With an influx of luxury hotels opening and in development as Bad Bunny brings recognition to the island on an international level, the visitor mix for Puerto Rico is changing — and hoteliers have a huge opportunity.
The island has been cooking up the perfect recipe, said Mike García, general manager of Caribe Hilton. That recipe includes the so-called "Bad Bunny effect," growth of luxury hotel supply, new flights in and out of Luis Muñoz Marín International Airport, expansion of the San Juan Cruise Port, growing the power grid and recovery from previous storms and hurricanes.
"Hospitality in itself has been one of the few industries within Puerto Rico that continues to thrive in every aspect, doesn't matter from which angle you look at it — from an owner's perspective, employees, individual families, etc.," García said. "I envision more hotels opening, both larger hotels as well as smaller properties. I envision Puerto Rico continuing to hold the standing, if not grow it, as a destination worldwide."
Luxury inventory and new 'discerning' visitors
Puerto Rico's hotel mix has evolved in recent years, with more luxury hotels opening to meet modern traveler's needs. According to CoStar data, the island has 175 hotels consisting of 16,239 rooms, with 16 luxury hotels representing 2,119 of those rooms.
Puerto Rico has seen a 25% increase in luxury hotel rooms since the start of 2024. While two more luxury hotels are in the pipeline, STR senior analyst Hannah Smith said the bulk of the expected new-build hotels are across upper midscale through upper upscale per CoStar data.
Meanwhile, existing hotels are renovating facilities and amenities for visitors, said Driftwood Capital Luxury and Lifestyle Managing Director Alinio Azevedo.
"What you've seen over the past few years in Puerto Rico is really an inflow of capital to upgrade the existing hotel basis," he said. "We're not the only ones who bought a hotel and repositioned it. There's a lot of examples of capital being invested in existing hotels on the island to make them better."
Driftwood Capital acquired the then-Sheraton Old San Juan in 2021 and rebranded and renovated the property to the 245-key Hotel Rumbao, a Tribute Portfolio Hotel. Driftwood is opening the property's new 10,500-square-foot Gran Casino Viejo San Juan in April.
Co-founder and Executive Chairman of Driftwood Carlos Rodriguez Sr. said the company is actively looking for more opportunities within Puerto Rico. Driftwood, which started as a hotel management company a few decades ago, has evolved to also own and lend capital for hotels, and Rodriguez said he's interested in growing its presence on the island.
"It's not just acquiring hotels or developing hotels — we would love to develop [more] — but it's also lending money in Puerto Rico to hoteliers. It's also managing hotels," he said. "We're very interested in all aspects of the business in Puerto Rico."
One of the reasons that Puerto Rico has become so attractive as a place to expand is the available tax incentives, Rodriguez said. Hotel owners acquiring and renovating existing properties receive a percentage of the capital spent on renovation back as a tax credit. But bigger renovation projects pay out even more, incentivizing hotels transforming into larger or higher-end properties.
"If you double the investment — you buy a hotel and you basically spend as much money as you spent in buying the hotel — then you get a tax credits on everything, not just the expansion, but also on the acquisition," Rodriguez said, adding that Driftwood is now reaping the rewards of its renovation from a few years ago.
The new casino project will have an impact not only on the Hotel Rumbao with a new revenue stream and amenity to guests but also to neighboring hotels and locals, Rodriguez said. The island's other casinos are 15 to 30 minutes away and the new facility is targeting a more elevated casino experience.
"We're doing, quite frankly, what I would call a higher-end casino compared to what's mostly in the island. So, this should attract an upscale clientele that we're looking for. We're looking to differentiate ourselves," Rodriquez said.
In general, the visitor profile on the island has evolved, Azevedo said, especially with more upper upscale and luxury products delivering.
"There is this growing supply of luxury accommodations on the island, which is kind of a reflection of the overall position of the destination," Azevedo said. "The profile of Puerto Rico as a destination [and] who is going there has been changing. It is more and more the discerning travelers that are willing to spend more for a better hotel experience and spend more when they're on the island."
From the Caribe Hilton's historical perspective, even as the travelers change, Puerto Rico remains a destination that has something for everyone.
"There's a corner, a place somewhere on the island for everyone to be able to experience whatever it is they're looking for, in addition to what then everybody experiences, which is the local culture — what Puerto Rico is," García said.
The 'Bad Bunny effect'
The other major factor evolving Puerto Rico's tourism economy is Puerto Rican native Benito Antonio Martínez Ocasio, also known as Bad Bunny, a Grammy Award-winning, Super Bowl halftime show-performing rapper and singer.
Last summer, Bad Bunny performed a 31-show residency at the José Miguel Agrelot Coliseum in San Juan from July 11 to Sept. 14. While the first leg of the performances were for island locals exclusively, the general public shows brought in visitors from around the world, boosting hotel performance in the otherwise slow season. In Puerto Rico, high season is essentially Christmas through Easter. While the spring and fall seasons are pretty strong, summer tourism slows down from July through September.
