Caribbean Hotel Investment Boom and CBI-Driven Resort Construction Surge as Hurricane Season Opens and Tourism Infrastructure Expands

Publication Date: 3 June 2023  |  Coverage Period: 3 May – 2 June 2023

Morning Briefing

• The 2023 Atlantic hurricane season officially opens on 1 June with NOAA forecasting an above-normal season of 12 to 17 named storms and 5 to 9 hurricanes, a forecast driven by exceptionally warm Atlantic sea surface temperatures and the anticipated end of El Niño conditions, with immediate implications for Caribbean property insurance renewal discussions.
• Caribbean hotel development investment commitments in the first five months of 2023 reached an estimated US$2.1 billion, with new projects announced in Jamaica’s north coast corridor, the Dominican Republic’s emerging Miches tourism zone, Grenada’s CBI resort portfolio and St Kitts’ southern peninsula development area.
• St Kitts and Nevis’ Citizenship by Investment programme recorded its strongest application month in May 2023, driven by sustained global demand for alternative citizenship and the programme’s reputation as one of the Caribbean’s most established and transparent CBI jurisdictions, with real estate option applications directly funding resort development.
• Jamaica’s Tourism Ministry confirmed that five new hotel development projects on the north coast have received final approval under the Hotel Incentives Act in the first quarter of 2023, representing approximately 1,200 new rooms in various stages from groundbreaking to advanced planning.
• Grenada’s CBI-linked resort construction pipeline includes three active development sites, with completion of Phase One resort units at two approved projects expected in the second half of 2023, generating new CBI application eligibility and maintaining the island’s competitiveness in the OECS CBI market.
• Caribbean construction costs, while elevated relative to pre-pandemic benchmarks, showed the first signs of modest easing in May 2023 as global supply chains continue to normalise, with some imported building material categories — particularly lumber and certain steel products — beginning to retreat from 2022 peak levels.

Hurricane Season Opens: What It Means for Caribbean Property Investors

The 1 June opening of the 2023 Atlantic hurricane season is both a meteorological calendar marker and an investment event. For Caribbean property owners, insurance brokers, hotel operators and real estate investors, the season’s opening triggers a set of risk management, insurance renewal and property preparedness activities that are as much a part of Caribbean real estate lifecycle as the annual tourism season itself. NOAA’s 2023 forecast — projecting an above-normal season of 12 to 17 named storms, 5 to 9 hurricanes and 2 to 4 major hurricanes — has been developed against the backdrop of record-warm Atlantic sea surface temperatures that provide the thermal energy that fuels tropical cyclone development.

For property investors assessing Caribbean assets, the hurricane season forecast is a relevant but not determinative input. Statistically, the Caribbean avoids direct major hurricane impacts in the majority of years even in above-normal seasons — the region’s exposure is measured in terms of probability over multi-year periods rather than certainty in any given year. The practical implications are most immediate for insurance: Caribbean property and casualty insurers and their international reinsurers set their annual underwriting terms based substantially on modelled hurricane risk, and an above-normal NOAA forecast creates pressure on insurers to hold firm on the premium increases that have been applied through the 2023 renewal season rather than compete aggressively on price.

Property buyers transacting in Caribbean markets during the June to November hurricane season period are well advised to ensure comprehensive property insurance coverage is secured before completion — and to review the adequacy of any existing coverage for the assets they already hold. The combination of rising construction replacement costs (which have increased 25 to 40 percent since 2019) and higher insurance premiums means that many Caribbean property owners may be inadvertently underinsured relative to the actual cost of rebuilding after a loss event, a risk that is best addressed through an annual insurance review rather than discovered in the aftermath of a storm.

For hotel operators and resort developers, the hurricane season’s opening triggers the implementation of seasonal preparedness plans — securing outdoor furniture and equipment, reviewing emergency procedures with staff, confirming generator and water supply backup systems, and establishing communication protocols with insurance carriers and guests. The best-managed Caribbean hospitality properties treat hurricane preparedness not as an annual inconvenience but as a fundamental element of operational risk management that protects both physical assets and the customer confidence that premium Caribbean resort brands require to sustain their pricing power.

Caribbean Hotel Investment in 2023: The Boom Continues

Notwithstanding the hurricane season context, the Caribbean hotel investment pipeline in 2023 is demonstrating a momentum that reflects investor conviction in the structural strength of Caribbean tourism demand. The US$2.1 billion in development commitments recorded through the first five months of the year would, if maintained at that pace through the full year, produce the strongest annual hotel investment figure for the Caribbean in the post-pandemic era and would rival the pre-pandemic records of 2018–19.

