HVS Key Takeaways: CHICOS 2016
December 6, 2016 11:29am
By Kristin Rinaudo , Parris Jordan
HVS recently held its 6th annual Caribbean Hotel Investment Conference and Operating Summit (CHICOS) at the Ritz-Carlton in San Juan, Puerto Rico. Hotel developers, investors, operators, lenders, brand representatives, and government leaders came armed with questions and information on the prospects for the region’s hotel industry. Here are some key takeaways.
While the Zika virus has affected the region’s hotel performance in 2016, it appears that the worst is behind us.
Media coverage and perceptions of the mosquito-borne Zika virus have negatively affected the Caribbean hotel market in 2016, causing reduced travel and cancelations, particularly with groups and wedding business. The Caribbean was the only resort destination (out of a sample of seven) to experience RevPAR decline year-to-date 2016 (through September); however, it remained the second highest in overall RevPAR, nearly $40 below Hawaii but surpassing Cancun, Mauritius, and Florida, among other markets.
HVS Managing Director and CHICOS Chairman Parris Jordan noted that the RevPAR decline so far this year follows six consecutive years of RevPAR growth in the Caribbean. According to Mr. Jordan, hotel demand was down -0.6% year-to-date through September, with RevPAR down -2.7%. Data, however, show month-over-month increases in demand since June and rising total revenues since July. Given this trend, Mr. Jordan noted that demand should turn out flat or register moderate gains by the end of the year. Furthermore, concerns over the virus are beginning to shift to markets in the U.S.
The following chart shows RevPAR dynamics in the Caribbean since 2007.
Caribbean Metrics: % Change 2007 – YTD Sept.
The development pipeline has become notably more active, with the most development activity now since prior to the recession of 2008/09.
Following the Global Economic Crisis, the Caribbean experienced an astonishing four consecutive years of declining supply levels, from 2009 through 2012. Supply growth did not gain traction until 2014; however, now, more hotel development is underway across the Caribbean than at any time since the peak in 2007. More than 50 proposed projects, under construction or in the planning stages, span nearly 10,800 new rooms. The largest of these is the 2,000-room Celebration Jamaica, a proposed resort and casino development to be built in Montego Bay.
Not surprisingly, some of the region’s most populous island nations, the Dominican Republic, Jamaica, and Cuba, dominate the 2016 development pipeline. The Dominican Republic is the current Caribbean leader in terms of RevPAR growth for 2016, further fueling its investment potential.
The following chart shows the course of supply change in the Caribbean since 2007.
Creative financing is key for the Caribbean, though conventional financing availability is improving for “A” projects with solid borrower profiles in strong markets.
The availability of financing has long been a challenge in the Caribbean. However, the strong development pipeline is an indicator that financing is becoming increasingly accessible, and several positive themes are taking place. Underwriting for hotel development has become more disciplined, and sources of institutional capital are recognizing the attractiveness of the Caribbean. As such, new equity and debt providers are participating in Caribbean hotel investment. Additionally, the marketability of portfolio deals in the region has broadened, attracting investors; development has shifted from conversions to new-build projects; and product design is evolving.
Financing is available for projects that contain the following criteria:
Other important aspects that sponsors need to consider include the following:
Panelists on the “Financiers Outlook” session noted varying degrees of confidence in the Caribbean over the last year. David Kosoy of Sterling Global Financial Limited and Adam Rosenberg of Fortress Investment Group agreed that, since the recession of 2008/09, Canadian banks have not had so strong an appetite for projects in the Caribbean. However, the region will continue to benefit from the increasing political sensitivities in countries such as the UK and the U.S., which have more recently created an influx of foreign capital.
The Caribbean financing landscape and underwriting parameters are differentiated from the U.S. by some key investment criteria.
High-level hospitality leaders view the U.S. Election result as mostly positive for business.
With CHICOS occurring on the heels of the November 8th U.S. presidential election, the sensitive topic was discussed more during networking periods than collectively during sessions. Nevertheless, panelists offered some insights from the stage.
