Nearly two years after Hurricane Maria devastated the island, Puerto Rico’s lodging market "abounds with opportunities," according to JLL’s Puerto Rico Hotel Destinations Report. Produced in collaboration with the Puerto Rico Tourism Col, the report notes hotels across the island are coming back online after renewed capital investments and economic incentives from the Government of Puerto Rico and the U.S. Government.
The report indicates air capacity to the island in 2019 will increase for the first time since 2016 and approximately 2,400 hotel rooms will be re-introduced to the market by 2020 to meet this demand, along with more than 850 new rooms currently being developed.
These figures will place available lodging supply ahead of prior supply levels by 2020. Additionally, GDP is projected to increase by 3.9 percent in 2019 and numerous investor-friendly policies are fueling strong lodging market performance.
“Spurring tourism development is a priority of the Government of Puerto Rico,” said Carla Campos, executive director of the Puerto Rico Tourism Co. “The Island’s 'Open for Business' policy, strategic geographic position, air and maritime access, modern infrastructure and highly skilled bilingual workforce, coupled with unprecedented incentives packages,make it a fertile environment for hospitality industry investors. In addition, Puerto Rico is under the U.S. legal system with financial sectors regulated by the FINRA, SEC and FDIC and part of the U.S. free trade zones and custom system.”
In the report, JLL notes tourism and hospitality investors receive a 90 percent exemption rate of property taxes, as well as a 100 percent exemption on municipal construction and sales taxes. New tourism projects could be eligible for tax credits for up to 40 percent of project development costs, compared to 10 percent in the past.
Additionally, Puerto Rico’s designation as a Qualified Opportunity Zone enables investors paying U.S. taxes to invest recognized capital gains in qualified projects in Puerto Rico on a tax-advantaged basis, creating a compelling environment for development or major renovation projects like the El Conquistador.
For example, Puerto Rico Governor Ricardo Rosselló recently announced the $120 million renovation of the former Gran Meliá Puerto Rico Hotel, which will re-launch as the Hyatt Regency Coco Beach Resort and was completed partially through tax credits granted under the Puerto Rico Tourism Development Act and also qualifies as an Opportunity Zone deal.
“San Juan is one of the most stable lodging markets in the Unites States from a RevPAR perspective and investors are taking notice of this stability,” said JLL EVP Andrew Dickey in the report. “In general, Puerto Rico’s pro-investment environment particularly in tourism and hospitality, along with limited supply growth over the last 20 years, has set the stage for a strong lodging market and long-term fundamentals.”
Locations in Puerto Rico’s Metropolitan Area host most of the island’s lodging supply: San Juan has 61 percent of total room supply and is home to the Port of San Juan and the Puerto Rico Convention Center (PRCC), both of which drive demand. Additionally, Carolina is home to Puerto Rico’s international airport, which handles more than 90 percent of total commercial passenger traffic.
The report suggested markets to watch include the Convention District, which will soon be home to The District! Entertainment complex and an upcoming film complex, as well as the up-and-coming neighborhood of Santurce, which features trendy restaurants and bars and an artistic atmosphere.
“The amount of opportunity across the island is remarkable,” said JLL VP Ben Appelbaum. “Whether it’s a well-known market like San Juan or an emerging hot spot like Miramar, investors and owners are confident in Puerto Rico’s commitment to rebuild and it’s a lodging market where they want presence.”
Read the full report here.