, called Krista, filling it with art nouveau furniture and serving croissants in the room where patients once had their temperature taken. "I never thought of running a hotel," says co-owner Cristina Marsden, a 34-year-old former marketing executive. "But when the dollar rose against the peso and the city filled with foreigners, I saw the advantage."
BUENOS AIRES

For the past three years, Buenos Aires has quietly attracted the attention of international travelers looking for a cool but cheap destination. While Europe became prohibitively expensive as the dollar fell against the euro, Buenos Aires offered some of the old-world chic of Paris or London at a fraction of the cost. Argentina is still a relative bargain -- its peso is at a near three-year low against the dollar -- while neighboring currencies in Brazil and Chile are climbing.
Now, this tourist influx is prompting a new movement to open up the city's fringe neighborhoods, with a wave of new boutique hotels, Argentine-fusion restaurants and stores featuring cutting-edge work by local designers. Much of this is concentrated in the once-quiet middle class neighborhood of Palermo -- far from touristy areas such as Recoleta and Microcentro.
A glut of former grand houses on Palermo's cobblestone streets is attracting investors -- both local and foreign -- who are transforming them into stylish hotels that can involve less risk and less capital than bigger projects. Across the city, there are about 20 of these designer hotels -- a cross between a cozy bed-and-breakfast and a high-end hotel with all the perks -- according to consulting group Horwath International. At least half of these have opened in the past three years. These intimate hotels can command relatively high rates, anywhere from $80 to $140, because travelers are willing to pay for an experience that feels more authentic. Many are in Palermo, while others are in the gritty, antique-filled neighborhood of San Telmo and in Las Canitas, known for its upscale restaurants and apartments.
Patricia O'Shea, a Palermo native who co-owns the new 17-room Home Buenos Aires with her husband, English record producer Tom Rixton, says that since they opened the hotel last December, competition in the area has been heating up. The Soho All Suites Hotel has opened, as has Krista. Ms. O'Shea says she suspects some aspiring hoteliers of sending spies to check out her operation, which features antique French wallpaper and a 3,000-square-foot garden. The tipoff, she says, is when locals come for just one night, ask a lot of questions about how she runs the business and then check out with a suitcase full of the hotel's "Do Not Disturb" signs and laundry bags: "I can spot them from a mile away."
Carrie Ehrlich, of East Lansing, Mich., recently spent four nights at Krista with her husband, a plastic surgeon. They were visiting their daughter, Casey, who is on a Fulbright Scholarship in the interior town of Rio Cuarto; it was their daughter who recommended they stay in Palermo. "We'd rather just be in the neighborhood and in the culture," says Ms. Ehrlich, having a traditional breakfast of café con leche and Argentine croissants in the house's former medical office. "If you're not, what's the point of going anywhere?"
A few blocks from Krista, an old car garage has been converted into an industrial-style shop, with poured-concrete floors and stark white walls. Pasion Argentina carries housewares and apparel that mix indigenous styles and materials -- such as the rich leather the country is famous for -- and modern design.
Co-owner Andrea Prado, a former sociologist, first came across the woven fabrics she uses while working on a documentary about the indigenous people in the northern provinces of Chaco and Catamarca. Along with co-owner Amadeo Bozzi, Ms. Prado spent $20,000 renovating the rented store space. When they opened in 2004, there were only about two other stores and restaurants within at least six blocks, and very little street traffic. Today, there are at least 20 local entrepreneurs in the area, and the owners say Pasion Argentina's business has picked up -- thanks, in part, to guests from the Home hotel.
Palermo's New Groove: Clockwise from top left, Home hotel; a room at the Cocker; Lele de Troya restaurant; Pasion Argentina boutique; Felix boutique.
The small hotel movement dovetails with changes in Argentine tourism. When the country's industries were undergoing large-scale privatization during the Menem presidency in the 1990s, 70%-80% of visitors were business travelers who stayed at chain hotels, says Juan Luis Paredes, a senior hotel, tourism and leisure consultant at Horwath. Overall, average hotel occupancy rose from 41% in 2002 to 72% three years later, according to an annual HotelBenchmark Survey by consulting group Deloitte. Daily room rates increased by more than 30% over that time.
Price hikes are one of several problems for travelers. At Bobo, an 85-year-old mansion in one of the most upscale areas in Palermo, prices start at $100, up from $80 when it opened two years ago. Hotel manager Belen Albertelli says the reason for the rise was an increase in overhead due to the country's 10-12% annual inflation. In stores, tourists are sometimes unofficially charged higher prices than locals. In bars and cafes, service can be slow and the remoteness of the country means that it can be difficult to find a foreign restaurant or newspaper.
For hoteliers, not all new projects are guaranteed to go up without a hitch. Two years ago, English couple Ian Spink and Aidan Pass bought and began to renovate a 3,500-square-foot, three-floor apartment in a old San Telmo building. Soon after, they say a neighbor threatened legal action to halt the conversion of a roof terrace into a room. Other building residents objected to problems caused by the construction crew.
The couple's $125,000 investment is now a five-room hotel, the Cocker (named for their dog), which they opened in June. On the wall behind the reception desk, Mr. Pass has painted a black-and-white, Guernica-like mural of men grappling and fighting -- a symbol, he says, of the fraught construction experience. In the top left, a women peacefully sits cross-legged. "She symbolizes the future," says Mr. Spink.