Report: Tourism a bright spot
Property consultant James Andrew said the Caribbean “continues to be in a period of slow recovery”, but he is encouraged by improving tourism numbers in the region.
Mr. Andrews, managing director of Integra Realty Resources – Caribbean, made his observations in a quarterly IRR Viewpoint that covers developments and trends in the Caribbean region, including the Cayman Islands. IRR-Caribbean is a property valuation and consulting firm with a specialty in hospitality and resort properties.
He writes, “The Caribbean tends to lag six to 12 months behind the United States when on a downward cycle as well as when in recovery or economic growth. While there is recovery in many aspects of the US economy, recovery in the Caribbean is lagging behind by several quarters or perhaps even a year or more.
“Mitigating some of the economic woes of the region, however; are some bright spots relative to the tourism industry, which heavily impacts the overall economies and real estate markets of the various jurisdictions,” he added.
Mr. Andrews notes the 3.7 per cent increase in stay-over arrivals in Cayman from January to August 2012, which is a bit lower than the average increase of 4.42 per cent among the 11 Caribbean leaders over a similar time frame.
“Airlift from the US to the larger destinations appears to be improving,” he said. Among other news, he highlighted JetBlue’s new or expanded services to the Dominican Republic, Puerto Rico and Grand Cayman.
In regard to Caribbean hotels, Mr. Andrews said occupancy and average daily rates began to decline in early 2009, and dropped significantly through the middle of 2010. Hotel occupancy and rates have grown modestly since June 2010. “At this rate, it will take perhaps another 2.5 years to reach the peak levels experienced in 2008,” he said.
Citing data from Smith Travel Research from November 2012, Mr. Andrews said the average daily rate for Cayman hotels ranks among the top five Caribbean destinations: Barbados (US$291), Bermuda (US$277), Cayman (US$261), US Virgin Islands (US$257) and The Bahamas (US$227).
While operating costs for hotels continue to increase, Mr. Andrews said there is evidence of improving net operating income for properties.
Mr. Andrews said, “These increases in performance may be relative to the specific hotels that reported in the survey, as we note that many properties in the region are still struggling.”
As examples, Mr. Andrews brings up lender RC Cayman’s purchase of The Ritz-Carlton, Grand Cayman, which follows the Westin Grand Cayman going into receivership and “the restructuring of the Marriott Beach Resort Grand Cayman due to difficulty with debt and capital expenditure obligations.”
He said, “Hoteliers are focussing on the upper end properties, which appear to be recovering faster than the mid-priced and all-inclusive sector in the region.
“This economic climate has not been as kind to the mid-priced and all-inclusive chain-scales.”
In his report, Mr. Andrews compares real estate figures from Jamaica and Cayman, saying that “Jamaica is somewhat representative of the larger domestic markets within the CARICOM group of nations, while Cayman is more representative of the smaller British colonies that rely on offshore financial services and have a higher GDP per capita”.
While in Jamaica there have generally been increases in the number and value of property transfers in the past three years, in Cayman the data have been erratic.
He said, “The varying statistics in the Cayman Islands are largely to do with active speculation on the part of several major investors such as the Dart Group – the developers who are building Camana Bay (a new Urban Town Centre) and various resort projects.”