Caribbean Post-COVID Tourism Boom Drives Luxury Property to New Heights — August 2022

Publication Date: 3 August 2022  |  Coverage Period: 3 July – 2 August 2022

Morning Briefing

• Jamaica summer tourism breaks all records: The Jamaica Tourist Board reported July 2022 visitor arrivals at their highest level ever for the month, with all three major airports — Norman Manley International, Sangster International and Ian Fleming International — operating at or near capacity as post-pandemic revenge travel demand peaks.
• Barbados west coast villas achieving record nightly rates: Professional villa management companies on Barbados’s platinum coast reported July 2022 nightly rental rates averaging 45% above July 2019 levels, with several properties setting all-time rate records as high-net-worth visitors prioritise premium Caribbean experiences.
• Dominican Republic Punta Cana records 90%+ hotel occupancy: All-inclusive resorts in the Punta Cana corridor reported average July occupancy of 92%, the highest summer occupancy rate in the zone’s history, driven by strong demand from North America, Europe and Latin America simultaneously.
• Cayman Islands luxury property demand outstrips supply: Real estate brokers in Grand Cayman reported that available luxury inventory in the Seven Mile Beach corridor had fallen to a record low, with some buyers entering bidding situations on premium properties not seen since the pre-2008 peak years.
• US CPI hits 9.1% in June 2022 — 40-year high: The US Consumer Price Index reached 9.1% year-on-year in June 2022, the highest rate since 1981, driven by food, fuel and housing costs, with the Federal Reserve already having raised its benchmark rate to 1.5–1.75% and signalling continued aggressive tightening.
• Short-term rental yields across Caribbean up 30% year-on-year: Data aggregated from major booking platforms shows Caribbean short-term rental properties generating average gross yields approximately 30% above their July 2021 equivalents, driven by higher nightly rates and sustained occupancy as pandemic-era caution among travellers gives way to exceptional demand.

Caribbean Tourism at Full Peak: The Summer of Revenge Travel

The summer of 2022 is delivering the Caribbean tourism boom that industry analysts predicted but few dared fully believe possible given the extraordinary economic headwinds. Two and a half years after COVID-19 brought the Caribbean tourism industry to a near-complete halt — with hotel occupancy dropping to single digits in some markets in 2020 and airlines cancelling the majority of Caribbean routes — the industry is operating at a level of demand intensity that has no precedent in its modern history. Jamaica’s record July arrivals, Barbados’s extraordinary villa rental rates, Dominican Republic’s 92% resort occupancy: these are not merely recovery to pre-pandemic levels but genuine new peaks driven by the release of multiple years of pent-up vacation demand.

The forces driving this extraordinary summer are well understood. Post-pandemic consumers — having spent two years constrained in their travel and social activity — have demonstrated with remarkable consistency that they are willing to prioritise vacation experiences in their spending, even as inflation erodes purchasing power in other areas of their budgets. The Caribbean’s combination of proximity to North America, tropical climate, English and Spanish-language accessibility and world-class resort infrastructure makes it the natural default destination for this surge of vacation demand. Airlines have restored routes and added capacity; hotels have reopened fully and in many cases completed renovations during forced closures; and the Caribbean’s political stability and reliable infrastructure have been reassuring to travellers who have experienced disruption and uncertainty for two years.

The summer tourism peak is having direct and immediate effects on Caribbean property markets. Hotel revenues at record levels are generating the cash flows needed to finance expansion, renovation and new development. Short-term rental investors are achieving occupancy and rate performance that validates premium property prices. And the circulation of tourism income through Caribbean economies — into wages, services, retail and hospitality — is sustaining purchasing power that underpins residential demand in the middle market even as mortgage rates begin their upward trajectory in response to global rate increases.

The concentration of international visitors in Jamaica during July underscores the island’s standing as the Caribbean’s largest and most diversified tourism destination. Sangster International Airport in Montego Bay, the primary gateway for Jamaica’s north coast resort complex, has been operating at or above its designed capacity for much of the summer season, with airlines adding charter and scheduled services to meet demand from the United States, Canada and the United Kingdom. The resulting economic activity in the parishes of St James, Trelawny and Hanover has been the strongest in the recorded history of those communities.

Luxury Property Market: Caribbean’s Golden Moment

For the Caribbean’s luxury property segment, the summer of 2022 represents a golden moment that has been building since the early stages of the pandemic recovery. The combination of extraordinary tourism demand, the sustained interest of high-net-worth buyers for whom Caribbean property represents both lifestyle and investment value, and the structural scarcity of truly premium inventory in the best locations has created market conditions that are decisively in favour of sellers.

