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| David Brillembourg of Brilla Group (right) makes a point about airlift’s effect on a hotel’s performance as Kenneth Blatt of Caribbean Property Group looks on during the Caribbean Hotel & Resort Investment Summit on Tuesday. |
MIAMI—Increasing airlift capacity is at the top of the priority list for many of the island nations in the Caribbean Sea, according to panelists on a Hotel Owners Outlook panel Tuesday at the Caribbean Hotel & Resort Investment Summit.
“It used to be ‘location, location, location,’” said Kenneth Blatt, principal, Caribbean Property Group. “Now the mantra is ‘lift, lift, lift.’”
David Brillembourg, CEO of Brilla Group, said airlift is one of the top three items on the company’s list of 56 items it looks at when performing its due diligence on investment possibilities.
“Lift has a direct affect on hotel bottom line from an occupancy and rate point of view,” he said.
Blatt used the Hilton Papagayo Costa Rica Resort & Spa as an example of the importance of adequate airlift.
“All the lift just collapsed (about three years ago) and nobody went there,” Blatt said. “In the last year, lift has improved and our occupancy is knocking the cover off the ball in a hotel that three years ago did nothing.”
Blatt said the days of customers accepting a trip that includes multiple airplane transfers and a boat ride to get to a destination are gone as they are searching for more practical uses of their time.
“Lift is extremely important,” Blatt said. “It’s important for us to work with the government and the hotel brands to create subsidies you need to get lift into a specific market.”
John Keith, managing partner of Caribe Hospitality, said the region’s biggest risk comes in the form of its heavy dependence on American Airlines to bring tourists to the islands. He said increased flights from more departure cities and diversifying the airlines that fly into the region would be good long-term projects for the Caribbean region.
Grupo Puntacana CEO Frank Elias Rainieri knows both sides of the coin well. His company owns two hotels in Punta Cana, Dominican Republic, where it also owns the international airport. Grupo Puntacana opened the airport in 1984 when the region had few hotel rooms. Rainieri said with more than 36,000 hotel rooms and another 14,000 more on the way during the next 10 years, airlift is a huge piece of the success puzzle for all hotel owners in the region. The biggest business booster from the airport: Its mission to keep travelers onsite for no more than 35 minutes from the moment they land.
“The more lift you have, the more hotel rooms you can have, and the better the hotels will be,” Rainieri said. “That’s the piece of the pie that was missing.”
Rainieri expects the airport to eventually be among the five largest airports in Latin America, and hotel owners will benefit from that growth.
Of course, the rising cost of oil doesn’t do much to help increase airlift as it makes flying an airplane more expensive. Rainieri said every addition dollar added to the price of a barrel of oil could mean as much as an extra US$50,000 to fly a plane from Europe to the Dominican Republic. With 50% of Puntacana’s customers coming from Europe, the rising cost of oil is a big concern for Rainieri.
“From a hotel perspective, it’s the elephant in the room,” Blatt said. “It’s the one area management can’t do anything about. … (The cost of) energy is uncontrollable.”
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| Grupo Puntacana CEO Frank Elias Rainieri said during a panel at CHRIS that he social media could eventually drive more business than a large brand’s reservations system. |
Blatt challenged the hotel industry to work with governments to set up programs and incentives for hoteliers to invest in solar panels to help reduce energy costs.
“How do we take advantage of our biggest resource, which is the sun?”
Consumer behavior, social media and deals
Other topics the panelists covered during the session included:
Changing consumer behaviors
Blatt: “Throughout the region you see all kinds of promotions. … That’s a jump start we needed to give to our consumer.”
He added group business is starting to come back to the region, but group planners are looking for deals that challenge hoteliers who are trying to create enough revenue to cover the costs of being part of a brand.
Keith: “In limited-service, we’ve been able to compete well because of the lower overhead.” Caribe focuses on developing Courtyard by Marriott properties throughout the Caribbean region.
Rainieri: “They are looking for all-inclusive. The market is changing and we have to be adapting.”
E-commerce and social media
Rainieri: “It is a cheaper way to get information to the people. E-commerce will be (very important in the future)—we believe bigger than any reservation system of the big brands.”
Brillembourg: “You’re really looking at a different world over the next five to seven years as mobile phones are integrated into online communities.”
Blatt: “It’s a great opportunity for operators in the Caribbean because a small property can make itself relevant by tying into a social network.” He added the dynamics of social media have dramatically reduced the booking window to hours in some cases.
Keith said the small countries located throughout the region could learn a big lesson about the importance of social media, too. “It’s a great opportunity for small countries to promote having a great experience that’s safe and has a value proposition.”
The deal climate
Brillembourg said his company has closed three deals since the beginning of the year, bringing its portfolio to nine luxury beach resorts. “People have a lot of liquidity. … With the Caribbean you have to spend a lot of time educating the source of funding. … We’re starting to see the first deals on the debt side at reasonable prices.”
Blatt: “How we’re going to get deals done in the next few years is locating offshore equity.” He said some investment fund managers from Canada and South America are looking for returns on investment of 6% to 8%, while United States fund managers tend to want returns in the 20% range.
