MIAMI—Thanks to the long-lasting effects of the recession, there are many opportunities for investors looking to pick up distressed hotel assets in the Caribbean region.
Speakers on the “Hotel Leaders Speak Out” panel during Monday’s opening general session of the Caribbean Hotel & Resort Investment Summit said the environment is rife with good deals as owners of troubled hotels are in some cases scrambling to unload them.
“This is the best time,” said Ralph Taylor, president and CEO of Almond Resorts—which has a handful of hotels on the market after getting into financial troubles of its own. “I do not believe you will see this movie again in our lifetime. You have entry prices that make a lot of sense.”
Taylor said would-be investors can turn to governments of many of the region’s island nations for help in acquiring assets.
“The governments in the Caribbean are running scared,” Taylor said, explaining that the increased unemployed caused by troubles in the hospitality industry are wreaking havoc for many countries. “Now is the time to talk to governments. Make them bring some of the money they have control of and put together joint deals.”
Steve Joyce, president and CEO of Choice Hotels International, responded to moderator Mark Lunt’s requested to provide advice to investors by saying flexibility is key. Investors have to consider how their plans might change if it takes a year or two longer to execute a deal then they originally expected, he said.
The Choice leader also said investors have to understand the distribution equation in the Caribbean—which at the moment is skewed toward online travel agencies.
“The distribution end of the business in the Caribbean is going to dictate the level of recovery,” Joyce said. “They have to get back to the notion that they should generate their own customers and not pay out fees that leak out of the business.”
Each of the three panelists is facing unique issues in the region.
Kerzner International’s change
George Markantonis, president and managing director of Kerzner International Bahamas, said he is glad his company’s restructuring is over. Canada’s Brookfield Asset Management acquired the company’s Atlantis resort hotel in the Bahamas by agreeing to waive $175 million in debt owed by Kerzner.
“It goes back five years ago when we privatized and a lot of debt collateralized,” Markantonis said. “The good news is the process is over with.”
He said his company’s approach during the high-profile proceedings, which also included Istithmar World acquiring the Atlantis resort hotel in the United Arab Emirates from Kerzner International Holdings for $250 million, was business as usual.
“Kerzner was distanced because in the end we knew someone (else) would have ownership,” he said. “I’m glad we can focus on the job at hand with no more distractions.”
Kerzner will continue to manage both Atlantis properties.
Almond Resorts’ woes
Meanwhile, Almond Resorts has had troubles of its own. It closed its Almond Beach Club in Barbados and has four other hotels for sale. Taylor said there are several reasons for the company’s woes, including:
- the collapse of average daily rates in the region;
- rapid growth in the months leading up to the recession, during which the company’s portfolio ballooned to 1,500 rooms from 500 rooms; and
- several of the hotels were tired and were scheduled to undergo major refurbishments before the recession, but it never happened.
“There was a requirement to inject capital. ... That didn’t happen,” Taylor said, adding that with the deterioration of rates in the region consumers now have their pick of the litter. Current rates allow consumers to stay at Caribbean hotels for less money than they would have paid 10 years ago.
The company has had “many bidders for the four hotels (that are for sale),” Taylor said. “We expect that process to be culminated in the next month or two.”
Growth plan for Choice Hotels
Choice wants to double its presence in the Caribbean during the next three years, Joyce said. It has nine hotels in the region.
Joyce said that while the last few years have been tough for its hotel franchisees, more hotel owners are looking at branded properties as a viable option because of the reservations brand can drive.
“The encouraging thing for us is we maintained the system (in the Caribbean) and were contributing roughly half the business to the hotels,” he said.
He said of particular interest is the resurrection of once-stalled projects—including two that he expects to be opened as Choice-branded hotels in the not-too-distant future.
“It’s interesting to see the interest in, not so much new development, but the rejiggering of old deals,” Joyce said.
He said there’s a lot of interest in the company’s Ascend Collection among independent hotel owners.