Barbados’s west coast — the so-called platinum coast stretching from Speightstown to Bridgetown — represents the most concentrated luxury property market in the English-speaking Caribbean. July 2022 villa rental rates averaging 45% above 2019 levels are a function of both the extraordinary demand and the premium product that this coastline offers: world-class cuisine, excellent medical facilities, a sophisticated cultural scene and the island’s distinctive Bajan sociability that has made it the preferred Caribbean destination for British royalty, international celebrities and the global super-wealthy for decades. The properties that command the highest rates — those with private beachfront, private pools, multiple pavilions and professional management — are achieving nightly rates that, over a full winter season, generate returns comparable to or exceeding what prime London or New York residential properties produce at much lower price entry points.

The Cayman Islands luxury market is experiencing perhaps the most acute supply-demand imbalance in the Caribbean. Grand Cayman’s combination of US dollar economy, zero income tax, political stability as a British Overseas Territory and world-class offshore financial infrastructure makes it uniquely attractive to a buyer profile that differs somewhat from Barbados or Jamaica: more focused on fiscal planning and permanent residency than seasonal vacation use. The shortage of luxury inventory in the Seven Mile Beach corridor — where absolute beachfront land is effectively exhausted — means that new supply can only come through replacement development or vertical construction, both of which take years from conception to completion. This structural supply constraint provides a powerful floor under Cayman luxury values that is largely independent of broader economic cycles.

In the Dominican Republic, the scale of luxury investment activity at Cap Cana and Punta Cana has no close parallel elsewhere in the Caribbean. The sheer volume of hotel rooms, branded residences and integrated resort infrastructure under construction in the eastern DR represents an investment programme of Caribbean-record proportions, financed by a combination of international hotel chains, Spanish and North American real estate capital, and DR domestic developers who have benefited from the country’s extraordinary construction activity. The average occupancy of 92% at Punta Cana’s all-inclusive resorts in July 2022 is the most compelling possible validation of this investment thesis.

Short-Term Rentals: The New Caribbean Investment Asset Class

The 30% year-on-year increase in Caribbean short-term rental yields in July 2022 confirms what specialist Caribbean real estate investors have been observing for the past 18 months: the professionally managed short-term rental property has become a genuine investment asset class in the Caribbean, capable of generating returns that compare favourably with almost any other accessible real estate market in the world.

The mechanics of this market have been transformed by technology. The combination of global booking platforms — Airbnb, VRBO, Booking.com — with professional property management software has enabled Caribbean property owners to access a global market of potential renters that was previously reachable only through expensive specialist agents. Dynamic pricing tools automatically adjust rates based on demand signals, comparable availability and booking pace, allowing sophisticated operators to capture the maximum available revenue from each booking period. The result is that a well-positioned Jamaican villa or Barbados beach apartment, managed by a professional operator, can achieve occupancy and rate performance that was previously the exclusive domain of hotel brands with major marketing budgets.

For property investors, the key question is whether current yield levels are sustainable or represent a peak of revenge-travel demand that will moderate as the novelty of unrestricted international travel fades. The evidence from booking data suggests that forward bookings into autumn and winter 2022–2023 are running well ahead of the equivalent period in 2021, indicating that Caribbean travel demand has structural as well as cyclical components. The growing integration of Caribbean destinations into remote-working lifestyles — particularly through Barbados’s Welcome Stamp, Jamaica’s Digital Nomad programme and similar schemes in Cayman and other territories — is creating a new category of medium-term occupant who blends vacation with work, extending stays and increasing per-visitor spend in ways that permanently improve the economics of well-positioned rental properties.

Inflation Threat to the Tourism Boom

Against the backdrop of extraordinary tourism performance, the threat posed by the inflation environment cannot be ignored. US CPI at 9.1% in June 2022 — the highest since 1981 — represents a profound squeeze on the disposable incomes of American tourists, who are by far the largest source of visitors to the Caribbean. The Federal Reserve’s aggressive response, having already raised rates to 1.5–1.75% and signalling further increases, will slow the US economy and potentially tip it into recession, reducing both consumer confidence and spending capacity among the middle-income American families who represent the core of the Caribbean’s mainstream tourism market.

The luxury segment of Caribbean tourism — those spending US$1,000 or more per night on accommodation — is largely insulated from this threat. The ultra-high-net-worth individuals and senior professionals who patronise Barbados platinum coast villas, Cayman’s premium hotel suites and the DR’s branded resort residences do not typically adjust their vacation spending in response to a 9% inflation rate. For this demographic, the real concern is portfolio values in a rising rate environment — and the decline in global equity markets in 2022 has trimmed the paper wealth of some luxury vacation buyers. However, the Caribbean’s appeal as an asset-class alternative to volatile equity markets — tangible, income-generating, climate-immune real estate in a stable jurisdiction — partly offsets this risk.

