BERMUDA—Like sharks circling their prey, investors are eyeing the Caribbean hotel market, ready to swim in when it hits rock bottom, according to panelists during the Caribbean Hotel & Tourism Investment Conference.
“There’s going to be a feeding frenzy,” said Ellen Smith, a member of the real estate and hospitality & leisure practice group at the Sutherland law firm.
Senator the Hon. Allen M. Chasstanet
Capital already has begun to nibble at distressed assets in various markets in the U.S., and it’s only a matter of time before investors take a bite out of the Caribbean market as well, according to Raj Chandnani, VP of strategy at design firm WATG. He expected that to happen within the latter half of this year.
But rock-bottom pricing isn’t the only thing that will lure investors back into the capital markets.
“The word that’s been missing is confidence,” said Senator the Hon. Allen M. Chasstanet, minister for tourism & civil aviation for the government of St. Lucia. “It’s like driving in the fog. As well as you know the road, you have to slow down.”
Not all opportunities are created equal, and the panelists had differing opinions on which prospects within the Caribbean would prove most fruitful when investors re-enter the market.
The first element that Enrique De Marchena Kaluche would take into account is location.
Enrique De Marchena Kaluche
“If you have a property that’s well located, people will come. The money is there,” said the president of the Caribbean Hotel & Tourism Association.
But even the most pristine locales aren’t enough to drive demand. The location must have an identity—a brand—that resonates with travelers, Chandnani said.
“You need to understand that if you have a destination that has established a brand and resonates with the customer, that’s a recipe for success,” he said.
Understanding what guests want is crucial in every aspect of investment, he added.
“Again, it goes back to who’s your customer and what is the demographic of your customer,” he said. “What can they afford? … Bigger isn’t always better. … Target a niche demographic or a niche customer. Really develop a product that caters to them. They’ll find you, even if you’re in a remote destination, and they’ll pay a premium because you’re catering to their needs.”
Another source of opportunity will be found in new builds—projects that have just been built or are still under construction but are distressed, Smith said.
“They might be ready to be scooped up,” she said.
Projects that already have been refinanced will be harder to come by, she added. Managing companies are trying to stick it out, even if it means delaying delivery, because they’ve already invested so much time and so many resources.