Speakers at the “Hospitality Leaders Outlook” session expressed a range of positive to neutral feelings regarding the Trump victory. The consensus ran that a Trump administration will be good for cash flow, with fewer restrictions and less regulation-constraining business, and that financial bailouts and debt rescue will be less likely to occur going forward.
Clear development opportunity exists in Cuba; however, given that ownership structures must involve the Cuban government, many investors are hesitant and waiting to see how conditions progress in due time.
Cuba was referenced throughout the conference, and a dedicated panel on the country concluded the event’s sessions with an in-depth discussion of development and investment opportunities on the island. Arturo Garcia Rosa, President and Founder of South American Hotel & Tourism Investment Conference (SAHIC), put it simply: “If you want to do business in Cuba, it’s easy. They are waiting for you.”
hvs key takeaways,
caribbean hotel investment conference and operating summit,
Kristin Rinaudo is a Vice President with the HVS Atlanta office. Kristin’s hospitality-industry experience extends to hotel market and feasibility studies, appraisals, valuations, destination studies, and various other consulting engagements. She has a range of geographical experience, with primary focus on Florida and the Caribbean, and has recently worked on proposed hotels in the U.S. Virgin Islands, St. Kitts and Nevis, and Belize. Kristin graduated Florida State University (FSU) with dual degrees in Psychology (magna cum laude) and Real Estate. At FSU, she was awarded the Teel Scholarship in Real Estate, the ICSC Undergraduate Award, the Florida Bright Futures Scholarship, and the FSU 21st Century Scholarship.
Contact: Kristin Rinaudo
Parris Eric Jordan is the Chairman of the Caribbean Hotel Investment Conference & Operations Summit (CHICOS) and the Managing Director of HVS in the Caribbean, where he overseas hospitality consulting and valuation assignments in the Caribbean, the United States, Central America and Mexico. CHICOS, which was founded by Jordan in 2011, is an annual event which brings together international investors and operators as well as leading hotel investment decision makers, including governmental representatives and international industry and opinion leaders, to discuss the markets, developments and opportunities for hotel growth in the Caribbean region. Parris’s hospitality-industry expertise extends to hotel market and feasibility studies, appraisals, valuations, operator searches, and target market and global expansion strategy development for prominent international hotel brands. Parris holds a Masters from the Preston Robert Tisch Center for Hospitality and Tourism at New York University, where he has also lectured as an adjunct professor on lodging development. Parris holds a Masters degree from the Preston Robert Tisch Center for Hospitality and Tourism at New York University where he also lectured as an adjunct professor on lodging development. Please contact Parris at firstname.lastname@example.org or +1 (917) 902-2314.
Contact: Parris Jordan
+1 (917) 902-2314
HVS, the world’s leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries, celebrated its 35th anniversary last year. Established in 1980, the company performs 4,500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 35 offices and more than 500 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. HVS.com
Superior Results through Unrivalled Hospitality Intelligence. Everywhere.
HVS Manhattan Lodging Report Q4-2017
2018 European Hotel Valuation Index
European Hotel Transactions Reach Record Levels as Investors Step Up Interest in Southern Europe, Says HVS Report
HVS Market: Snapshot Seychelles Hundred Islands of Paradise
HVS Market Pulse: Palm Springs & Desert Cities
HVS Market Pulse: San Diego, CA
Supply-Induced Hotel Demand in Portland, Maine: An HVS Case Study
Hotel Bulletin Reveals Q4 2017 Was Tough for UK Hotels but Long-Term Outlook Looks Strong
HVS 2018 European Hotel Lending Survey Reports Positive Outlook for Financing Although Banks Showing Caution on Over-Supply
Africa: The Land of Opportunity
HVS Market Pulse: Downtown Los Angeles
Impact of Countervailing Forces on Hotel Values and Cap Rates
In Memoriam: HVS’s Michael Brophy
Casual Dining: A Fresh Perspective
HVS Market Pulse: Fort Worth, Texas
HVS Market Pulse: Seattle, Washington
China - Hotel Asset Management in Numbers
Reorganizing Spa Operations to Leverage Automation and Technology
HVS Market Pulse: Detroit, MI
HVS Market Pulse: Anaheim/Garden Grove
Please login or register to post a comment.