The mainstream Caribbean market faces more direct exposure to US economic conditions. Jamaica’s tourism mix includes a significant proportion of middle-market American and Canadian families for whom the cost of a Caribbean vacation — already elevated by higher airfares and accommodation rates in 2022 — represents a meaningful portion of discretionary income. If US consumer confidence deteriorates sharply in response to inflation and rate increases, some of these bookings will be cancelled or deferred in 2023. The industry is watching US consumer sentiment data and credit card spending patterns closely as leading indicators of potential demand softening.

Caribbean Leaders This Month

Jamaica takes the top position in July 2022 with its all-time record monthly visitor arrivals, a landmark achievement that validates the island’s extraordinary tourism infrastructure and positions it as the leading destination in the Caribbean’s greatest-ever tourism summer.

Dominican Republic achieves historic 92% all-inclusive occupancy in Punta Cana, an extraordinary performance that reinforces the DR’s position as the Caribbean’s largest tourism market by visitor volume and hotel room count, and validates the extraordinary scale of hotel investment in the eastern tourism zone.

Barbados delivers its finest luxury market performance on record, with villa rental rates 45% above 2019 levels validating the island’s premium positioning and generating the cash flows that sustain the west coast’s status as the Caribbean’s most prestigious property address.

Cayman Islands records its tightest luxury inventory position in living memory, with the structural scarcity of Seven Mile Beach property generating bidding situations that demonstrate the depth and quality of demand from the island’s globally distributed buyer base.

Trinidad and Tobago is generating record LNG revenues as European buyers scramble for non-Russian gas supply, with the consequent fiscal strength enabling continued investment in the HDC housing programme and public infrastructure at a scale that would be impossible for energy-importing neighbours.

St Lucia is seeing strong summer performance driven by a premium product mix that is increasingly well-known in European source markets. The island’s combination of luxury boutique properties, dramatic volcanic scenery and authentic Caribbean culture is differentiating it effectively from mass-market competitors.

Guyana continues its extraordinary oil-driven economic expansion, with ExxonMobil’s Stabroek Block output growing steadily toward the 300,000 bpd milestone. Georgetown’s real estate market remains the fastest-appreciating in the Caribbean, driven by energy sector income that is creating demand for quality housing far in excess of current supply.

Antigua and Barbuda is reporting a strong summer season with hotel and villa properties performing well and the CBI real estate pipeline continuing to attract international buyers seeking alternative residency and citizenship options in a politically stable, well-governed jurisdiction.

Overall regional performer this month: Jamaica, whose all-time record July tourism arrivals represent the most concrete single metric of the Caribbean’s extraordinary post-pandemic recovery and position the island as the region’s standout tourism success story of summer 2022.

Looking Ahead

The Caribbean’s extraordinary summer performance raises the question of whether this pace can be sustained through the autumn and winter high season. Most indicators point to yes: forward bookings for the traditionally stronger winter period are running well ahead of the equivalent 2021 booking pace, airline capacity is being maintained and even expanded on key Caribbean routes, and the structural drivers of post-pandemic demand — the premium placed on experiential travel, the integration of Caribbean destinations into remote-working lifestyles — appear durable rather than merely transient.

The risk picture is dominated by two factors: the US economic slowdown, which will test whether Caribbean tourism demand is truly resilient to reduced American consumer spending power; and the Atlantic hurricane season, which reaches its climatological peak in September. A major hurricane strike on any Caribbean destination would damage not merely that destination’s immediate tourism season but the broader regional reputation for reliability and safety that underpins the investment case for Caribbean tourism property.

For property investors, the summer of 2022 has provided the most compelling possible validation of the Caribbean short-term rental investment thesis. The combination of record visitor numbers, record nightly rates and record occupancy levels has generated returns that exceed virtually any projection made at the time of purchase for well-positioned properties. The challenge for new buyers entering the market today is the price discovery process: properties that were attractively priced relative to their yield potential two years ago are now priced to reflect the extraordinary rental performance of 2022, meaning that entry-level returns for new investors are lower than for those who bought earlier in the cycle. Selectivity — focusing on the locations, property types and management arrangements that offer sustainable yield rather than peak-cycle performance — is the essential discipline for Caribbean property investment in the current environment.

The Caribbean Property & Investment Review is published monthly and covers developments during the preceding calendar month. All factual statements reflect information publicly available at the time of publication.