The Caribbean: Trending Issues and Challenges Facing Hospitality Development

By Parris Jordan Managing Director, HVS - Caribbean | August 30, 2015

The Caribbean hospitality industry continues to strengthen as hotel operating fundamentals have exhibited continuous growth following the global economic downturn that began in the last decade. The Caribbean hotel market has shown steady improvements in average rate, occupancy and RevPAR since 2010. As STR shares, Caribbean-wide average daily rate increased every year since 2011 and notably by 4.3% year to date through June 2015, compared to same period last year. And Caribbean-wide RevPAR improved every year since 2011. These trends are driven mainly be the increases in average daily rate. Moreover, with limited new supply scheduled to enter the market coupled with a favorable forecast for higher levels of tourist arrivals, the overall market is expected to continue to strengthen even further. However, the one major challenge still facing the region is the limited amount of financing available for new construction, which in turn limits opportunities for developers to build new hotels.

The Re-Emergence of the All-Inclusive

The re-emergence of all-inclusive hotels is taking great strides, as it is a fast growing sector. It seemed to fall a little under the radar, as independents and brands now have their own vacation club programs. But the all-inclusive hotel is back and better than ever with their creation of ultimate loyalty programs. Neil Kolton, Director of Resort Sales & Service for the Caribbean and Florida at Interval International, sees the all-inclusive ultimate loyalty programs to be appealing to the same demographic attracted to timeshares.

When the all-inclusive segment saw its lull, the emergence of such programs occurred in the traditional, timeshare resort; these were usually residential with the home away from home feel. Developers began selling such programs as an alternative to vacation purchases. All-inclusives have now joined in, and as Kolton has noted, it has become a very popular product offering. The all-inclusive product is similar, but it is not real estate. Rather it offers distinct amenities to customers such as special VIP privileges, early check-in and late checkout, good locations throughout the property, and at times a discount on the all-inclusive fee.

Javier Coll, Executive Vice-President & Chief Strategic Officer (CSO) of Apple Leisure Group believes that the all-inclusive hotel has long since been a trend, but is definitely now on the rise. The emergence of the high-end, all-inclusive hotel is a catalyst in such a rise. Apple Leisure Group is a vertically integrated business made up of tour operation companies, travel agencies and resort brands. Coll remarks that 99% percent of his customers chose to stay in all-inclusive resorts. Fifteen years ago, there would be a mixture between the all-inclusive and the traditional hotel, but that trend has in fact slowly faded.

Also 15 years ago, Apple Leisure Group developed the first set of high-end all-inclusives. "We believe that we are pioneers when it comes to that sector," remarks Coll. Most of Apple Leisure Group's all-inclusive properties are located in Cancun, Riviera Maya, Montego Bay, and Punta Cana. Interval International's Neil Kolton also sees most all-inclusive properties in Mexico, Jamaica, and the Dominican Republic. He also sees more space for those all-inclusives to grow in areas such as Aruba and St. Maarten.

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Coming up in December 2018...

Hotel Law: New Administration - New Policies

In a business as large as a hotel and in a field as broad as the law, there are innumerable legal issues which affect every area of a hotel's operation. For a hotel, the primary legal focus includes their restaurant, bar, meeting, convention and spa areas of their business, as well as employee relations. Hotels are also expected to protect their guests from criminal harm and to ensure the confidentiality of their personal identity information. These are a few of the daily legal matters hotels are concerned with, but on a national scale, there are also a number of pressing issues that the industry at large must address. For example, with a new presidential administration, there could be new policies on minimum wage and overtime rules, and a revised standard for determining joint employer status. There could also be legal issues surrounding new immigration policies like the H-2B guest-worker program (used by some hotels and resorts for seasonal staffing), as well as the uncertain legal status of some employees who fall under the DACA program. There are also major legal implications surrounding the online gaming industry. With the growing popularity of internet gambling and daily fantasy sports betting, more traditional resort casinos are also seeking the legal right to offer online gambling. Finally, the legal status of home-sharing companies like Airbnb continues to make news. Local jurisdictions are still trying to determine how to regulate the short-term apartment rental market, and the outcome will have consequences for the hotel industry. The December issue of Hotel Business Review will examine these and other critical issues pertaining to hotel law and how some companies are adapting to them.