San Juan, Puerto Rico – Attaching a brand to a property can assist considerably in attracting capital.
And there are hotel chains willing to invest with key money in the right project.
That’s the view of Danny Hughes, vice president, Caribbean, Mexico and Latin America for Hilton Hotels Corporation.
“The Caribbean presents a great opportunity to expand and we have sponsors with big pockets looking for the right project,” he said.
This kind of demonstration of interest from a brand assisted developers in longer terms due to the associated stamp of quality. This would drive real estate sales, he said.
Non-traditional sources
Mr. Hughes was part of an panel of investors set up at the Caribbean Hotel and Tourism Investment Conference. The experts were charged with unpicking that aspect of the hotel industry and Buddy Petrillo of Trident Development, Miami, said that one issue was that traditional sources of capital such as Wall Street were “not happening”.
Therefore there was a need to approach different sources such as regional lenders, high net worth individuals and partnering with other sources such as the gaming and timeshare industries.
“Capital seeks the path of least resistance, like water, but there are dams in the Caribbean such as lack of incentives,” said Mr. Petrillo.
He advised that governments and the private sector should come together to form Government Development Banks, otherwise it could prove impossible to start projects at all.
High energy costs, he said, were also a problem.
“Rates are five to eight times higher than on the mainland which lowers the bottom line. Developers do think about renewable energy but governments need to contain these costs as soon as possible,” he noted.
And whilst tax concessions were useful, they would be more useful kicking in following business facilitation, which would get the fundamentals of deal making rolling in the first place.
Creative capital
Being creative in raising capital and looking at non-traditional sources was key, but to be in the business required more than a yearning for financial return.
“You also need passion for this which drives you to want to succeed. In this difficult marketplace you need a hardy soul,” he said.
Some ways to raise capital for projects, explained Phil Keb of Christophe Harbour Development Company, included such mechanisms as the citizenship by investment programme which St. Kitts introduced in 1984. Currently, a US$400,000 investment enables investors to apply for citizenship without a residency requirement, he said.
Finally, Mr. Petrillo said that cruise passengers actually did assist with developments. The more people that come on shore and for longer, the better, albeit that too much congestion put people off. Integrating hotel, food and beverage elements in cruise areas “invigorated the community”.
“[It enables the area] to remain active at night with local business and stay-over visitors,” he said.
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