Jamaica’s north coast is the region’s most active hotel development zone. The Jamaica Hotel Incentives Act, which provides income tax exemptions, import duty relief and other fiscal concessions to qualifying hotel developments, has been effective in attracting both international brand operators and regional developers to the island’s established and emerging tourism zones. The five projects approved in Q1 2023 under this framework — adding approximately 1,200 new rooms to the pipeline — represent a significant capacity addition that will, when completed, contribute to Jamaica’s ambition of expanding its accommodation base substantially from current levels.

The projects range in character from large-format all-inclusive resorts targeting the mass North American market — where international brands have demonstrated strong demand that supports conventional hotel development economics — to smaller boutique developments targeting the growing segment of independent travellers seeking authentic Caribbean experiences that the all-inclusive model cannot provide. The latter segment has been particularly encouraged by the Jamaica Tourist Board’s sustained marketing investment in positioning the island beyond the traditional beach resort product, with Kingston’s cultural and culinary scene, the Blue Mountains trekking experience and community-based tourism offerings all gaining international recognition.

The Dominican Republic’s hotel development activity in 2023 is concentrated in two distinct areas: the continuation and expansion of the established Punta Cana mega-resort corridor, and the opening of the Miches — El Macao area as a new major tourism development zone. Miches, located on the Samana Peninsula’s northern coast, has been designated by the Dominican government as a priority eco-tourism and sustainable resort development destination, with major international operators including AMAN and several European luxury hotel groups reported to be in advanced discussions or committed to development sites. Miches represents the DR’s most significant new tourism zone development since Cap Cana was established in the 2000s, and its impact on regional property investment patterns — with land values in the immediate area already responding to the development announcements — will be significant.

CBI Programme Activity: St Kitts, Grenada and the OECS Resort Investment Engine

The Citizenship by Investment programmes operating across the OECS continue to function as the primary driver of new resort investment in several of the region’s smaller island economies — an investment mechanism that is genuinely distinctive to the Caribbean and delivers real estate development capital that would not otherwise be available to these markets at the cost and on the terms that CBI programmes make possible.

St Kitts and Nevis maintains its position as one of the most established and administratively mature CBI jurisdictions in the Caribbean. The programme, which dates to 1984, has generated decades of institutional experience in processing applications and managing approved developments that newer programmes — Vanuatu, Turkey, Jordan — are still developing. The May 2023 record application month reflects several converging factors: sustained global demand for alternative citizenship from high-net-worth individuals in jurisdictions with travel restrictions, geopolitical risk or limited passport visa-free access; St Kitts’s own programme enhancements that have streamlined processing times and improved the investment product options; and the growing global awareness of CBI as a legitimate wealth diversification and family planning tool among UHNW families in major origin markets including the Middle East, Southeast Asia and increasingly Latin America.

Grenada’s CBI programme occupies a distinctive position in the OECS CBI landscape: its real estate option is one of the most actively marketed in the region, and the island’s approved resort developments — several of which are in active construction phases — represent genuine additions to the island’s accommodation product quality and quantity. The three active construction sites in Grenada’s CBI resort pipeline as of June 2023 are at different stages of completion, with Phase One unit deliveries at two projects expected in the second half of the year. These completions will open new tranches of CBI eligibility, allowing the programme to continue absorbing application demand from a pipeline of interested investors. Grenada’s E-2 treaty investor status with the United States — unique among Caribbean CBI programme holders — continues to provide an additional incentive for American investors considering the island’s CBI offering alongside its real estate market.

Antigua and Barbuda, St Lucia and Dominica all maintain active CBI programmes with real estate components that generate investment flows into approved hotel and resort developments. The competitive dynamic between OECS CBI jurisdictions — each seeking to attract applicants and development capital from a shared global pool of UHNW investors — drives a progressive improvement in programme terms, approved development quality and processing efficiency that ultimately benefits both programme participants and the host economies receiving the investment.

Construction Costs: First Signs of Modest Easing

For Caribbean developers, contractors and property buyers, the May 2023 emergence of the first tentative signs of construction cost easing in certain material categories is encouraging, even if the scale of any reduction remains modest and the broader cost environment remains substantially elevated relative to pre-pandemic norms. Global lumber prices, which experienced extreme volatility during the pandemic period — reaching historic highs in mid-2021 before a dramatic correction — have continued to move toward more sustainable levels, with Caribbean timber and timber-product import costs beginning to reflect the global normalisation. Certain categories of steel product have also seen price easing as Chinese production has increased and global demand has moderated from the extraordinary pandemic-era construction boom levels.

