After hurricanes, Caribbean plans future growth

Premier and Minister of Finance The Hon. E. David Burt welcomed attendees to the 2017 CHICOS Conference.

 

HAMILTON, Bermuda - This year’s Caribbean Hotel Investment Conference and Operations Summit acknowledged the elephant in the room right at the opening session: Hurricanes Irma and Maria were a “one-two punch” for the entire region, and the damage the storms caused cannot be downplayed. “It's the worst year on record,” HVS Managing Director and CHICOS Chairman Parris Jordan told the 300 hoteliers and lenders who had gathered at the Hamilton Princess and Beach Club.

But while the hurricanes were undeniably destructive, the Caribbean is a large region, and most of it is still open for business, Jordan said. “A lot of people don’t understand the difference between Bermuda here and Barbuda, which is miles away.” While Barbuda was severely damaged by Hurricane Irma, Bermuda, 1,600 kilometers to the north, was untouched by the storms. Some affected areas are already rebuilding, Jordan noted, and will be ready for the high season this year.

Educating travelers and investors alike about the diversity of the entire region will help the different Caribbean nations and islands survive challenges like these hurricanes, he emphasized. “We need to let the world know that the Caribbean is open for business. That’s our theme for this year.”

Lessons Learned

Over the last six years, Jordan said before the opening session, Caribbean hospitality metrics were showing a steady increase. But in 2016, the Zika virus caused visitor numbers to drop, and RevPAR fell.

As with the hurricanes, Jordan said, much of the Caribbean region was not directly affected with the virus, but the region as a whole suffered as travelers grew wary. “We were getting the word out, explaining to people that it's not the entire region,” Jordan said, and emphasized that the visitor and revenue declines in 2016 were “marginal.”

By the beginning of this year, the numbers were back on track for growth. “What we saw at the start of 2017, the market was going extremely well. RevPAR was increasing, demand levels were increasing, average rates were increasing—and then the region was impacted by a one-two punch.”

This time, however, hoteliers in the region were ready. After other disasters, from terror attacks to economic downturns, many hotels had lowered rates in a bid to attract guests, Jordan said. This time, they maintained or even raised their rates, which bodes well for the market. “They realize it's not because people wanted a better rate,” he said. “They just weren't coming because of the hurricane, and because of that we will be better prepared to weather this storm and the demand will come back.” Hoteliers in the region are continuing to book rooms towards the end of this year and into next year, Jordan added. “They expect the market to recover.”

By the Numbers

Caribbean year-to-date RevPAR is up 0.8 percent, which includes a decline of 16.6 percent in September, STR’s Jan Freitag told the crowd. ADR, meanwhile, is “plateauing out” after rapid growth in the last few years.

“Everybody’s building everywhere,” Freitag said, noting that most of the major markets throughout the region have healthy pipelines. Overall, the Caribbean has 17,500 guestrooms under construction today, up 25 percent from the previous year.

A full 43 percent of the rooms under construction are luxury or upper-upscale, Freitag said. “That's where the opportunity is—but so is the opportunity to not be there.” Developers eyeing select-service hotels in the region might find demand, he suggested.

Bermuda's hotel performance has seen strong increases

Investing in Bermuda

As the host country for the event, much of the opening buzz focused on Bermuda, which has some upcoming upscale and luxury developments in the works, including a Ritz-Carlton Reserve slated for 2018 and a St. Regis due to open in 2020. That pipeline may grow, however, thanks to the new Tourism Investment Act, which was recently signed into law.

The Act provides tax relief for hotel owners in the form of the payroll tax as well as customs duty relief for a fixed period of time depending on the scale of the investment. “The Tourism Investment Act, for the first time, really clarified to a marketable proposition the incentives that are available to investors in Bermuda, and what do you have to do in order to get those benefits,” Kevin Dallas, CEO of the Bermuda Tourism Authority, explained ahead of the opening session. “Previously, Bermuda was willing to work with investors but it was on an ad hoc basis and it was difficult coming in as an investor to know what you'd be able to get. Now we have have a clear proposition and the proposition has benefits for investors and benefits for Bermudians, so the kind of relief you get from tax and the kind of incentives that are available are dependent upon an investor's willingness to invest in Bermuda.”

Notably, Dallas said, the Act applies not only to new hospitality development projects but for refurbished hotels. "For the first time, we're making the distinction between a new property versus refurbished one, as well as for all other tourism-related aspects."