CORAL GABLES, Florida — The Caribbean and Latin American region holds a lot of promise for hotel companies, but it's not a guaranteed success for just any venture.
During an executive panel at the Americas Lodging Investment Summit CALA conference, hotel executives said the region is taking off, and hoteliers can ride along with it provided they know what is required of them.
It is one of the most fluid areas in the world, said Juan Corvinos, president of Hotel Equities CALA. It is a specialty niche, and people who work in this area are often solely dedicated to it.
“We are specialists in a moving target,” he said, adding that each country in the region has its own jurisdictions election cycles.
There are so many factors that affect hotel supply and demand, he said.
With all that in mind, however, the region is seeing “a golden era” with U.S. consumers, this year in particular, Corvinos said.
“We all as an industry have an opportunity to convince people that have not thought about our region that we should be their main, leading destination for travel,” he said. “That’s all of our challenges. … I can’t think about a better time for us that we rely on the North American market, both Canada and U.S. and intra-country, to benefit form this surge in travel as fuel costs rise, as things are happening in the Middle East.
“It is the best time that I’ve ever seen in my career,” he said.
The region is in the perfect cycle at the moment, and it has long-term growth potential, Baha Mar President Graeme Davis said. The Bahamas are like the Hamptons of South Florida as they are 30 minutes away by plane, he said. Geopolitically, it’s a safe destination with stable currency rates compared to the U.S.
The region as a whole is seeing a 40% lift in arrivals from Canadians flying over the U.S. to the Caribbean, he said.
“I think that’ll certainly continue for the next few years,” he said. “I think people are now discovering, from Canada even more so, the Caribbean. I think we’re even now seeing European business. Instead of looking east to the Middle East, they’re now actually looking to come to the Caribbean, as well.”
The Baha Mar team is constantly looking for opportunities to make sure they’re marketing to potential travelers, he said. There will always be lower cycles, hurricane seasons and unknowns, but the foundation is strong and the region is opening up and creating more awareness.
“That’s going to build for the future that they weren’t looking at before but are now looking at it, and we’ll continue to build on it,” he said.
About 15 years ago, roughly 30% of Americans had a passport, said Javier Coll, president of Mullen Hospitality Management. Now it’s close to 50%, and Europe is at 99%.
“There’s a lot of potential in the American market, the natural market for these destinations,” he said. “The Europeans have been stable for a long time. Some countries, they went up and they went down, but Americans are growing every year. So what that means is that the potential for us to keep growing in these destinations is pretty big.”
The distance of the region from the U.S. is a positive when considering the limited amount of vacation time Americans take each year, he said. They don’t want to go too long, too far, so being between three and four hours away as a destination makes it an ideal place to travel.
“There’s no other place to go unless they want to travel within the United States,” he said. “If they want to go to the beach that is not in Florida or California, that’s Mexico, that’s Dominican Republic, that’s the Caribbean islands.”
These countries are enjoying a post-pandemic boom, but Jamaica is still recovering from last year’s Hurricane Melissa, Coll said. That’s driving a lot of business to other parts of the region.
“That’s going to eventually change,” he said. “The moment Jamaica opens, everything is going to be stabilized, and we’re taking that into account for our underwriting, for our projections to owners. We’re not presenting projections that keep going up. That’s not really healthy.”
It’s important for investors to know that demand and performance won’t go up forever, he said. It’s not going to go down, but eventually it will go flat.
Corvinos echoed Coll’s sentiments, saying no one should assume constant growth in the region without rising costs. Dollar per dollar, it’s getting more expensive to operate in CALA, including Mexico, where labor costs alone are expected to rise 12% to 18% this year.
“It is important to realize that we are in a very competitive environment, but assuming ceteris paribus [all else being equal] is not a strategy, it's madness,” he said.
One way to success in the region is establishing relationships with local landowners and officials, said William Phelan, Dominican Republic country manager for Cisneros and president of the company's under development Tropicalia project. To be a good developer in the region, the Tropicalia team needs to be good neighbors. Early in the resort’s development process, they reached out and created a coalition of local landowners to work together and fill the needs of Miches region in the Dominican Republic.
“We knew that nobody else was going to take care of them and nobody else was going to address them, so we sat at this table,” he said.
The coalition members realized they needed roads for access, so the landowners and developers worked together and, through a public/private partnership in 2020, started putting money into Miches to build roads. The area needed water, so it built a municipal aqueduct.
“We are the first tourism area in the Dominican Republic to be connected to a municipal aqueduct, and that was done through provincials,” he said.
They wanted a say in what would happen with the beaches, so they worked with the government and requested co-management of a large natural marine protected area that neighbors the resort, he said.
“We’ve done this because we’re obviously looking long-term at protecting our investment through a group of like-minded individuals,” he said.