The months of August and September 2017 saw Mother Nature unleash a string of fury: Hurricanes Harvey, Irma and Maria battered Texas, Florida and the Caribbean in rapid-fire succession and left many dead, thousands homeless and residents scrambling for water, food and other necessities.
For the hotel industry’s more than 250,000 guest rooms, Irma and Maria are taking their toll on the Caribbean’s winter 2018 high travel season and the robust US$56.4 billion in revenues that tourism brings to the region’s GDP. While the Caribbean Hotel and Tourism Association reported in early November that more than 70% of the Caribbean was open for business, “for the most severely impacted destinations, it will take some time for full recovery to occur,” said Frank Comito, the association’s CEO and director general.
“Tourists are pretty resilient, and we will see tourism dollars bounce back in about 18 months in Puerto Rico, and two to three years for some of the smaller islands,” said Ann Fastiggi, Greenwich, Connecticut-based RSR Partners, an executive recruiting firm.
Properties that were not strong performers before the hurricanes may not even begin making money again until 2020, said Michael Bellisario, Chicago-based vice president and senior research analyst at Robert W. Baird & Co.
Relief in some markets
Some Caribbean hotels will have an immediate influx of travelers and high occupancies as they house recovery workers, business travelers and affected residents, employees and their families, he added. The 400-room Wyndham Grand Rio Mar Puerto Rico Golf & Beach Resort, which did not sustain structural damage, was hosting relief teams from the American Red Cross, FEMA, U.S. Coast Guard and other organizations, General Manager Nils Stolzlechner said.
The Hyatt Place and Hyatt House hotels in Puerto Rico accommodated first responders and relief workers, according to a company representative. Some Hyatt properties there weren’t accepting reservations for stays prior to December 1, others not until January 1.
“Hotels in the most severely impacted markets will be open for business, for the most part, by early to mid-2018, but hotel performance in some of these areas may not be as strong as it can be until the beginning of 2019,” predicted Parris Jordan, managing director at HVS. These markets included Anguilla, Barbuda, British and U.S. Virgin Islands, Dominica, Puerto Rico, St. Barts and St. Maarten. Turks and Caicos, because of its strict building codes, should be largely open for business by Christmas. Destinations that were somewhat impacted included the Bahamas, Cuba, the Dominican Republic and Haiti, Jordan says.
Leisure travelers who booked holiday and 2018 dates in the most hard-hit islands have switched to less-impacted destinations such as Aruba, Antigua, Bermuda, the Cayman Islands, Curacao and Jamaica – giving these areas a boost in occupancy and room rates, Jordan said.
“The average consumer believes that the entire Caribbean was equally impacted by the recent hurricanes, and this is not at all an accurate assessment. There are 30 Caribbean nations, and only seven were severely affected by the recent storms,” said Javier Coll, executive vice president and chief strategy officer of Apple Leisure Group, parent company of AMResorts. The brand operates 21 all-inclusive resorts across the Caribbean.
One of the most glamorous properties on St. Barts – hard hit by Irma – the 34-unit, 5-star Eden Rock St. Barths, won’t reopen until summer 2018, GM Fabrice Moizan said. This is true for the majority of hotels on the 9.7-square-mile destination, he added.
Long-term changes
“I would anticipate building codes changing for hotels; we have to build stronger for the future in a lot of these markets where tourism is the bread and butter business,” HVS’ Jordan noted. This includes the use of hurricane-proof windows and stronger and more durable building materials. Hotels also will take the opportunity to build more sustainably and become increasingly energy-efficient, Caribbean Hotel and Tourism Association’s Comito said.
In fact, Mark Durliat, CEO and founder of the luxury Grace Bay Resorts in Turks and Caicos partially attributes Turks and Caicos’ resilience to these events to the island’s long-standing building code that requires the use of reinforced concrete with structured steel, which better withstand hurricane force winds. Second, the natural geography of these islands keeps them better protected from massive storm surges, which can result in the type of life-threatening flooding that Hurricane Harvey brought to Houston in August. Third, the privatized water and utility companies enable services to be restored quickly after natural disasters.
“Even though we had blowing rain coming into some rooms through sliding glass doors and we needed to do minor repairs, we did pretty all right – although I kept asking myself if this storm was ever going to end. It just seemed to go on and on,” he said.
Hotels that are well insured will bounce back faster in the long run, PwC’s Berman said. “Now is the moment in time to strategically fix whatever infrastructure that needed to be fixed anyway in different parts of the Caribbean, to make this region come back even stronger down the road.”
The insurance companies will have their say regarding what building codes should include, since claims are costly, RSR Partners’ Fastiggi said. And insurance will be harder to obtain for hotels in impacted areas, noted Nalini Galbaransingh, executive director of the LeGrand Courlan Spa & Resort and Grafton Beach Resort, both in Trinidad and Tobago, which the hurricanes avoided.
Some smaller independents on more heavily damaged islands that may not be as well insured would be less likely to renovate and reopen, Fastiggi predicted. “The big hotel companies have disaster response teams they can send to the Caribbean to work on the rebuilding; the independents don’t have that,” she said.
Vulture investors
Those buyers who see a chance to buy very damaged hotels at reduced prices in the Caribbean actually will help these locations by injecting badly needed capital, Jordan pointed out. Many non-branded, smaller properties did not have professional management, and new owners could result in better-run hotels. Investors likely would come from North America, Europe, and Asia, he said.
In addition, damaged hotels that were not adequately insured will be ready for opportunistic buyers, Berman said. And hotels built decades ago now will have the chance to be upgraded, improved and better able to compete for business, Fastiggi noted.
“Hope is a much-needed mindset during this rebuilding period, and the Caribbean can become even stronger when all this is in the past,” Galbaransingh said.