Wall Street Journal: Much $ being invested, Fewer Tourists? [long post!]

gringosabroso

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Caribbean Draws More Development, Less Tourism

By RYAN CHITTUM, Wall Stret Journal, June 11, 2007; Page A2

CURA?AO, Netherlands Antilles -- At a recent conference on this Dutch West Indies island, hotel and real-estate executives raved about the record amount of development under way across the Caribbean, long a top vacation spot for Americans.

But underlying their excitement was a more immediate worry: tourism, which is rising world-wide, is declining in the Caribbean, with overnight stays in the region down 2.3% last year to 18.45 million, according to data from the Caribbean Tourism Organization.

The decline has been even steeper in some of the places whose beaches and other charms have traditionally drawn the region's biggest share of tourists from the U.S. During the first quarter of this year, American visits were down 12% in Jamaica, 9% in the U.S. Virgin Islands and as much as 8% in the Bahamas, the CTO says.

Whether the decline is a blip or a longer-term trend will go a long way in determining the economic health of the region. Tourism is critical to the Caribbean, making up 16% of its overall economic activity, according to the World Travel & Tourism Council. On smaller islands such as St. Lucia, tourism can account for as much as 50% of the economy.

The Bush administration's announcement Friday that it will temporarily ease passport requirements for Americans traveling to the Caribbean, Mexico and Canada is expected to give Caribbean tourism a temporary lift. Stricter rules, which took effect in January -- right as the high season was under way -- caused huge backlogs of passport applications,
prompting many Americans to change their travel plans and vacation closer to home.

"If it takes people three months to get [a passport], people are sayingit's just not worth it," says James R. Hepple, director of tourism for Trinidad and Tobago.

But the longer-term outlook for tourism also presents challenges. Apart from the passport backlog, travel to the Caribbean is being hurt by weaker economic growth in the U.S. and falling home prices, which are making Americans skittish about spending on discretionary items such as travel.

For a region that's heavily dependent on the U.S., even a small pullback by American consumers can have big consequences. "Once you sneeze in the U.S., we're going to get pneumonia in the Caribbean," says Peter Odle, president of the Caribbean Hotel Association, which is based in Puerto Rico. The falloff in travel to the Caribbean also reflects growing competition from other regions around the world, including Asia and Central America, which are building beachfront resorts at a furious pace, posing a
long-term competitive threat.

The Caribbean traditionally has relied on its pristine beaches and proximity to the U.S. to set it apart from other destinations. But that isn't enough anymore, says Vincent Vanderpool-Wallace, secretary-general of the CTO, which is based in Barbados. Costa Rica, for instance, is gaining market share by promoting its combination of rainforest and beaches.

"For a long time the Caribbean has been a place where we owned the tourism business," Mr. Vanderpool-Wallace says. "Now the rest of the world is beginning to understand this is a good business, too."

Last week, travel Web site TripAdvisor issued its ranking of the top 10 destinations with the "hottest beaches and coolest night life." Miami's South Beach and Ibiza, Spain, led the list, but no Caribbean islands made it.

"There's a lot of competition around," says John Kester, director of marketing intelligence and promotion for the United Nations World Tourism Organization. "You need to offer something more than just a beach."

At the same time that demand is slowing, a wave of construction is sweeping the region. Developers and investors, along with governments, are hoping to cash in on a demographic surge of baby boomers flush with cash and dreams of tropical vacations and second homes. About 24,000 hotel rooms currently are under development in the region, equivalent to
about 10% of the region's current room supply, according to Lodging Econometrics.

When the Baha Mar resort on Nassau Island in the Bahamas is finished in 2011, it will have 3,000 hotel rooms, occupy 1,000 acres of land and have the first Las Vegas-style casino in the Caribbean, along with a price tag of more than $2 billion. And that's just Phase 1. The project will have several hotels including a Caesar's, St. Regis, W, Westin and Sheraton, says its chief marketing officer Brian Guillot. "It is a huge
amount of hotel rooms," he says. "But we're going to grow the marketplace and the destination and grow the visitors to Nassau."

In the Bahamas alone, 53 tourism-related projects are in the works valued at $13.6 billion, according to the country's Ministry of Financial Services and Investments. Four new hotels will open in Trinidad and Tobago in the next year, adding nearly 1,000 rooms to the islands' existing supply of 1,500, says Mr. Hepple, the tourism director. In the Turks and Caicos Islands, one of the region's rising destinations, four major luxury hotels have opened or will open in the next couple of years. Development of timeshares, second homes and condo hotels is also booming.

The biggest project in the region is the Ginn Sur Mer resort on Grand Bahama Island. When finished, the resort, part of which will be modeled after the Palace of Versailles, will be 10 miles long and occupy 2,000 acres of land. The developer, Ginn Resorts of Celebration, Fla., is selling parcels of land for individual homes and plans to build 4,000 condominiums and condo hotel rooms. The project will cost $5 billion.

"Some of this may fluctuate a little bit," says Greg Ulmer, vice president of sales and marketing for Ginn Resorts. "We can shift with the market." But he adds, "There's enough demand to absorb this."