The easing is not yet sufficient to alter the fundamental economics of affordable housing development in the Caribbean. Portland cement, which is produced domestically in several Caribbean countries (Jamaica and Trinidad both have significant cement production capacity) but is also widely imported, remains at elevated price levels. Electrical materials, plumbing fixtures, roofing products and other building components continue to trade above pre-pandemic levels, reflecting the general inflation in manufactured goods that has characterised the 2021–23 global inflationary episode. Caribbean construction contractors continue to report that project quotations are highly sensitive to commodity price movements and that fixed-price contract commitments for large projects remain difficult to price with confidence given input cost volatility.

For hotel and resort developers, the construction cost environment affects not only new-build economics but also the calculations around renovation and refurbishment of existing properties. Several Caribbean hotel owners who had deferred major renovation programmes during the pandemic are now confronting the reality that the cost of executing the upgrades their properties need to remain competitive has risen materially since the pre-pandemic estimates they had used for planning purposes. The hotel upgrade cycle — which Caribbean hospitality markets require on roughly ten to fifteen year cycles to maintain competitive product quality — is therefore more expensive across the board than operators had budgeted, compressing the margins on renovation projects and in some cases causing programme deferrals that will affect product quality in the medium term.

Caribbean Leaders This Month

St Kitts and Nevis claims the leadership position this month for its CBI programme’s record May 2023 application month, reflecting the programme’s enduring appeal and administrative maturity. The real estate investment flows from CBI applications directly underpin the resort construction activity that is expanding the federation’s accommodation capacity and generating employment and economic activity across the dual-island state.

Jamaica demonstrated the depth of institutional investor appetite for its tourism hospitality sector, with five new hotel projects receiving Hotel Incentives Act approval in Q1 2023 representing a significant pipeline addition that will deliver new capacity to the north coast’s accommodation market over the coming years.

Dominican Republic advances two parallel investment narratives: the continued expansion of the Punta Cana mega-resort corridor and the emergence of the Miches eco-luxury zone, together positioning the country as the Caribbean’s most dynamic hotel investment destination across both volume and premium market segments.

Grenada maintained active resort construction across three CBI-linked development sites, with Phase One completions expected later in 2023 that will generate new CBI application eligibility and reinforce the island’s position as an active and credible OECS CBI jurisdiction alongside its broader appeal as an Eastern Caribbean second-home destination.

Barbados continued to position its premium resort and villa market as a destination for high-net-worth international buyers, with the island’s planning and investment framework providing a stable environment for the luxury development activity that is a defining feature of the Barbados property market.

Antigua and Barbuda benefited from CBI-linked resort investment alongside its established English Harbour and Jolly Harbour premium property markets, with the island’s sailing and yachting community providing a distinctive high-value visitor segment that supports premium marina and waterfront property values.

Guyana maintained its position as the region’s growth story of the decade, with oil production on track for further milestone achievements in the months ahead and Georgetown’s commercial and premium residential property markets continuing to set Caribbean standards for appreciation rate if not for absolute value per square foot.

Trinidad and Tobago opened the hurricane season with commercial property markets in Port of Spain performing solidly, the energy sector providing economic stability, and the approaching Carnival planning season beginning to focus hospitality sector attention on the investment in product and capacity that the 2024 festival will require. Overall May regional performer: St Kitts and Nevis, for a CBI programme record application month that demonstrates the enduring global demand for Caribbean citizenship and the role that real estate investment plays in delivering that opportunity while simultaneously funding resort development.

Looking Ahead

June and July will see the Caribbean hotel investment pipeline continue to develop, with further project announcements expected across multiple jurisdictions as developers who have been assessing market conditions respond to the sustained tourism performance data with capital commitment decisions. The investment cycle in Caribbean hospitality typically runs two to three years from commitment to completion, meaning that projects breaking ground in mid-2023 will come to market in the 2025–26 period, when the tourism demand and rate environment will be substantially different from today’s. Investors are making long-duration bets on the structural strength of Caribbean tourism appeal.

CBI programme developments across the OECS will continue to be closely watched, both for their direct real estate investment implications and for the regulatory and reputational dynamics that affect programme sustainability. Several CBI jurisdictions are engaged in ongoing dialogue with the European Union regarding their programme frameworks, following EU concerns about the due diligence standards applied to CBI programme applicants from certain origin markets. How these dialogues resolve will have implications for programme volume and the composition of applicant pools across the OECS CBI jurisdictions.

The construction cost outlook for the second half of 2023 will be critical for affordable housing policy and hotel development economics across the region. If the modest easing visible in May 2023 continues and broadens to more building material categories, the economics of both affordable housing development and hotel renovation will improve, potentially unlocking projects that are currently marginal. If costs stabilise at current elevated levels or reaccelerate — a risk that cannot be excluded given ongoing global supply chain vulnerabilities and the potential for energy price spikes — the squeeze on affordable housing economics will persist, and the housing deficit will continue to widen.

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.

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