HNN’s Jeff Higley recaps the opening day of the Caribbean Hotel Investment Conference & Operations Summit with takeaways, quotes and more highlights from the event.
HAMILTON, Bermuda—Speakers throughout the first day of the seventh annual Caribbean Hotel Investment Conference & Operations Summit were quick to offer their condolences over the loss of life and property as a result of hurricanes Irma and Maria that wreaked havoc in the region in September. But as the disasters grow further in the rearview mirror, there’s a silver lining beginning to emerge, they said.
The message throughout the day was clear: In some ways, the insurance payouts and government financial support is like a giant stimulus package.
“A lot of CapEx takes place, a lot of properties modernize and take advantage to fix things they haven’t had a chance to fix before,” said George Spence, principal with Leading Property Group, during his “Strategic context and development news” presentation. “It’s a time for rejuvenation in the industry.”
“On the other side of this, you’re going to have a hotel supply that’s all new, all renovated,” added Andro Nodarse-León, managing partner for León, Mayer & Co. “It’s going to have a better product to compete.”
“I also see the benefit of taking an opportunity like this and renovating an asset that for the most part never shuts down for a renovation,” said Diego Lowenstein, CEO of Lionstone Development, during the “Leaders outlook” session.
Lowenstein added his company has a Miami property that will be offline for several months as a result of hurricane damage.
“For an asset that’s meant to last 50 years, a six-month frustration is not that big a deal,” he said.
While the optimism couldn’t completely overshadow the effects of the catastrophes, speakers were enthusiastic about the current state of the hotel industry in the region.
“We can’t downplay how those hurricanes impacted the region, but over the years the Caribbean has been a very resilient market,” said Parris Jordan, conference chair and managing director of HVS Caribbean, during his “Overview of the Caribbean lodging market” presentation.
The biggest challenge, according to speakers, is overcoming the perception that the entire region was devastated. More than 75% of the region was unaffected by the hurricanes, according to Jordan.
“We need to get the word out to investors and to visitors alike,” he said.
Alex Zozaya, CEO of Apple Leisure Group, said during the “Leaders outlooks” session that he learned three things in the aftermath of the hurricanes:
- The people in the Caribbean, particularly his company’s employees, are good at taking care of others;
- The region has an over reliance on airlift connectivity from Florida, and it’s import for the Caribbean to develop more flights from other areas of the U.S.; and
- There’s an overall ignorance among U.S. consumers and media outlets about the Caribbean’s geography.
“On the hotel side, we have to be very careful to make a distinction of all of the islands,” Zozaya said. “The notion that the Caribbean was devastated … We are a little to blame for that. We have to talk a little less about the umbrella and more about the uniqueness of each location.”
Speakers said the hurricanes caused more overall devastation in the United States than they did in the Caribbean.
“Most of the damage was in the U.S., not in the Caribbean,” said Ross Brennan, managing director of Sterling Global Financial Ltd., during the “Financiers outlook” session.
“We in the Caribbean are deeply exposed to it, but we are not alone,” Spence said.
The devastation is very real in the seven markets that were directly hit, including Puerto Rico. A poster child for hard luck is Nodarse-León's company. León, Mayer & Co. is facing another renovation of the El San Juan Resort & Casino in Puerto Rico. The company acquired the hotel in 2015 and reopened it in February 2017 after a $60-million renovation.
“As a result of the storm, we’re renovating it a second time,” León said.
The affected areas have demonstrated the power of stringent building codes, speakers said.
“The survivability of buildings has improved dramatically over the last 15 years,” Spence said. “They’re built smarter and better.”
“The better built hotels, the concrete built locations, suffered very little damage,” said Bill Stadler, chief investment officer for Aimbridge Hospitality, during the “Leaders outlooks” session. “Going forward developers have to look at different ways of construction techniques given this uptick in hurricane activity.”
Brennan said developers are learning. A hotel development in Turks & Caicos is being built to withstand 200 mph winds, he said.
The availability of debt has also been affected by the storms, according to speakers.
Nick Hecker, senior principal for Och-Ziff Real Estate, said during the “Financiers outlook” session that the hurricanes were a major event that caused a knee-jerk reaction on many lenders’ credit committees.
“Any time someone is going to their credit committee in New York, San Francisco or somewhere in the States with a Caribbean investment deal, the bar is always going to be higher,” Hecker said. “An event like this will raise it higher.”
“Hurricane risk is just one of many things to consider when you invest in this market,” said Adam Rosenberg, global head of gaming & leisure for Fortress Investment Group-Credit Funds. “You need to have an investment horizon that’s long enough to ride it out. Not all capital is set up to do that.”
The region, which was trying to overcome the effects of the Zika virus breakout in 2016, is slowly gaining momentum, speakers said.
“There was a lull in bookings in the Bahamas until last week when everyone said the hurricane season is over,” Brennan said. “Someone turned on the switch and we started to get the bookings.”
“In the short term, it’s a complete change in demand base for the market,” Nodarse-León said. “We’re looking at the next four months for the mix of demand being very different.”
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