What’s Next for the Puerto Rico Hotel Industry
It was a major step for the reopening of Puerto Rico’s tourism industry this week as the destination reopened all of its nearly 15 golf courses, including the popular course at the Dorado Beach, a Ritz-Carlton Reserve hotel, which is currently taking reservations for tee times.
This is perhaps Puerto Rico’s most positive tourism news since the coronavirus (COVID-19) put a halt to most leisure travel around the world.
In fact, Carla Campos, the executive director of the Puerto Rico Tourism Company, told Caribbean Journal Invest (CJI) on Friday that other Puerto Rico activities will now be open this week.
According to guidelines released by the Puerto Rico Tourism Company and the Department of Sports and Recreation, “Beaches, reserves and golf courses will open strictly for professional and recreational non-contact sports. Social beach gatherings are not authorized at this time. Equipment rental for permissible activities is not authorized at this time. Club houses and gyms are not allowed to open.”
Dining also appears to be coming back slowly in the destination. According to the guidelines, table seating is allowed “so long as the seating capacity remains at or below 25 percent of the total facility’s capacity as per the PR Building Code 2018.”
Restaurant table seating will be arranged by reservations only to avoid the gathering of clients and to best plan for the limited capacity, according to the guidelines.
CJI spoke with Campos and Brad Dean, CEO of Discover Puerto Rico, to find out more positive news for investors clamoring for a return of Caribbean hotel business.
“Puerto Rico is a stable market for investors, specifically for brands,” said Campos. “We are a U.S. domestic destination, so we will bounce back at a quicker rate, and I think hotel investors recognize this.”
Campos also told CJI she thinks Puerto Rico’s history of bouncing back from negative events will give hotel investors confidence that their money is protected.
“We have proven to come back after many different types of crises,” she said, “and that is something investors view positively. It means their investments are secured. If we get can weather the storm from crises from zika to economic turmoil, to bankruptcy, to hurricanes, earthquakes, political adversity, hotel investors will remain confident.”
The Current Hotel Situation
Campos said there are a total of roughly 160 hotels in Puerto Rico, including boutiques. Campos said about 97 properties voluntarily closed because of slow demand. The properties that are currently opened are housing mostly hospitality workers and domestic, corporate travelers, said Campos.
Perhaps the most anticipated new hotel is the Aloft San Juan. The hotel had a soft opening shortly before the pandemic struck and voluntarily shut its doors down as the coronavirus began forcing borders to close and airlines to go on hiatus.
It represents the first Aloft hotel in the Caribbean. According the property’s website, the Aloft San Juan will have about 175 rooms. Campos said it is now set to open in the fall. It is located within a new, roughly $125 million entertainment complex called the District San Juan. The District, Campos said, was expected to open in April and is now slated to open “later this year.”
Campos also said most hotels that were shuttered will be quickly prepared to reopen because most of the hotels that were opened were recently renovated following damage caused by Hurricane Maria in 2017.
Puerto Rico’s Hotel Investment Climate
So, how does Dean think the condo resort market will fare following the COVID-19 pandemic?
“With every challenge comes opportunity,” said Dean. “Based on data, we expect to see a steady resurgence of tourism in the upcoming months and plan to highlight two important factors that travelers are seeking and Puerto Rico offers: 1. their preference to visit destinations that offer diverse outdoor options post COVID-19 and 2. the increase of domestic travel in comparison to international travel.
“Luckily, our island has the best of both worlds as an accessible destination with vast offerings, with no need of a passport for U.S. citizens,” he continued. “In fact, Puerto Rico is one of the top destinations searched as of late by travelers, according to Hopper and other sources.”
Campos again credited Puerto Rico’s asset as being a domestic destination as another reason why the condo resort arena looks positive.
“I think the condo resort market continues to show strong signs in Puerto Rico as we continue to engage virtually with all of our stakeholders,” she said. “The international market will take longer to stabilize, but the domestic market will stabilize quicker, and considering that we are domestic, it makes us attractive [to investors].”
Incentives for Investors
Campos shared with CJI some of Puerto Rico’s most intriguing incentives for hotel and condo resort investors.
They include a tax credit of 30 or 40 percent of the total project cost; an up to 75 percent exception on property taxes; an up to 50 percent exception on municipal taxes; an up to 100 percent exemption from sales and use taxes with respect to items acquired and used by the exempt business in relation to the tourist activity; an up to a 75 percent exemption on any tax, levy, fee, license, excise tax, rate, or charge for the construction of works to be devoted to a tourist activity within a municipality; a flat four percent tax on tourism development income and a 100 percent exemption from excise taxes on crude oil, and other hydrocarbons mixture used by the exempt business.
Also, dividends are 100 percent exempt, said Campos.
“[These incentives make] Puerto Rico a very interesting market for hospitality [investment],” she said, “for the resort market and other kinds of hotel development projects.”
Hotels Under Construction
Dean told CJI that the process of resuming construction for all stalled projects has also begun. Campos said the hotel projects underway will include 2,200 new rooms and 2,000 rooms that are being renovated.
“We expect a strong reopening rollout of hotels that closed as U.S. travel restrictions loosen,” said Dean. “Many hotels remained open, but with limited capacity. The local hotel industry is implementing strong health and safety measures to welcome visitors when they start to arrive.”
Perhaps the most notable hotel project that was underway was the Residence Inn by Marriott on Isla Verde. Campos said construction has recently resumed for the more than 220-room hotel. She said the construction was only interrupted for a few weeks.
“The pandemic has not soured the interest of investors and developers,” said Dean. “In fact, in recent weeks, we’ve fielded multiple inquiries regarding planned and potential development.
“While construction and financing might move at a slower pace than pre-COVID, the increased awareness and brand appeal of Puerto Rico as a premier leisure and business destination, combined with the record-breaking performance of the destination in 2019, caught the attention of many potential partners who remain highly interested in Puerto Rico.”
