Partnerships Could Be Key to Tourism Rebound in Caribbean

Governments in Region Assist in Financing, Marketing

Like the rest of the world, the Caribbean tourism industry was hard hit by the global recession. One way the region can pull itself back to success is through partnerships: public/private ventures as well as deals among two or more private firms. That was one of the themes discussed at length during several sessions yesterday at the Caribbean Hotel Investment Conference & Operations Summit at the Atlantis mega-resort in The Bahamas. The HVS Caribbean-sponsored conference continues today.

Panelists in several sessions tackled the variety of challenges the region faces and how closer cooperation can solve some problems. For one, the region is addressing ways to market itself collectively, in addition to the marketing efforts of each of the 24 countries. As Bahamas Tourism and Aviation Minister Vincent Vanderpool-Wallace explained, the Caribbean Tourism Development Corp. recently signed a deal to relaunch an enhanced regional tourism website that will have a direct booking capability, a feature that will especially benefit smaller hotels and resorts.

“We’re the best-known unknown brand,” said Vanderpool-Wallace during an opening morning general session. “Until now, no one has owned the brand, but this effort will drive the brand for the benefit of all countries. The image of the Caribbean as a whole transcends the image of any individual country and we need to take advantage of that.”

Atlantis in The Bahamas

While the marketing effort is a step forward, some panelists expressed concern about the level of taxes and fees imposed by Caribbean governments on airlines and airline passengers. Chad Meyerson, director of global sales for JetBlue Airways, gave an example: The carrier’s base round-trip fare to fly from San Juan to the Dominican Republic is $100, but he says the total airfare is more than $250 because of taxes.

“It’s important to make governments understand there needs to be a balance,” he said. “Of course, they need the tax revenues but it must be within reason. If the taxes were lower, we could stimulate more demand, driving more customers and more revenues to the destinations.”

Caribbean governments and the tourism industry are working more closely on financing initiatives. Panelists discussed programs at work in Puerto Rico, St. Kitts and the U.S. Virgin Islands. Kenneth Blatt, principal of the Caribbean Property Group, said the Puerto Rican government has helped his firm’s redevelopment of the Dorado Beach resort through financial guarantees, mezzanine financing and tax credits. While this kind of help has been crucial to the project, Blatt wishes more was available.

“It’s imperative governments provide these kinds of incentives but they should also develop programs to provide funds or credits for renovations. We desperately need it,” he said, echoing the remarks from other panelists.

Added Adam Cohen, managing director & COO of the Brilla Group, “Our properties’ greatest asset is the natural beauty of the Caribbean, but it creates a lot of wear and tear. In particular, the Mom and Pop hotels and resorts, which really represent the vast majority of hotels in the region, need sources of financing to keep their properties up to date and competitive.”

St. Kitts and the U.S. Virgin Islands are two governments with unique financial programs aimed at tourism development. As Matt Norton, a partner with the law firm of Parker, Poe, Adams & Bernstein, reported, the government of St. Kitts this week unveiled a major enhancement to an economic citizenship program that has been available since the 1980s.

According to Norton, it’s been possible to obtain a St. Kitts passport by either paying $200,000 or buying $400,000 of real estate. “The government just added a third leg to that stool,” he said “For qualified hotel projects, a limited partnership investment of $400,000 will also quality for a citizenship application.”

As a result, he said a developer in St. Kitts has made an arrangement with a firm in Dubai to raise capital through the program for a five-star hotel on the southeast peninsula of St. Kitts. “It’s an innovative solution to an obvious problem since there is no capital elsewhere for development of a luxury project like this.”

In the Virgin Islands, a new law allows hotel owners to divert part of their accommodations taxes or casino taxes and use the funds to service long-term debt. While innovative, the program doesn’t cover hotel renovations.

Another area some speakers believe governments could do more is visas for foreign workers. Scott Worach, executive vice president of worldwide development for Four Seasons Hotels, said the government of Nevis was flexible in allowing the chain to bring in foreign managers and other workers to teach locals hospitality skills and service culture at its property there. Other governments in the region aren’t as accommodating, he said.

“In some countries, it’s imperative to bring in qualified and trained labor to train local labor. There is a tremendous amount of talent in some of these countries but it must be developed,” he said.

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