Caribbean Tourism Breaks Q1 Records as Hotel Investment Surges: April 2024

Publication Date: 3 April 2024  |  Coverage Period: 3 March – 2 April 2024

Morning Briefing

• Caribbean-wide Q1 2024 stopover visitor arrivals reach their highest first-quarter total on record, surpassing pre-pandemic benchmarks by 11 per cent.
• Dominican Republic posts record 3.4 million visitors in Q1 2024, cementing its position as the Caribbean’s largest tourism market by volume.
• Jamaica’s hotel investment pipeline expands with three new management agreements for north coast properties announced in March.
• Barbados reports its strongest March hotel occupancy in a decade as the winter season closes with record revenue per available room.
• Guyana’s oil production surpasses 400,000 barrels per day as ExxonMobil’s Payara development continues its ramp-up phase.
• St Kitts and Nevis Citizenship by Investment programme records its highest Q1 application volume since 2019 reforms took effect.

Record Q1: The Caribbean Tourism Boom Defies Expectations

The first quarter of 2024 has delivered something Caribbean tourism operators had barely dared to project when they prepared their forecasts in late 2023: visitor arrival numbers that not only recovered to pre-pandemic levels but exceeded them comprehensively, setting new records across the majority of the region’s destinations. The Caribbean Tourism Organization’s preliminary data, circulated to member governments during the March reporting period, showed that Caribbean-wide stopover visitor arrivals in the January-to-March 2024 window were approximately 11 per cent ahead of the equivalent Q1 2019 figure — the previous record — and 7 per cent ahead of Q1 2023, itself a strong year for the region.

The drivers of this exceptional performance are well understood, even if their combined force has exceeded most analysts’ expectations. The sustained appetite among North American and European leisure travellers for Caribbean holidays — stimulated by the post-pandemic release of suppressed demand, the growing recognition of Caribbean destinations as premium experiences rather than budget alternatives, and the active marketing investments made by Caribbean tourism authorities during the difficult 2020-2021 period — has produced a structural upshift in visitor volumes that now appears durable rather than transitional.

The performance across individual destinations varied, reflecting their different product mixes, air access situations and marketing positions. The Dominican Republic was the runaway leader by volume, the Bahamas and Cayman Islands led by spend-per-visitor, Jamaica delivered its strongest-ever Q1 stopover numbers, and Barbados and St Lucia both recorded new records for revenue per available room in their hotel sectors. The ECCU member states — Antigua and Barbuda, Grenada, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Dominica and Montserrat — collectively recorded Q1 arrivals that were 9 per cent ahead of their 2019 benchmark, a particularly significant result given that several of these small island economies remain highly concentrated in tourism.

For property markets across the Caribbean, the tourism performance data matters directly. Hotel occupancy rates, visitor spending levels and the degree of demand for short-term vacation rental accommodation all feed into the income projections that underpin property valuations, investment decisions and lending appraisals. A Caribbean tourism sector that is consistently outperforming pre-pandemic benchmarks by double-digit margins is one that provides robust economic support for residential and commercial property values in tourism-dependent markets.

Hotel Investment: The Development Pipeline Deepens

Strong tourism demand data is the primary catalyst for hotel investment decisions, and the Q1 2024 performance figures have reinforced what was already a significant and growing Caribbean hotel development pipeline. In Jamaica, the government announced in March the signing of three new hotel management agreements with international hospitality groups for north coast properties, adding approximately 850 rooms to the confirmed pipeline for the Montego Bay and Ocho Rios corridors. The agreements, signed at a ceremony attended by Tourism Minister Dana Morris Dixon, covered a range of product types: a 350-room all-inclusive on the Ironshore strip, a 280-room boutique resort near Rose Hall, and a 220-room adults-only property at a site in Discovery Bay.

Each of the Jamaican hotel developments carries significant implications for surrounding residential property markets. Hotel construction projects of this scale require substantial workforces during their multi-year build periods, create permanent hospitality employment upon opening, and attract the supporting commercial activity — restaurants, retail, transportation, business services — that drives demand for residential accommodation in the surrounding area. Land values in proximity to confirmed hotel development sites in the Montego Bay corridor have been tracking upward in response to the pipeline of announced projects.

