Sandals Resorts International is in talks with investors to help fund about a dozen new Caribbean hotels. According to BloombergPursuits, the resort company is ending its old strategy of developing just one project a year and keeping debt minimal to allow for its expansion plan.
“We’re open to taking on more debt to build more than on hotel at a time,” CEO Adam Stewart told BloombergPursuits. “We want to build three or four hotels a year. We are trying to look for bigger capital to grow. We know exactly what to do and how to do it. But up until now we’ve been restricted by the balance sheet of regional banks.”
Stewart, who leads Sandals with his father, Gordon "Butch" Stewart, squashed rumors that the company is for sale or going public. It is, however, looking outside of regional Caribbean banks—what the company traditionally uses—to finance a massive expansion of its 23-resort portfolio across seven Caribbean islands.
As it plans the new projects, which include four hotels breaking ground next year, Sandals is in talks with Deutsche Bank and others to raise money for the expansion, Stewart said. He declined to say how much the company is looking to borrow, but he did say that Sandals has planned to spend close to $375 million to develop a 580-guestroom Barbados hotel and about $500 million to develop a resort on the island Tobago in the southern Caribbean. “We’re not looking at $200 million anymore,” he said.
Cashing In
Sandals has aimed to capitalize on the recent Caribbean tourism surge. According to the Caribbean Tourism Organization, visitor numbers hit a record 29.3 million. Meanwhile, 41,000 new rooms are currently under construction or being planned in the region, up over 40 percent from last year, STR reported. STR data showed that several major projects led the increase in guestroom stock, including a 2,000-guestroom casino hotel in Montego Bay, Jamaica and a 934-guestroom beach resort in Varadero, Cuba.
For many countries in the region, tourism is the largest source of foreign revenue. Stewart said that Caribbean tourism growth has attracted interest from private equity and some of the hotel industry's biggest chains. The company does not disclose revenues, but Stewart said Sandals is "very sound." Its ratio of debt-to-earnings before interest, tax, depreciation and amortization are at less than one. “The Marriotts, the Hiltons, the Hyatts, institutional capital and private equity, they’re all looking to get a piece of the action in the Caribbean,” he said. “It’s at an inflection point. I expect to see a massive boom in the 2-star or 3-star level of hotels,” he said.
Sandals' ADR across its 6,000-guestroom portfolio is approximately $550, Stewart said. The resort company is opening over-the-water suites in Jamaica and St. Lucia, which come with a personal butler and around-the-clock service, for close to $3,000 per night.