SAN JUAN, PUERTO RICO—When hurricanes Irma and Maria blew across the Caribbean in late August and early September 2017, the magnitude of the one-two punch they delivered to the area was, by large, unprecedented. Puerto Rico, in particular, reeled from the devastation, an off-kilter condition it only recently rectified with the restoration of power to the entire island on Aug. 14 (at press time Vieques was still using generators). The overall damage, which is estimated in the billions of dollars, skewed an economy that already had been suffering. Pundits who forecast a slow recovery for the U.S. territory have seen their predictions come to fruition for almost a year—and counting—into the island’s recovery.
Interestingly, Puerto Rico’s hotel sector, particularly near the airport and San Juan, fared better than expected by some estimations. According to Steve Smith, managing director, CBRE Hotels, it remains an active process.
“They’ve actually done quite well year-to-date—we’re talking about the three-plus, four-, five-star properties—from an occupancy standpoint because of all the [Federal Emergency Management Agency] (and construction) workers,” said Smith of the hotels that are open.
Even some hotels that experienced damage have kept their doors open as owners negotiate with their insurers regarding renovations, so they can still support their own staffs. And depending on the outcome of such discussions, hoteliers potentially could reposition their properties via upgrades and enhancements, which they might not have been able to do without a claims payment, Smith observed.
Smith noted that leisure tourism, which is a key driver of the island’s economy, also is seeing stronger recovery.
Toward this, a newly created not-for-profit group, Discover Puerto Rico, which is promoting the island, compiled data specifically around tourism.
Regarding lift, it indicates there are 110 daily flights via 28 different airlines to Puerto Rico; cruises expect to see 1.7 million passengers (representing approximately $250 million in revenue); and some 132 lodging choices will see additional inventory as renovated rooms come on line. For example, coming to the mix between now and January will be 657 new guestrooms among the Dorado Beach, a Ritz-Carlton Reserve; El San Juan Hotel, Curio Collection by Hilton; and The St. Regis Bahia Beach Resort; 480 rooms from Meliá Coco Beach; and 652 new rooms available from Caribe Hilton.
Commenting on the outlook for tourism, Brad Dean, CEO of Discover Puerto Rico, stated that while there is still progress to be made in some areas, “Puerto Rico declared itself open for tourism in late December, and the local tourism industry has worked very hard for the past year to come back strong. There’s a lot to celebrate and we don’t want the one-year anniversary to set us back.”
The group also is engaging with locals to get the word out. A key initiative is using a “then-and-now” image out of Punta Santiago, Humacao, a community severely impacted by the storms. It shows the original SOS message for help, water and food now transitioned to a welcome message of “Bienvenidos!”
While an enormous focus over the past year post-hurricanes has been placed on Puerto Rico, largely owing to its relationship to the United States and government response to the ongoing situation, other regional islands also were impacted.
“The countries of Anguilla, Barbuda, Dominica, Puerto Rico, St. Barts, St. Maarten/Martin and the Virgin Islands were hit the hardest by hurricanes Irma and Maria. However, according to our latest hotel construction pipeline trend report for the Caribbean, we’ve begun to see these countries rebound,” said Tim Ford, president of Lodging Econometrics. “While it will take a few years to return to prestorm levels, the increase in early planning and scheduled-to-start-in-the-next-12-month stages is promising, meaning that the rebuilding effort is underway.”
He noted many of the hotels affected during the storm have already completed or begun renovation/reconstruction and/or conversion.
“Of course, with a natural disaster of this magnitude, there were over 100 hotels that closed and more than 60 that have not shown any activity since the storm. Only time will tell if these hotel owners will rebuild, but the outlook for these countries is positive,” Ford said.
With uncertainty also comes opportunity, and CBRE Hotels' Smith was asked if any so-called investment vultures were circling Puerto Rico's hotel space.
"There are more people looking for distressed assets than there are people willing to sell," at this point, said Smith. "What that tells me is that there's still upside to the market."