If one company does liquidate its properties in Venezuela, this could potentially create an opportunity for another firm to acquire those properties and build market share. Such a strategy would make sense if the political risk decreased the purchase price and was believed to be either minor or short-term in nature. However, it is unlikely that a macroenvironment that one firm considers to be unfavorable would be considered favorable by another firm in the same industry. Only if there are specific conditions in the second firm that the first firm does not have -- in this case special connections to government would be one -- would it make sense for another hotel company to increase its presence in a market that was being abandoned by a close competitor.

The deciding factor, however, should be the balance between the costs of leaving Venezuela and the costs of re-entering...

Using Cuba as an example, the costs of re-entering would have been very high, as the country is still communist. However, most socialist regimes in Latin America are not as long-lasting. Most of the major hotel chains have hundreds of properties, so while losing one is undesirable, it is not something that is a major risk to the business overall. As such, it is recommended that the hotel firms remain in Venezuela at present, because even with the loss of a single hotel the cost of exiting and then later re-entering the market, perhaps with an inferior property -- are high. In addition it is recommended however that if a firm is exiting the market, that this does not represent an opportunity for a competitor firm to enter. Thus, the competitors should stay out of the Venezuelan market, because the political risk is too high to justify market entry at this point.