Outlook may be brighter for the Cayman Islands, says developer
Lenders believe it will take two to three years for any meaningful growth in tourism returns to the Caribbean, according to a state-of-the-industry report from financial consulting firm KPMG.
The 2013 Caribbean Region Financing Survey cautions that the “waters are still choppy” for the industry across the region.
The report looked at the attitudes of money-men to the tourism industry and found that many were still very cautious about committing to large-scale investment.
“The general theme among lenders is once again, one of conservatism. The consensus appears to be that it will be at least two to three years before any meaningful growth in tourism returns to the Caribbean.
“A similar time horizon is anticipated before we can expect to see a return to strong sales of real estate, timeshare and fractional units and condominiums,” the report stated.
Despite the gloomy outlook financiers expressed a belief that things would ultimately improve with investor confidence higher than at any point since the world financial crash in 2008.
Cayman Islands developer Gene Thompson said the recovery would be slower than normal regionally, but added that there was reason to believe that the territory would see a swifter return to normality than some of its neighbours.
He said, “Bearing in mind that the Cayman Islands has maintained a greater degree of financial prudence, including maintaining its Moody’s AA3 rating, and has a sustainable budget, we will see a better recovery than most other countries in the region.
“With government’s support of private sector projects that have started, including the [ForCayman Investment Alliance] project, Health City and the planned government infrastructure projects, we can expect growth next year and increased growth in the next several years.”
Mr. Thompson added that Cayman was currently out-performing regional expectations and there were reasons for optimism.
“It is important to note that the Cayman Islands has maintained its position in the tourism industry through a very specific and strategic plan and has also managed to do a good job in providing a strong value for money offering and a safe destination.
“These factors have been important in us seeing tourism growth that is above the regional average; this growth is expected to continue in the coming years.”
The KPMG report warned that almost everyone involved in the industry had suffered during the crash.
“The region’s hospitality industry has been in the doldrums for several years now as a result of the global economic downturn and volatility. “Lenders are cautious and wary of uncertainties, However, so are developers, investors and governments. Many participants in our industry have suffered greatly in recent years. When they return to the market it will be on the basis of “lessons learned” with a new, more conservative approach to managing risk.
“There are fewer lenders to the industry and those entities that are lending are doing so more cautiously and with more demanding terms and conditions,” the report read.
Potentially brighter news for Grand Cayman was that lenders were leaning towards safe jurisdictions with strong airlift and hotels with established brands.
Timeshare and fractional developments are perceived as better bets than the second-home market.
The report also looked at key performance indicators, including hotel occupancy rates across the region, and concluded that the industry had hit bottom in 2010 and was starting to pick up.
Lenders were asked to predict the outlook for the industry over the next 12 months on the basis of a sailing metaphor with five possible responses ranging from perfect storm to smooth sailing.
Most opted for somewhere in between – either “rough seas” or a “bit choppy”.