In the Dominican Republic, the hotel investment pipeline remained the Caribbean’s largest and most active. The country’s Ministry of Tourism reported in March that hotel construction projects totalling more than 8,000 rooms were either under active construction or in advanced planning approval stages, spread across the established Punta Cana-Bávaro corridor, the growing Cap Cana development zone and newer frontier destinations including the Pedernales area on the country’s south coast and the Samaná peninsula on the north. International hotel brands including Marriott, Hilton, Hyatt and several Spanish groups were all represented in the Dominican pipeline, reflecting the country’s exceptional position as the Caribbean’s most diverse and high-volume hotel investment market.

In Barbados, the hotel investment story in March 2024 was characterised more by refurbishment, repositioning and capacity optimisation than by greenfield development, reflecting the island’s mature tourism product and its scarcity of undeveloped coastal land. Several established West Coast properties announced significant renovation programmes designed to upgrade their offerings to the ultra-luxury tier that commands the highest achieved rates in the Caribbean and that Barbados, with its reputation for quality, service and natural beauty, is particularly well-positioned to serve.

Citizenship by Investment: A Sector in Recovery

St Kitts and Nevis’s report of its highest Q1 application volume for the Citizenship by Investment programme since the 2019 reforms reflected a broader trend of recovery in the Caribbean CBI sector that had been building through 2023 and was now delivering measurable results. The enhanced due diligence requirements implemented across Caribbean CBI programmes in response to European Union and United Kingdom concerns about the programmes’ integrity had created a period of reduced application volumes in 2021 and 2022 as the administrative machinery adjusted and applicant pools self-selected toward higher-quality candidates.

By early 2024, the evidence suggested that this adjustment period had produced a more robust and sustainable CBI sector. Grenada, Antigua and Barbuda, Dominica and St Kitts and Nevis all reported improved Q1 application volumes compared with the equivalent 2022 and 2023 periods. The real estate investment routes — under which CBI applicants commit to approved property developments in lieu of or alongside a direct contribution to a government fund — remained popular, creating a flow of property investment capital into Caribbean resort and residential developments that would not otherwise be accessible to those projects at comparable cost of capital.

The interaction between CBI real estate routes and the broader Caribbean property market is nuanced. CBI-linked developments, by definition, need to achieve approved status under their country’s programme, which typically involves government vetting of the developer, the project design and the pricing structure. This creates a subset of the Caribbean property market that operates at premium pricing — the minimum qualifying investment typically being well above the market rate for comparable property — but that benefits from a demand stream of applicants seeking programme passports rather than conventional property buyers seeking value.

Guyana’s Oil Production: Approaching the Half-Million Milestone

Guyana’s crude oil production crossed 400,000 barrels per day during the March 2024 reporting period, according to data from the Guyana Energy Department and reporting in the Stabroek News. The milestone — achieved approximately five years after first oil from the Stabroek Block in late 2019 — placed Guyana on the steep portion of its production ramp-up curve, with the Payara development (ExxonMobil’s third FPSO, the Prosperity) contributing meaningfully to the growing output alongside the established Liza Phase 1 and Phase 2 operations.

Georgetown’s property market continued its extraordinary trajectory in March. Commercial property rents in the central business district were commanding prices that, in US dollar terms, were competitive with comparable space in Kingston or Port of Spain — a remarkable development for a city whose property market was largely domestic and modest in scale as recently as 2018. The residential market maintained the dual character that has defined it since the oil boom began: extraordinarily hot at the upper end, driven by expatriate demand from oil sector personnel, with acute affordability pressures in the lower and middle segments as oil wealth inflated prices well beyond the reach of non-oil sector incomes.

The Guyana government’s response to the property market challenges of the oil boom focused primarily on the supply side. The Housing Ministry’s accelerated construction programme, funded from oil revenues, was delivering new units in several communities on the East Bank and East Coast Demerara corridors. The programme’s scale, while significant by Guyanese historical standards, remained modest relative to the pace of demand growth, and advocacy organisations and opposition politicians continued to press for faster delivery and for policies to constrain speculative land price inflation in areas adjacent to planned government developments.

Interest Rates: The Affordability Weight Persists

The first-quarter 2024 tourism boom was delivering strong income growth for Caribbean economies most exposed to visitor spending, but the interest rate environment continued to impose a significant constraint on Caribbean property market activity — particularly for aspiring homeowners seeking mortgage finance. The US Federal Reserve held its benchmark rate at 5.25-5.50 per cent throughout the first quarter of 2024, maintaining the tightest US monetary policy stance in more than two decades and signalling that any easing was likely to be gradual and data-dependent.

