Caribbean Property & Investment Review — March 2012

Publication Date: 3 March 2012  |  Coverage Period: 3 February – 2 March 2012

Morning Briefing

• Trinidad and Tobago’s Carnival 2012, celebrated on 20 and 21 February, drew record visitor numbers and generated an estimated TT$600 million in direct economic activity across the twin-island republic’s hospitality and entertainment sectors.
• Jamaica’s Prime Minister Portia Simpson Miller holds preliminary discussions with IMF officials in Washington as her government advances toward a formal programme framework that would address the island’s debt sustainability challenge.
• Caribbean spring tourism demand from North American source markets shows encouraging early signs, with March and April bookings tracking ahead of the comparable period in 2011 at several major destination markets.
• The Bahamas reports that Nassau’s hotel sector performed solidly through the winter season, with high-end properties reporting occupancy levels comparable to pre-2008 peaks.
• Barbados’s spring break period brings an influx of North American visitors, partially offsetting the continued softness in European arrivals linked to the Eurozone economic climate.
• St Kitts confirms approval of two new CBI-qualifying hotel and villa developments, adding to the islands’ tourism accommodation pipeline and generating construction employment.

Carnival 2012: An Economic and Cultural Triumph

Trinidad and Tobago’s Carnival season reached its magnificent climax on 20 and 21 February 2012, with the twin-island republic hosting what festival organisers described as one of the best-attended and best-organised Carnivals in recent memory. The festival, which draws participants and spectators from across the Caribbean diaspora in North America and Europe as well as from Europe itself, generated an economic impact that permeated every corner of the T&T hospitality and entertainment economy.

Hotels in Port of Spain, which had been fully booked for the Carnival weekend since November, reported exceptional spending patterns from Carnival visitors, who typically combine their festival attendance with shopping, dining, and sightseeing in and around the capital. The broader business community — from costume designers and mas band producers to car rental operators and supermarkets — reported their strongest Carnival trading in several years. The festival’s economic multiplier effect is well documented and continues to demonstrate the value of major cultural events as drivers of economic activity in small island economies.

For Tobago, the period following Carnival provides its own tourism dividend, as visitors who attended the festival in Trinidad extend their stays for beach and eco-tourism experiences on the smaller island. Tobago’s hotel and villa rental market performed well in the post-Carnival weeks, and the island’s property developers are taking note of the growing independent traveller interest that the festival indirectly generates. Several boutique villa projects on Tobago are attracting early-stage investor interest from buyers seeking properties that can generate both personal enjoyment and rental income during the high seasons.

Jamaica: Portia Government Pursues IMF Engagement

The Simpson Miller government in Jamaica is making steady progress in its engagement with the International Monetary Fund. Preliminary discussions in Washington have focused on the parameters of a new Extended Fund Facility that would provide Jamaica with access to external financing while committing the government to a multi-year programme of fiscal adjustment. The business community in Kingston is broadly supportive of the IMF engagement, recognising that debt sustainability is the precondition for the lower interest rates and improved investor confidence that Jamaica’s economy needs to grow.

In the Jamaican property market, the stabilisation of the political environment following the December election is translating into improved transactional activity. The north coast remains the primary focus of international investor interest, with enquiries for villa and branded residence developments in the Montego Bay and Ocho Rios corridors coming predominantly from North American buyers. The commercial real estate market in Kingston is also seeing some increased activity, particularly in the office and mixed-use sectors where several projects that had been deferred are being revisited by developers now that the electoral uncertainty has been resolved.

The longer-term outlook for Jamaica’s property market remains tied to the island’s fiscal trajectory and to the strength of the tourism sector, which drives demand for hospitality-related real estate across the north coast. If the IMF programme proceeds as expected and Jamaica demonstrates consistent delivery on its fiscal targets, the resulting improvement in sovereign creditworthiness should gradually reduce borrowing costs and stimulate broader economic activity, including in the real estate sector.

Caribbean Spring Tourism: Positive Early Signals

The Caribbean tourism industry is entering the spring period with greater confidence than at any point in the past three years. Bookings data from major North American travel operators for March and April show positive year-on-year growth at several key destination markets, including Jamaica, the Dominican Republic, and the Turks and Caicos Islands. The US economy’s modest recovery — characterised by gradual job creation and cautiously improving consumer confidence — is feeding through into travel spending, and the Caribbean is well positioned as a value-for-money destination relative to more distant long-haul alternatives.

