As this year’s Caribbean Hotels & Resorts Investment Summit and Hotel Opportunities Latin America conferences take place this week in Miami, Javier Coll, Apple Leisure Group’s EVP and chief strategy officer, talked to HOTEL MANAGEMENT about the group’s outlook for hotel development in the region, the properties most successful in driving profitability and where both Apple Leisure Group and AMResorts are headed next in the region.
1. Why do you feel this year will be marked by more conversions in the region rather than new builds?
When hotels are doing well, there’s an appetite for developers to develop and there’s no real opportunity for conversions or acquisitions since no one wants to sell a hotel when it’s doing well. But now we’re at a turning point because we’ve seen rates start to decline this year. We believe this is a trend that will continue and as rates keep going down; there will be more opportunity for conversions because owners will need a stronger partner to make sure that they perform well during the crisis that’s coming. This is why we’re talking to independent hotel owners at CHRIS and HOLA, to explain to them that it takes time to position a hotel and if you anticipate the end of the cycle that’s coming and decide to work with us, we will have time to make the changes necessary to reposition the hotel so that when crisis arrives, the hotel will be that much better off. This is the time to reposition, not when a hotel’s already in trouble.
I think there are a number of factors contributing to the turning point in the cycle. A lot of new construction has come to the market in the last few years and all of those new hotels will affect the market at some point. Combined with the rates and the offers coming to our tour operator businesses, we believe we’re turning to a new cycle. Some of it is also political and economic uncertainty. The U.S. is a very strong market for this region and no one knows what’s going to happen with regard to tax, trade and tourism policies or what effects changes will have on the country.
2. What are the key components of a successful all-inclusive product today?
You want to make sure acquisition, renovation or new-construction costs are appropriate to the location. From a developer standpoint, that’s key. Of course, the product is important and knowing who your competitors are is also important because you have to look at their product and invest in your own accordingly. If you go to the Riviera Maya or Cancun, the hotels are next generation and that’s your competition. But in the English-speaking Caribbean, hotels have been struggling for years because they didn’t move to the all-inclusive model quickly enough, but also because of the bureaucracy that exists there as well as local energy and labor costs. Owners also haven’t invested in their product as they should have and they need to be careful when they do invest because the competition may not be in better condition, but the rates may not be there and the lift may not be there. So it’s critical to analyze what will make sense in the location.
Camping for 3 nights was the worst experience of my life. I'm more of a nice hotel all inclusive kinda gal I think— Dori Lloyd (@dori_lloyd) April 19, 2017
3. Does Latin America present investors and developers with additional challenges beyond politics?
Some countries are more complicated than other counties. Some are very difficult to get permits or it’s a very long process and in others, it’s easier. The political environment isn’t necessarily an issue unless you’re talking about Venezuela and the risk there is huge. Otherwise, countries in Latin America are fairly stable. What’s happening in the U.S. and Europe right now is probably more important because those are your source markets.
But developers should also consider that Americans won’t travel more than four hours and they average vacations of 5.5 days. When you exceed a four-hour flight, your universe of customers dramatically decreases. That’s why Mexico and the Caribbean are so successful.
4. What are AMResorts’ future plans in the region?
AMResorts Planning 10 Mexico Openings by 2020 https://t.co/o3IzyZcAw7— NAI Bahamas (@NAIBahamas) April 10, 2017
We’ve added a secondary strategy to complement our existing growth plans. AMResorts is owned by Apple Leisure Group, which is the largest tour operator in the U.S. and which owns Apple Vacations, the OTA CheapCaribbean.com and Travel Impressions. So our core strategy is to go to the destinations from Mexico to Aruba where we already have passengers and where we can add value to the hotels in those locations. Our brands are also already known in Latin America because travelers there also go to the Caribbean and at some point, Americans will start coming to Latin America if the brands are already present. We know we can capture the customer there, but that will be in the long-term.
Now we’re looking for distribution opportunities in Latin America—especially Colombia and Brazil—and talking to different companies there to partner or possibly acquire. So, that would be a new source of growth for our group and we believe those two markets are a good start for getting into Latin America. Also, we’re already present in Panama and Costa Rica and so acquiring a distribution company in Latin America would also help our Central America projects.