Caribbean Resort Development Scene - Flat or Recovering?

• 
  SAVE
• 
  SHARE
• 
  TEXT SIZE
• 
  PRINT
• 
  COMMENT
• 
  PDF

. April 23, 2010

April 22, 2010 - With two weeks to go before the annual Caribbean Hotel and Tourism Investment Conference in San Juan, it may still seem optimistic to believe that the Caribbean resort development scene has already bottomed out and is now in recovery mode, but that is the belief of Robert MacLellan who has a long and specialist track record in the region. MacLellan is Managing Director of MacLellan & Associates, the largest Caribbean based hospitality consultancy.

In explaining the reasons for his view, MacLellan said, “While much of our work in 2009 consisted of appraisals on stalled projects, expert witness assignments involving project legal disputes and advising banks on exit strategies for distressed projects, 2010 has turned the corner and the majority of our assignments are now development consultancy oriented.” While he would not divulge confidential details, he confirmed that the company was currently working on six resort projects and that he expected the majority of these to break ground this year. According to MacLellan, two of the projects are located on Dominican Republic's North Coast, two in the Grenadines, one in Dominica and one in Anguilla - some will be operated under management contract by international boutique brands. He went on to say that in order to cope with the increased workload the company had expanded the consultancy team to fourteen persons and now includes a project finance expert, a specialist hospitality industry lawyer and a marina consultant.

MacLellan compared the impact on the Caribbean of the recent world-wide recession to the region's challenges in the aftermath of the 9/11 disaster and said, “We had to modify the business models for mixed use resort development in 2001 to ensure that projects could proceed then and we have made similar changes now to allow projects to progress. Marketing and construction phasing is now more sensitive, real estate marketing must reach a wider range of potential target countries in a cost effective manner and project financing requires higher levels of both equity and debt than structures employed during the boom years.”

Commenting on present difficulties, MacLellan stated that many of the semi completed but distressed projects in the Caribbean could be mired in legal disputes for periods of up to five years, based on past history in the region, and that real estate sales on these projects were obviously blighted in those circumstances until the courts ruled on all outstanding matters. He also highlighted challenges in producing accurate valuations in current market conditions, saying, “Appraisals of existing properties and development sites across the Caribbean have always been challenging, given the shortage of accurate deal data for comparable transactions, but today specialist expertise in the hospitality industry and in depth regional knowledge is an absolute prerequisite to even commence the exercise with hopes of a meaningful result.”