Declining hotel occupancy has left some hotels scrambling for ways to attract travelers. Couples Resorts in Jamaica offered $200 in spa treatments to travelers who stayed there first with a new passport. Nassau/Paradise Island is reimbursing travelers for the cost of their new passports if they stay at least two nights.

Still, rates have yet to be hit much. Revenue per available room, a key industry measure, was up 5.7% last year, according to Smith Travel Research. And visits are up in some destinations, including Bermuda and Curacao, according to the Caribbean Tourism Organization. While some economists and analysts have their doubts about whether the Caribbean will attract enough baby boomers to occupy all those new rooms, hotel
executives remain optimistic. "I think you're seeing the real beginnings of the power of the wealth of the baby boomers," says Tom Anderson, chief development officer for Wyndham Worldwide Corp., a Parsippany, N.J.-based lodging company. "They're going to drive 20 years of this" development.

The WTTC also believes that American baby boomers and their increasing appetite for travel, as well as second homes, will create plenty of demand for Caribbean travel. The council expects regional economic activity from tourism to nearly double in 10 years to $107.3 billion from $56.1 billion this year.

But only time will tell. "I think the falloff is short term," Mr. Vanderpool-Wallace says. "But we need to become more competitive. [Other regions are] starting to add the same sort of sun, sand and sea."

Gringo Sabroso's comments: While the DR is not mentioned in the WSJ article, I see the same patterns in the DR. Who is going to buy these $400K - $600K - $1,000,000 houses & condos being planned? Are there that many millionaires in the USA & Canada? Who want to spend winters in the DR? Electricity! Will there be a R E bust in the DR? When? Time will tell.
 

Funnyyale26

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Dec 15, 2006
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The Caribbean is clearly at a disadvantage What else can we do besides tourism? About a week or a two ago, an article in Diario Libre mentioned that we in the DR are still doing better than all of these islands. When Fidel decides to open up more tourism opportunities, Cuba will then be the leader, I have heard Cuban beaches are nicer than ours.
 

NALs

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Jan 20, 2003
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Gringo Sabroso's comments: While the DR is not mentioned in the WSJ article, I see the same patterns in the DR. Who is going to buy these $400K - $600K - $1,000,000 houses & condos being planned? Are there that many millionaires in the USA & Canada? Who want to spend winters in the DR? Electricity! Will there be a R E bust in the DR? When? Time will tell.
There are around 7 million millionaires in the US, don't know how many in Canada. Assuming that a mere 1% of those millionaires have a latent need for a vacation/retirement/second home in the Caribbean, that makes the potential market 70,000 strong.

Of course, there are many more millionaires living in Europe and Latin America which greatly adds to that potential market size and let's not forget other high income non-millionaires who can get financing on such properties.

In terms of Real Estate in the Caribbean, the DR is still a great bargain and that (along with the new cach? the words "I went to the Dominican Republic on my vacation" has nowadays) is the main attraction aside from the more traditional sun, surf, and sand.... and sin.

BTW, keep in mind that the article mentions a decrease in American tourist arrivals to the traditional vacation spots in the region. For most Americans, the Dominican Republic is still virgin territory. New developments like Cap Cana and Roco Ki plus further development in Casa de Campo and the upmarket swing occuring in Juan Dolio and other places will simply help in attracting more tourists to what was once the last place on their minds in terms of visiting.

The DR is on a league of its own right now. During the 9/11 ordeal, the rest of the Caribbean was devastated and the DR made it in much better shape than any other destination in the region.

-NALs
 

moonzulu

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Jun 16, 2007
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DR Future

The Dominican Republic could have a great future as both a tourism and second home destination if the Island is managed correctly.

It's costs are very competitive, it is a large island with resources unavailable to the smaller places, and it has large amounts of undeveloped beach and other attractive real estate -- compare it to Puerto Rico, which is 75% paved over!!

But there is a real, serious, in-depth crime problem. Not a "poor people stealing wallets and cell phones" problem. An institutionally supported, systematic, police and military compliant, widely spread criminal enterprise. It is operated in Cap Cana, Samana, Cabarate, Playa Grande --anywhere there are concentrations of tourists or foreign residents.

This enterprise runs protection rackets and has high-quality, real time intelligence on who arrives and leaves the island, where they live and what they have.

While it is silly to suggest that "Lionel knows about this" -- who can tell what he knows or doesn't know, or even what powers he may really have to control it -- it is absolutely true that it is being carried on by people with real power and position who are protected and -- this is the bottom line -- do not care a bit about the future of the Dominican Republic, because they plan to have their money in Miami and New York banks, will move their families, over time and therefore couldn't care less what impact these activities may have on the development of a properous and civil society in this country.

I cannot prove this with documentation, nor would I if I could, for obvious reasons. Suffice it to say that there is no piece of paper filled out by an incoming tourist or resident at customs and immigration that doesn't find its way immediately into the hands of those who use it for criminal targeting.

It would be nice if letters like this would "inspire politicians to do something." That is not the way the world works, unfortunately.

Good luck.

moonzulu
 

Mirador

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Apr 15, 2004
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Moonzulu, are you sure you're talking about the Dominican Republic? sounds more like ?le de la Tortue (Turtle Island) in the 17th century...