Caribbean Property & Investment Review — August 2012

Publication Date: 3 August 2012  |  Coverage Period: 3 July – 2 August 2012

Morning Briefing

• President Danilo Medina of the Dominican Republic is formally inaugurated in Santo Domingo, marking the beginning of his administration and signalling continuity of the country’s pro-investment economic policies.
• The Caribbean’s peak summer tourism season is delivering solid performance across North American source markets, with Jamaica, the Dominican Republic, and the Turks and Caicos all reporting July hotel occupancy above prior-year levels.
• Trinidad and Tobago’s energy sector continues to anchor regional economic confidence, with LNG export revenues performing well and the government maintaining its infrastructure investment programme.
• The Atlantic hurricane season approaches its climatological peak, with meteorologists monitoring active tropical development in the eastern Atlantic and Caribbean property sectors maintaining heightened preparedness.
• Jamaica’s government confirms its Extended Fund Facility programme with the IMF is in final stages, with Board approval expected in the coming months.
• Barbados’s summer tourism shows improvement over June’s weak figures, driven by stronger North American arrivals partly offsetting continued softness in European visitor numbers.

Dominican Republic: Medina Inaugurated, Investment Confidence Maintained

Danilo Medina’s formal inauguration as President of the Dominican Republic has been welcomed by the Caribbean investment community as the conclusion of a smooth and credible democratic process. The inauguration ceremony in Santo Domingo was attended by regional heads of government and representatives from the international investment and tourism community, providing Medina with a visible platform to reaffirm his administration’s commitment to the economic openness and infrastructure investment that have underpinned the DR’s remarkable tourism growth over the past decade.

In his inaugural address, Medina emphasised the importance of continued foreign investment in the DR’s tourism sector, pledging to maintain the regulatory and fiscal frameworks that have made the country one of the Caribbean’s most welcoming environments for international hotel and resort capital. His government has moved quickly to confirm the continuity of key economic personnel, with the Tourism Ministry maintaining the institutional knowledge and international relationships that have been central to the DR’s success in attracting new hotel development and airlift.

The Dominican property market has responded positively to the political clarity provided by the completed transition. Transactions that had been finalised but deferred in the pre-inauguration period are now being executed, and agents in the Punta Cana and north coast markets report a return of buyer confidence. Developer roadshows for new projects on the Samaná Peninsula and in the Cap Cana resort community are attracting strong attendance from North American, European, and Latin American investors.

Peak Summer: Caribbean Tourism Performance

July marks the heart of the Caribbean summer tourism season, and the region’s hotels and resorts are performing with the robustness that the North American vacation market typically delivers at this time of year. American and Canadian families seeking reliable sunshine and beach experiences at accessible prices continue to find Caribbean destinations highly competitive against alternatives. Jamaica, the DR, the Bahamas, and the Turks and Caicos are all reporting strong July figures from this North American cohort, which provides a crucial revenue base for the region’s hospitality sector through the summer months.

Jamaica’s resort corridor from Montego Bay to Negril is reporting strong July occupancy, with all-inclusive properties operating at high capacity. The island’s airlift from major US gateway cities is at its annual peak, and the tourism sector is benefiting from sustained improvement in the Jamaica brand’s standing in North American leisure travel markets. The Turks and Caicos Islands continues to demonstrate its extraordinary capacity to attract ultra-premium visitor spending, with Grace Bay’s hotel and villa rental market operating at high occupancy and premium rate levels year-round.

The property investment market is reflecting the positive summer tourism performance. North American buyers — who have been the primary driver of Caribbean real estate transactions through 2012 — remain active at this time of year, combining holiday visits with property searches across the key destination markets. Agents in multiple markets report that the summer visitor season is generating a pipeline of serious buyer enquiries that will convert to transactions through the autumn and winter months.

Hurricane Season: Peak Period Under Monitoring

August marks the beginning of the most climatologically active period of the Atlantic hurricane season. Statistical analysis of historical storm data places the seasonal peak around 10 September, with August and September combined accounting for the majority of intense hurricane formations in the Atlantic basin. The Caribbean property and tourism sectors are maintaining full preparedness posture, with hotel operators, property managers, and island governments all operating their hurricane season protocols.

The 2012 season has been moderately active, with several named storms developing but none yet causing significant damage to major Caribbean tourism destinations. Meteorologists are monitoring tropical waves tracking westward from the African coast, a pattern typical of the peak season. Caribbean property owners and investors are being advised to ensure their insurance arrangements are current and adequate before the season reaches its maximum activity. For new investors, hurricane risk assessment and appropriate coverage remain non-negotiable elements of sound due diligence.