The European picture remains more challenging, though the outright collapse in European visitor numbers that some had feared has not materialised. British visitors — the most significant European source market for much of the Caribbean — continue to travel to the region, though spending patterns suggest some compression relative to pre-crisis levels. Continental European visitors from Germany, France, and the Scandinavian countries are proving more resilient than those from the hardest-hit southern European economies, where austerity measures are having the most direct impact on household disposable income.

T&T Energy Sector: The Regional Anchor

Trinidad and Tobago’s energy sector continues to serve as the principal anchor of Caribbean economic confidence. The country’s natural gas production and liquefied natural gas export operations are performing well, and global LNG demand — bolstered by Japan’s post-Fukushima shift away from nuclear power toward gas-fired generation — is providing a supportive price environment. T&T’s petrochemical sector, which produces ammonia, methanol, and urea for global markets, is also benefiting from firm commodity prices.

The property market implications of T&T’s energy prosperity are visible across the twin-island republic. In Port of Spain, commercial office demand from energy sector companies and their service providers continues to sustain an active leasing and development market. High-end residential development in premium areas of the capital and in suburban communities west of the city is catering to a professional class with genuine purchasing power. For regional investors, Trinidad’s economic stability and the depth of its domestic demand base make it one of the most reliable Caribbean real estate markets in which to invest.

Caribbean Leaders This Month

Portia Simpson Miller, Prime Minister of Jamaica: Simpson Miller is making the IMF engagement the centrepiece of her government’s early economic strategy, a pragmatic stance that is winning cautious approval from Jamaica’s business community and from international investors watching the island’s fiscal trajectory.

Kamla Persad-Bissessar, Prime Minister of Trinidad and Tobago: Persad-Bissessar’s post-Carnival satisfaction reflects the genuine achievement of a successful festival season, and the Prime Minister is channelling the economic momentum into continued infrastructure and social investment across the republic.

Leonel Fernández, President of the Dominican Republic: With the May presidential election approaching, Fernández is in the final months of his administration. His legacy will be assessed partly on the economic performance of the DR under his stewardship and partly on the smooth management of the democratic transition.

Freundel Stuart, Prime Minister of Barbados: Stuart is managing Barbados’s spring tourism season with a focus on North American market development. The island’s spring break period has been performing better than feared, providing some relief to an otherwise challenging tourism revenue picture.

Denzil Douglas, Prime Minister of St Kitts and Nevis: St Kitts’s CBI programme continues to generate the investment flows that are reshaping the island’s tourism infrastructure. New hotel and villa project approvals are maintaining the programme’s momentum and keeping the construction sector active.

Perry Christie, Leader of the Opposition, Bahamas: Christie and the PLP are preparing for the Bahamian general election expected in May 2012. The property and investment community is monitoring the political landscape carefully, though both major parties have historically maintained pro-investment stances on the key issues affecting the Bahamian market.

Baldwin Spencer, Prime Minister of Antigua and Barbuda: Antigua’s sailing week preparations are underway, with the island’s annual regatta — one of the Caribbean’s premier sailing events — expected to draw strong international participation and generate significant hospitality sector activity in late April.

Looking Ahead

The Caribbean investment calendar for March and April is filling up, with several developer roadshows and property investment events scheduled across the region. The spring season typically marks the beginning of the most active transaction period for Caribbean real estate, as buyers who have been researching the market through the winter tourism season move toward purchase decisions before the summer.

Jamaica’s IMF programme negotiations are expected to advance significantly in the coming weeks. The terms of any agreement will be closely scrutinised by the investment community, as the fiscal adjustment measures required to achieve debt sustainability will shape the domestic economic environment for years to come. The property market is watching these developments with particular attention to any measures that might affect mortgage lending conditions or investment incentives.

The Dominican Republic’s approaching presidential election in May is beginning to attract more attention from the Caribbean investment community. The DR is one of the region’s most dynamic investment markets and the outcome of the election — and any resulting policy shifts — will have significant implications for the tourism and real estate sectors. The next edition will provide a comprehensive preview of the electoral landscape and its investment implications.

The Caribbean Property & Investment Review is published monthly for property professionals, investors, and stakeholders across the Caribbean basin. Edition 173 covers the period 3 February to 2 March 2012.

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