Banks’ optimism helps hospitality industry – survey

One of the key findings of a new KPMG survey is that the banks which participated in the survey continue to be positive about the Caribbean region’s hospitality industry.

A press release from KPMG, says its travel, leisure, and tourism practice has presented the findings of their second annual Caribbean hotel & tourism financing survey.

The survey covered banks with an aggregate exposure to the hospitality industry in the Caribbean of more than US$2.5 billion, and included large cross-jurisdictional and international banks such as Butterfield Bank, Deutsche Bank, First Caribbean International Bank, RBTT, Royal Bank of Canada, Scotiabank, as well as several members of the Caribbean Association of Indigenous Banks, says the press release.

Simon Townend, partner and head of KPMG’s corporate finance operations in the Caribbean presented the findings of the survey at the Caribbean Hotel & Tourism Investment Conference (CHTIC) in Bermuda on 5 April, 2006. Of the findings Simon says ‘the general consensus for lenders providing loans is that the short to midterm outlook is positive. Short term optimism is primarily because of the 2007 Cricket World Cup with several Caribbean countries hosting matches. Key opportunities also include increases in conferences in the region and optimism about the condo hotel and fractional ownership sectors.’

However, the release notes that the top three issues that keep lenders awake at night include hurricanes, event risk and sustainability of condo hotels. Operational risks include the ability to recruit skilful staff and provide a consistently high level of service.

The release continues, ‘Financing trends show that high net worth companies and individuals are increasingly looking to invest in the hospitality industry in the Caribbean, a region viewed by the U.S. as stable when compared to other regions.

‘Banks did not feel comfortable lending more than 75 percent in debt to equity as they would be taking more of an equity type risk. Banks stated that they placed more emphasis on the ability to complete construction than on land value.’

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