Haiti presents challenges to hotel developers
 
Haiti presents challenges to hotel developers
11 MARCH 2013 7:11 AM

Hotel development is a slow process in Haiti, but experts believe the country has potential for further tourism and hotel development.

REPORT FROM HAITI—Haiti is a country that presents both opportunities and challenges for hotel developers and operators. The Caribbean nation on the island of Hispaniola is one of poorest in the Western Hemisphere and is still recovering from a devastating earthquake that struck in January 2010.

Since then, hotel development in the country has moved at a slow pace. One hotel managed by Spanish chain Occidental Hotels & Resorts opened in December. Two properties with U.S.-based brands are under development and a property managed by another Spanish chain is preparing to open.

The country has 20 hotels and 962 rooms open, with two hotels comprising 279 rooms in construction, according to STR, parent company of HotelNewsNow.com.

The Royal Oasis, a 128-room new-construction boutique hotel managed by Occidental, opened in December. Another property, the NH Haiti El Rancho, was scheduled to open last month but has yet to do so. Spanish chain NH Hoteles will operate the 72-room property.

Next to open (scheduled for 26 March) will be a 105-room Best Western Premier in the Port-au-Prince suburb of Petionville. The property, which has been under development for six years, will be managed by Plano, Texas-based Aimbridge Hospitality. According to Mark Williams, VP of North American development for Best Western, planning for the hotel began a year or so before the earthquake and was about a week from groundbreaking when the disaster hit the country.

“It was originally designed using elements from our Atria prototype, but when the Premier descriptor became available we approached the developers about making it a Premier,” he said. “It was already planned to have a full-service restaurant and two lounges so the fit made sense.”

Rich Cortese, senior VP of Caribbean development and operations for Aimbridge, said while operating in Haiti creates some challenges, he believes the firm is well positioned to manage the new Best Western since it operates three hotels in Jamaica and there are three flights a week from Haiti to Montego Bay, Jamaica.

The 105-room Best Western Premier opens 26 March in Petionville, Haiti.
 

“The synergies are terrific,” he said. “I sent our laundry manager from Jamaica to Haiti to help set up the laundry; my chef went to work with the chef in Haiti; and we sent the controller from Haiti to Jamaica to learn our systems,” he said.

One challenge is staffing, Cortese said. He said there are plenty of people looking for jobs but not many with hospitality experience. To compensate, Aimbridge extended its typical one- to two-week training period for new employees to two or three weeks.

Construction started in December on a 175-room full-service Marriott Hotels & Resorts in the Haiti capital of Port-au-Prince. Digicel, a major wireless carrier in the Caribbean, is the lead developer of the $45-million project, and Marriott has a long-term management agreement. It is Digicel’s first hotel venture, but Damian Blackburn, CEO of Digicel Haiti and group director special projects, said the project makes sense for the company for several reasons.

“We were looking for business opportunities in Haiti and saw a gap in the hotel market we thought we could fill,” Blackburn said. “And as the largest private investor in Haiti, we want to encourage others to follow our lead with additional investments.”

Blackburn said the hotel is scheduled to open in early 2015.

The development challenge
Developers with interest in building hotels in Haiti face a number of challenges, several sources said. Jonathan Kracer, managing principal of Sion Capital LLC, a Miami-based hospitality and real estate advisory and investment firm, said one hurdle is that it’s more complicated for some developers in Haiti to deal with U.S. hotel companies because of all the paperwork the brands require and their inflexible design standards, particularly for conversions.

“The key question I’ve heard from developers is, ‘Do I really need a brand or can we do it on our own?’ Under the current conditions in which there is limited supply and such high demand from contractors, aid workers and those in the Diaspora, maybe you don’t need a brand,” he said. “However, over time the market will become more competitive and visitors will steer toward branded properties because of the quality and safety standards they provide.”

“Haiti has always been ripe for hotel development. It is an underserved market, but from a risk perspective it’s been at the far end of the spectrum,” said Mark Lunt, principal in the real estate and hospitality transaction advisory services for Ernst & Young.

Like the situation is some other Caribbean nations, Haiti has issues with transparency, a consistent rule of law and political uncertainty, Lunt said. But, he added, Haiti is viewed as even riskier because it has gone through even more turmoil than other countries in the region.

Opportunities in various segments
Lunt believes that like Jamaica, which also suffers from the perception of safety challenges, Haiti might benefit from the development of all-inclusive resorts. Full- or select-service business hotels are another development opportunity, according to Lunt.

“Haiti is one of a handful of countries in the Caribbean with a true commercial center, Port-au-Prince, which presents the opportunity to develop corporate-oriented hotels like Courtyards, Hampton Inns or even Alofts that appeal to business travelers,” he said. “And these are the type of assets that institutional investors like to pick up in portfolios.”

Kracer said he sees opportunity for hybrid hotels that combine full-service and extended-stay elements. There is a short-stay market, he said, made up of businesspeople who only need to be in the country for a few days. There are also many humanitarian workers, engineers and project workers who are there for longer periods of time.

Both Lunt and Kracer believe Haiti might be able to develop heritage and sustainable tourism.
“There aren’t many Caribbean islands that have distinct cultures—Bermuda and Jamaica are two examples—but with its French background and strong culture, Haiti has a deep, rich history that gives it an opportunity for culture-based tourism,” Lunt said.

The Haiti Minister of Tourism last week unveiled plans for a sustainable resort development on Île a Vache, a 55-square-kilometer (34-square-mile) island off the southeast coast of the country. The government hopes to attract foreign investors to the project, which would be developed in phases.

Kracer has advice for developers and investors who might have interest in the Haiti hotel market. “While it’s important everywhere in the Caribbean to partner with reputable, knowledgeable and well-connected local people, there’s not a country where it is truer than Haiti.”

He said it’s also important to develop properties to global safety and security standards. He said at present approximately 80% of visitors to the country are from the U.S. and many of them contractors and personnel from humanitarian and aid organizations. In the future it will be difficult for hotels to get contracts from these groups unless they meet these standards.

In determining the feasibility of potential hotel development, Kracer recommended using the U.S. Foreign Per-Diem hotel rates issued by the State Department as a guide to what kind of rates are achievable. “This is a market with limited data available, so rates are highly correlated to the per-diem rates from the U.S. government,” he said. Effective last month, the hotel per-diem for Port-au-Prince is $155 a night.

He said developers need to look for expansive sites. “In the U.S. and some other Caribbean nations, you get can by with a tighter, more integrated site, but in Haiti self-contained sites are the norm in which all facilities and services the guests need are within the compound.”

Finally, Kracer noted development costs are typically 25% to 30% higher than in the U.S.

“It’s the poorest country in the Americas, but the costs to develop are high even though labor is relatively inexpensive,” he said. Higher costs, added to greater social, political and currency risks and limited amounts of available debt, create higher hurdles of return on investment.

As a result, said Kracer, you might find “some projects are market feasible but (are) not financially or economically feasible.”

2 Comments

  • GJM March 11, 2013 3:24 PM

    Great to see for Haiti. Nice job MI and Aimbridge.

  • panthernation January 9, 2014 1:52 AM

    Haiti benefited from years of tourism in the 1960s - 1970s. If the Haitian president cared about that sector, the country would have been better off financially. Heck, Haiti was the only caribbean country with a clubMed. Today, Haiti has a leader/president who actually works for the people and cares about the tourist dollar. I sure hope to see Haiti rise up again (1804).

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