But that's not what happened in 2025 thanks to Bad Bunny's residency. As Smith reported in October, Puerto Rico hotels saw notable revenue-per-available-room lifts, culminating in a 74.7% year-over-year RevPAR increase on Sept. 14.
"The residency happened purposely in the lowest months of the year," Azevedo said. "It was a purposeful effort to try and help tourism on the island during the part of the year where the problem of seasonality is most relevant."
Azevedo added that Hotel Rumbao saw an increase of around 20% to 25% increase in demand throughout that period, with peaks of demand happening on the days of the shows.
During the residency, the Caribe Hilton offered guests and concertgoers activations across its entire lobby with a vintage photo booth, domino tournaments and an expansion of the daily piña colada tastings — a nod to the hotel's claim to inventing the frozen cocktail in 1954.
"Intentional or not, [Bad Bunny has] given Puerto Rico a chance of a lifetime," García said, adding that the residency brought in fans from around the world — Colombia, Argentina, Chile, France and even Singapore — into the hotel.
Because it's a U.S. territory, Puerto Rico continues to attract mostly domestic tourists from the mainland U.S. But according to 1-92 data, that changed in the weeks during Bad Bunny's residency. In fact, international arrivals increased 18% in 2025 compared to 2024.
The second wave of the "Bad Bunny effect" happened in February, when the performer took the stage at Super Bowl LX. Azevedo said the performance on that caliber of a platform exposes the destination to new travelers who "had never really heard of or paid much attention" to Puerto Rico.
"I was reading statistics the other day about the tremendous increase in flight searches from Europe to Puerto Rico following the Super Bowl presentation. It was something like 255%," he said. "What is that? That's a public that, in the past, wasn't really thinking about the destination then all of a sudden got exposed to the destination."
Bad Bunny's total impact might be intangible from a data perspective, but for García and other native Puerto Ricans, it was personally impactful.
"For those of us born and raised here in Puerto Rico watching it, [we] could tell that this was Puerto Rico culture, exposed to 127 million people at once," García said. "Our culture was put out there completely from A to Z for people to see it, to look at it and and to engage with it.
"I know he's not going to stop there either. Someone like him as an advocate for Puerto Rico. You can't put price on that."
Resiliency and future of the island
One challenge that will continue to plague Puerto Rico is its unstable power grid and vulnerability to hurricanes, but resiliency has greatly improved over recent years.
In 2017, Category 5 Hurricane Irma and Category 4 Hurricane Maria walloped the 3,500-square-mile island and decimated the power grid. In the years since, Puerto Rico's grid is improving its response following blackouts caused by major storms.
"During Hurricane Maria, the average was nine months before the entire island was able to get power on. Now we can do it in days," García said. "So, we're ready for the challenge, and we're more than capable. We prove it time after time to be able to get back on that horse and continue working as if nothing happened."
Rodriguez said Driftwood — with its portfolio of hotels on the Florida coastline — has a unique skill set navigating hurricane seasons.
"Initially, you may have some damage, no question about it," he said. "But if properly run and properly organized and you react to it, in many instances, we recuperate the money from the damages that we had and the loss of revenue, because we're able to open the hotel quicker."
A bigger concern of Rodriguez's is what the future holds from a government perspective.
"With the tax incentives and with what the island has to offer, Puerto Rico can change significantly in the next 10 to 15 years," he said. "The big factor here is the government. Is the government going to get in the way? Or, is the government going to continue to be helpful in providing the incentives?"
Azevedo added that includes the U.S. government's role in keeping up the island's infrastructure.
"There needs to be a continual evolution on infrastructure to make sure that things remain in place — airports, the electrical grid — all those things that are kind of basic that today is a competitive advantage relative to other destinations in the region. But it needs to be kept up, and it needs to continue to evolve."
Currently, Puerto Rico is undergoing a $425 million redevelopment on two cruise port areas. While not currently strained, the Luis Muñoz Marín International Airport is adding more flights. Last year, JetBlue added new flight routes to Puerto Rico from across the U.S.
Another element hoteliers are contending with is the growth of short-term rentals on the island. According to AirDNA data, Puerto Rico rental listings have more than doubled since 2019. Total short-term rental nights stayed in 2025 were 3.8 million, an increase of 171% since 2019.
"Supply growth was stronger than demand growth between 2022 and 2024, causing [year-over-year] occupancy declines, but occupancy stabilized in 2025," said Linda Rollins, research analyst at AirDNA. "Annual average occupancy was 56% in 2025, up 5% from 2019."
Hoteliers are confident that Puerto Rico's tourism will continue to grow because it's a destination that has a lot to offer visitors from the U.S. and beyond.
"There is a culture component to Puerto Rico that I think is actually starting to get more attention, again going back to the Bad Bunny effect," Azevedo said. "It is a place that has its own culture, and it's a cool thing to see and experience as a visitor, and not every beach destination gives you that opportunity. ... And then one thing we can never forget is it's a place where people are very hospitable."