Through foreign investment, Jamaica ramps up hotel development

Ocho Rios, Jamaica. Image: ©mikolajn / Getty Images

As tourist destinations go, Jamaica is teflon. The country saw visitor growth for every year during the Great Recession.

“We grew by an average of three-and-a-half percent during the recession and our revenue also grew,” Edmund Bartlett, Jamaica's minister of tourism, said. Now that the global economy is improving, he wants to see those numbers improve. 
 
To that end, Bartlett has set a target of 5 percent growth per year for the next five years. Keeping with the theme, he wants to bring 5 million visitors to Jamaica and to earn $5 billion from visitor spend. “Achieving that objective will significantly enhance the flow-through effect of the tourism dollar in the economy, and from there to job creation, and from there prosperity,” he said. 

Investment Opportunities 

To accommodate those visitors, Jamaica will need new hotels—and Bartlett is looking to capture the eyes—and wallets—of foreign investors to open new accommodations across the country. 
 
“The process of generating foreign direct investment is one that requires, among other things, the building of an infrastructure and an atmosphere or climate—an environment that is conducive to investor confidence—and also a program and strategy that will enable them to have a sense that they will make a good return on their investment,” he said. 
 
The country’s “optimal capacity,” he said, is 50,000 rooms—20,000 below the current supply. “The investment search is therefore to find capital to build 20,000 rooms over the next five to 10 years. So far, I think we are on par for 15,000 of those—some which have started already and others that we expect to break ground for later this year and into next year.”

The new room supply is expected to skew luxury and cost Jamaica between $2 billion to $3 billion, he added, and he estimated that each room would cost between $300,000 and $400,000 per key. “Any decent market prompts you to that kind of [cost] region,” he said.
 
These hotels would cover a range of different types, Bartlett said, in order to appeal to a range of demographics. “Investors are always careful about what the market is requiring, what the market is saying, and to respond to that.” Still, he said, he would like to see a “mix” of hotels in the “higher end of the market” because the first 30,000 guestrooms have already covered the midrange to lower-midrange segment. “We'll be looking at encouraging low-density development and also thematic arrangements where the product is centered around certain of the five networks that we have,” he said.

Jamaica will be encouraging investment in spas and in hotels that cater to culinary tourism, as well as more hotels around the Montego Bay Convention Centre—“which is in need of a companion arrangement by way of adequate rooms that can be tied with it for marketing purposes,” Bartlett said. “And then, of course, we are looking at different types of luxury offerings—among them, rustic luxury where people want to be close to nature but still want to have the trappings of luxury. So it is a diverse mix in relation to the passion point that we have to build the product around.” 

Who’s Investing?

Much of the money for Jamaican hotels is coming from Mexico, Spain and Canada, Bartlett said, with the U.S. only starting to invest in recent years. “The U.S. over time has not had much investment in our space,” he said. “The investment is now more diverse also in terms of its origin. China is doing a little, South America [and] Mexico, Canada and the U.S. are investing. So we are in a better place I think in terms of broadening the investment profile and responding to the call for more destinations than previously.”
 
Jamaica may attract more investment from the U.S. as the all-inclusive model has become more attractive to brands like Hyatt and Marriott. Upcoming branded hotels include a Curio Collection by Hilton, a Hyatt and a Hard Rock. Bartlett said that his team is also talking with an investor out of Belgium “who has made a contract with Six Senses to produce a hotel experience that is very special and high-end, low-density, with a greater emphasis over-water facilities and also maritime activities.” 
 
The Six Senses hotel, he said, will “create a new element to the product in Jamaica” and will also help to position Port Antonio as the destination for high-end brands. Sandals is also building a special brand facility in Port Antonio that will have about 300 guestrooms. “It is a very luxurious brand that is going to be there, so that is in keeping with creating Port Antonio as a high-end destination,” he said. Other investments are bringing 5,000 rooms to the St. Ann area, and approximately 1,000 rooms to the Rose Hall area, he said. 

Retention Rates 

Bartlett also plans to increase Jamaica’s retention rate from tourism earnings by more than 300 percent in the next four years. Currently, Jamaica earns just over $2 billion annually from tourism but retains 30 percent of that amount, or 600 million.
 
“We are among the destinations of the world that has the highest leakage of U.S. dollars from tourism expenditure,” Bartlett said. “So we have to build the capacity within our country now to send that flow and to create what we call more linkages in the economy.”
 
This would involve investing in local transportation companies that would bring people from the airport to hotels and other attractions—and enhancing those attractions to boost their appeal for visitors. “We have to ensure that the services in the industry are provided by our people,” Bartlett said. “There's a whole range of economic activity that we have to make sure that we own now as the people of Jamaica. If we are able to do that, then the leakage will be stemmed.”