INTERNATIONAL REPORT—The Caribbean, known for its sunny locales, expansive beaches and palatial resorts, is the world’s most tourism-dependent geographic area, according to Horwath HTL’s “September 2019 Market Report: Caribbean,” with roughly 15% of the region’s GDP going to the industry. The most traveled cruise destination globally, it also remains a popular choice for hotel guests and developers.
Over the last few years, Hurricanes Irma, Maria and Dorian have paved a path of destruction through many of the Caribbean islands, forcing closures and reconstructions in many destinations. Fernando Garcia-Chacon, managing director for the South Florida, Caribbean & Latin America division of CBRE Hotels, noted than many tourists have adapted by staying at hotels on islands that were bypassed by the natural disasters or that sustained minimal damage.
“Overall, the Caribbean hotel industry has been performing well, save, of course, for those destinations that have been impacted by the hurricanes,” he said. “The good news is that most of the displaced demand has remained within the Caribbean; tourists who would have visited Puerto Rico, St. Maarten and other islands impacted by these disasters have gone, for the most part, to other resort areas like Jamaica and Aruba.”
According to CBRE’s “Caribbean Trends in the Hotel Industry 2019” report, the hurricanes took their toll on occupancy. From 2016 to 2018, the occupancy rate declined from 67.2% to 65.3%. However, ADR increased from $203.86 in 2017 to $208.48 in 2018. When comparing year-to-date figures of June 2018 vs. June 2019, occupancy dropped from 69.7% to 68.7%, while ADR increased from $221.01 to $240.81. Because of the strength in ADR, RevPAR jumped from $154.09 to $165.50.
Despite the recovery efforts, Daniel Stockhammer, associate director at Horwath HTL, called the region “one of the most stable markets of the world,” adding, “The Dominican Republic has experienced the biggest growth across different segments. Smaller destinations have struggled with changing customer reservation habits but, during the last two years, managed to adapt by altering their marketing strategies and successfully focusing on their strength.”
He continued, “The Caribbean provides the perfect ground for the modern traveler’s desire for experiential tourism, while maintaining its traditional strong selling points of all-year sun and paradisiac surroundings and beaches. Various destinations offer tax incentives for investment in hotel and tourism related projects, which remain popular among developers and investors.”
Many of the hotels on various Caribbean islands are finally getting back on track after reconstruction efforts. “St. Barts and St. Maarten are almost back to pre-hurricane levels, and Turks & Caicos recovered quickly,” said Garcia-Chacon. “The verdict is still out for the Abaco Islands and Grand Bahamas, though they had limited hotel inventory. Puerto Rico has had mixed results. While the area in and around San Juan has totally recovered, other parts of the island are slowly coming back online. Dorado Beach, a Ritz-Carlton Reserve, boasting one of the highest ADRs in the region, reopened in late 2018, as did the St. Regis Bahia Beach Resort. The Melia Coco Beach converted to a new Hyatt, but the El Conquistador remains closed (though it has since been sold). There is also the political storm the island is currently experiencing, which has suspended certain reconstruction efforts.”
At press time, it remained to be seen how these efforts to rebuild would be affected by a string of earthquakes that struck the region.
Stockhammer pointed out that “in destinations that have been heavily affected by Irma and Maria, visitor arrivals were still modest during September. However, in the majority of destinations, no distinction between hurricane season and the rest of the year can be made. Properties that restarted operations after being off due to hurricane damages often enjoy the competitive advantage of fresh refurbishment and new installations.”
All-inclusive resorts have emerged as one of the strongest leisure segments in the region, according to Garcia-Chacon, who added, “In fact, the growth of this segment has attracted the likes of Marriott, Hilton and Hyatt. Hyatt was the first one to step into the space when it partnered with Playa Hotels & Resorts and franchised its newly created brands, Hyatt Ziva and Hyatt Zilara. Playa then entered into a partnership with Hilton to manage its resorts. And, finally, Marriott announced this summer its entry into the space via to-be-developed resorts in Riviera Maya and Punta Cana.”
He continued, “Currently, most all-inclusive packages are sold via travel agencies and major wholesalers, so their reach is somewhat limited. However, despite this ‘limited’ exposure, the sector has expanded significantly organically. What will be very interesting to see is the impact of major hotel groups entering the space. These companies have robust frequent guest programs and reservation systems, and limited presence in these destinations, so there is a real possibility that the role of the tour operator will be disrupted.”
According to the CBRE report, as of July 2019, there were just over 52,000 hotel rooms in various stages of the pipeline to enter the Caribbean market.
“Major international and regional hotel chains are currently seeking opportunities for a significant expansion in the region, adding some of their traditional brands and also new and innovative products,” said Stockhammer.
However, Garcia-Chacon noted that this amount of growth can present some challenges to hoteliers. “Some optimists look at the relatively small percentage—though growing—of Americans with passports and highlight the huge potential,” he said. “More conservative industry observers point to the region’s limited airlift and infrastructure and caution the islands are not ready.”
Looking to the future, Garcia-Chacon tied the health of the Caribbean tourism industry to the economies of both the U.S. and Canada.
“As long as there is no recession over the short term, we see visitation figures continuing to increase,” he said. “We anticipate Punta Cana resuming its solid growth pattern during the second half of next year and even diversifying into the more luxury-oriented segment with the recent opening of Club Med Miches Playa Esmeralda, and the development of the Four Seasons. Bahamas’ Nassau market should also continue to strengthen as Baha Mar reaches stabilization and even expands with the expected opening of the new Margaritaville. The Mexican Riviera remains somewhat of a question mark given the recent security issues and the uncertainty brought about by the Lopez-Obrador administration.”
Stockhammer expects an “accelerated bounce back of hotel supply and performance, especially in destinations that were affected by the hurricanes in September 2017, and that this will add to an overall strong performance and industry growth.” HB