Caribbean central banks had generally followed the global tightening cycle with their own rate increases, and by March 2024 the Bank of Jamaica’s policy rate stood at a level that kept commercial mortgage rates well above 10 per cent for most borrowers. The Eastern Caribbean Central Bank had maintained its rates given the ECCU’s fixed exchange rate arrangement with the US dollar. The consequence for first-time buyers seeking to enter the Caribbean property market through conventional mortgage finance was a monthly payment burden that consumed 40-50 per cent of median household income for properties at the lower end of the formal housing market — levels that housing finance professionals characterised as beyond the threshold of sustainability.

The affordability constraint was most visibly affecting the mid-market residential segment. At the luxury end — where buyers are frequently cash purchasers or are financing through international wealth management facilities at rates below Caribbean commercial lending rates — demand remained robust and the interest rate environment was a secondary consideration. At the ultra-affordable end — where government housing programmes set prices and provide concessional finance — supply constraints rather than financing costs were the binding limitation. The squeezed mid-market, comprising households earning between the minimum wage and twice the median income who neither qualified for social housing nor could comfortably service commercial mortgage rates, was where the interaction of high rates and insufficient supply was most damaging to Caribbean social and economic development.

Caribbean Leaders This Month

Based on evidence available during the 3 March to 2 April 2024 reporting period:

Best Q1 tourism performance: Dominican Republic — 3.4 million Q1 visitors, a Caribbean record for any single territory in a single quarter, underscores the country’s unrivalled position as the region’s tourism volume leader.

Strongest hotel investment pipeline: Dominican Republic — more than 8,000 rooms under construction or in advanced planning represents a development programme with no parallel in Caribbean hotel investment history.

Most significant hotel announcement: Jamaica — three north coast management agreements adding 850 rooms to the confirmed pipeline in a single reporting period is the region’s most productive single-month hotel investment result outside the Dominican Republic.

Fastest economic growth: Guyana — Stabroek Block production crossing 400,000 bpd confirms the continued acceleration of the country’s oil-driven growth trajectory, with further expansion in the pipeline.

Best CBI performance: St Kitts and Nevis — highest Q1 application volumes since programme reform demonstrates that the enhanced due diligence investment has yielded a more credible and durable programme.

Most stable investment environment: Barbados — completed IMF programme, low inflation, and strong luxury tourism performance make Barbados the Caribbean’s most consistently attractive jurisdiction for long-term capital.

Most acute housing challenge: Jamaica (mid-market) — the intersection of 10 per cent-plus mortgage rates and persistent supply shortfalls is most damaging for the mid-market segment where households have income but cannot access affordable finance or government social housing.

Overall Caribbean performer of the month: Dominican Republic — for record Q1 tourism, the Caribbean’s largest hotel pipeline, sustained FDI attraction and macro-economic stability that together make it the region’s most comprehensively strong performer.

Looking Ahead

The exceptional Q1 2024 tourism performance raises high expectations for the remainder of the year, but the Caribbean tourism sector faces a seasonally more challenging period in the April-to-June shoulder months before the summer season begins. Hotel operators and tourism authorities will be watching advance booking data closely to assess whether the extraordinary Q1 momentum can be maintained through the traditionally quieter spring period, and whether the summer 2024 season builds on the record-setting 2023 summer performance.

For Caribbean property markets, the coming months will be heavily influenced by the trajectory of US Federal Reserve policy. If the expected easing cycle begins in the second half of 2024, as financial market pricing suggested in early April, the transmission into Caribbean commercial lending rates could begin to provide meaningful relief to mortgage borrowers and residential developers during the second half of the year. Any further delays to Fed easing would extend the period of affordability constraint and continue to suppress mid-market housing demand across the region.

The Atlantic hurricane season opens on 1 June 2024, and early seasonal forecast indicators are being watched carefully by the insurance market, hotel operators and property investors alike. The warming sea surface temperatures that have characterised recent years continue to provide the thermodynamic fuel for intense hurricane activity, and Caribbean stakeholders are preparing their risk management and resilience strategies accordingly. The coming months will determine whether 2024 delivers the full-year tourism and investment performance that Q1’s exceptional results have made possible.

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.