Trinidad and Tobago: Economic Anchor of the Region

Trinidad and Tobago continues to serve as the Caribbean’s most economically robust nation, underpinned by its natural gas and petrochemical production base. Global LNG demand, bolstered by Japan’s continued shift away from nuclear power following Fukushima and by growing consumption in emerging Asian markets, is providing a supportive price environment for T&T’s exports. The government’s fiscal position remains healthy, with energy revenues comfortably funding both the current social investment programme and the capital expenditure commitments that are reshaping the twin-island republic’s infrastructure.

Port of Spain’s commercial real estate market is among the most active in the Caribbean, supported by consistent demand from energy sector companies and their extensive supply chain. High-end residential development on the west coast corridor continues to attract buyers from T&T’s professional and business class. Tobago’s appeal as a tourism and property investment destination is growing, with the smaller island attracting interest from both Trinidadian buyers and from international investors who recognise the potential of the island’s natural setting. Several boutique hotel and villa development projects are at various stages of planning and construction, and the island’s international airlift is gradually improving.

Caribbean Leaders This Month

Danilo Medina, President of the Dominican Republic: Now formally inaugurated, Medina is establishing the priorities of his administration through meetings with major tourism investors and infrastructure partners. The DR’s pro-development economic posture is being maintained under his leadership, reassuring the investment community that the country’s trajectory of growth will continue.

Portia Simpson Miller, Prime Minister of Jamaica: Simpson Miller’s government is managing the final stages of the IMF programme process while navigating the domestic political challenges of fiscal adjustment. The Prime Minister’s measured public communications continue to project stability and purpose to a watching investment community that is ready to respond positively to any formal programme announcement.

Kamla Persad-Bissessar, Prime Minister of Trinidad and Tobago: Persad-Bissessar is overseeing a period of continued economic strength in T&T, with energy revenues funding a wide-ranging programme of social and infrastructure investment. The Prime Minister’s challenge is to ensure that the current prosperity translates into durable long-term economic transformation beyond hydrocarbons.

Perry Christie, Prime Minister of the Bahamas: Christie’s PLP government is establishing its approach to the major issues facing the Bahamian economy, including the management of the Baha Mar resort development in Nassau and the question of broadening the government’s revenue base. The Bahamian property market remains resilient and internationally recognised.

Freundel Stuart, Prime Minister of Barbados: Stuart is managing a difficult period for Barbados with characteristic calm and deliberation. The island’s fiscal challenges and softness in European visitor numbers are testing the government’s resolve, but the fundamentals of Barbados’s investment proposition — its legal framework, institutional quality, and premium brand — remain intact and command respect across the global investment community.

Denzil Douglas, Prime Minister of St Kitts and Nevis: Douglas is presiding over the continued transformation of St Kitts through CBI programme revenues. The island’s debt position has improved dramatically as programme revenues have been applied to fiscal consolidation, and the construction activity generated by new qualifying developments is reshaping the island’s physical landscape in ways that will benefit the tourism sector for decades.

Roosevelt Skerrit, Prime Minister of Dominica: Skerrit’s government is making strategic investments in Dominica’s tourism infrastructure, using CBI revenues and development assistance to improve the island’s connectivity and hospitality capacity. The Nature Isle’s growing profile in global eco-tourism media is translating into increasing visitor interest and property investment enquiries.

Looking Ahead

August and September represent the most challenging period of the year for Caribbean property owners and operators, as the peak hurricane season overlaps with the summer shoulder period. The region’s industry is well prepared, but the inherent unpredictability of tropical weather means that continued vigilance and readiness to activate storm response protocols will be essential in the coming weeks.

Jamaica’s IMF programme approval is expected in the autumn, representing a significant milestone for the island’s economic credibility. The investment community will be watching not just the formal programme announcement but the subsequent delivery on its targets, which will ultimately determine whether the fiscal improvement that the programme promises translates into improved investment conditions on the ground in the years ahead.

The Caribbean investment market approaches the end of summer with cautious optimism. The North American summer has delivered solid tourism performance at major destinations, the CBI sector continues to generate investment property demand year-round, and the political transitions in Jamaica and the Dominican Republic have both been managed more smoothly than some had feared. The autumn season will bring the return of the winter booking season, which will be the critical test of whether the Eurozone’s persistent difficulties have fundamentally altered Caribbean tourism flows from European source markets. The next edition will carry a comprehensive end-of-summer assessment and an early winter season outlook.

The Caribbean Property & Investment Review is published monthly for property professionals, investors, and stakeholders across the Caribbean basin. Edition 168 covers the period 3 July to 2 August 2012.

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