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 to a watching Caribbean investment community.
• 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 figures above prior-year levels.
• Trinidad and Tobago’s energy sector continues to anchor the region’s economic confidence, with LNG export revenues performing well and the government maintaining its programme of infrastructure investment and social development.
• The Atlantic hurricane season approaches its climatological peak, with meteorologists monitoring active tropical development in the eastern Atlantic and the Caribbean property and tourism sectors maintaining heightened preparedness levels.
• Jamaica’s government confirms that its Extended Fund Facility programme with the International Monetary Fund is in the final stages of formal preparation, with IMF Board approval expected in the coming months.
• Barbados’s summer tourism performance shows some improvement over June’s weak figures, driven by stronger-than-expected North American arrivals that are providing partial compensation for the 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 and improve 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 in particular 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. Several transactions that had been finalised but not formally completed in the pre-inauguration period have now been executed, and agents in the Punta Cana and north coast markets report a return of buyer confidence that was temporarily moderated by the electoral transition. 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 at Its Best

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 from the eastern seaboard continue to find Caribbean destinations — particularly Jamaica, the DR, the Bahamas, and the Turks and Caicos — highly competitive against alternatives in Europe or Asia. This annual North American demand surge provides a crucial revenue base for the region’s hospitality sector, helping to offset the lower-occupancy periods of the spring and autumn.

Jamaica’s resort corridor from Montego Bay to Negril is reporting strong July occupancy, with all-inclusive properties in particular operating at high capacity. The island’s airlift from US gateway cities — New York, Miami, Atlanta, and Philadelphia — is at its annual peak, and the tourism sector is benefiting from what appears to be a sustained improvement in the Jamaica brand’s standing in North American leisure travel markets following several years of careful destination marketing investment.

The Turks and Caicos Islands continues to demonstrate its extraordinary capacity to attract ultra-premium visitor spending. Grace Bay’s hotel and villa rental market is operating at high occupancy and premium rate levels, and the island’s profile as one of the world’s premier beach destinations — regularly acknowledged in international travel rankings — continues to drive strong year-round demand from a globally diverse high-net-worth visitor cohort. The property investment market in TCI reflects this desirability, with transaction activity and pricing in the premium segment maintaining levels that stand out from the broader Caribbean market.

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 identifies the peak of seasonal activity 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 their full preparedness posture, with hotel operators, property managers, and island governments all operating their hurricane season protocols.

The 2012 season has been moderately active in its early stages, with several named storms developing but none so far causing significant damage to major Caribbean tourism destinations. Meteorologists are watching a number of tropical waves emerging from the African coast and tracking westward across the Atlantic, a pattern that typically generates hurricane formation during this time of year. The Caribbean property investment community is following these developments with professional attention, recognising that storm activity during the peak tourism months can have short-term revenue implications even when physical damage is limited.

Caribbean property owners and investors who have not already reviewed their hurricane insurance arrangements are being strongly advised to do so before the season’s peak. The region’s insurance market continues to develop its product range and underwriting capacity, and there are more options available to property owners than at any previous point in the region’s insurance history. For new investors considering Caribbean property acquisitions, hurricane risk assessment and appropriate insurance coverage are 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 extensive 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.

The property market in Trinidad reflects the underlying economic strength. 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 substantial professional and business class, who have the purchasing power to support a market that operates at price points well above those typical in many other Caribbean markets.

Tobago’s appeal as a tourism and property investment destination is continuing to grow, with the smaller island attracting growing interest from both Trinidadian buyers seeking weekend and holiday retreats and from international investors who recognise the potential of the island’s exceptional 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 as Tobago’s profile rises in global travel media.

Caribbean Leaders This Month

Danilo Medina, President of the Dominican Republic: Now formally inaugurated, Medina is establishing the rhythms and priorities of his administration. His first weeks in office have been characterised by meetings with major tourism investors and infrastructure partners, signalling that the DR’s pro-development economic posture will be maintained under his leadership.

Portia Simpson Miller, Prime Minister of Jamaica: Simpson Miller’s government is managing the final stages of the IMF programme process while simultaneously 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.

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.

Perry Christie, Prime Minister of the Bahamas: Christie’s PLP government is in its early months and is establishing its approach to the major issues facing the Bahamian economy, including the management of the ambitious Baha Mar resort development in Nassau and the question of introducing a value-added tax to broaden the government’s revenue base.

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 the softness in European visitor numbers are testing the government’s resolve, but the fundamentals of Barbados’s investment proposition — its legal framework, its institutional quality, and its premium brand — remain intact.

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.

Roosevelt Skerrit, Prime Minister of Dominica: Skerrit’s government is making strategic investments in Dominica’s tourism infrastructure, using a combination of CBI revenues and development assistance to improve the island’s connectivity and hospitality capacity. The Prime Minister has also been active in international climate advocacy, drawing attention to the vulnerability of small island developing states to extreme weather events.

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 shoulder season for North American tourism. The region’s industry is well prepared and professionally managed, but the inherent unpredictability of tropical weather means that the coming weeks will require continued vigilance and readiness to activate storm response protocols if conditions require.

Jamaica’s IMF programme approval is expected in the autumn, and this will represent 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 the programme’s targets, which will ultimately determine whether the fiscal improvement that the programme promises translates into improved investment conditions on the ground.

The Caribbean investment market is approaching the end of its traditional summer season 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 European buyers to the market — if Eurozone conditions permit — and the beginning of the all-important winter booking season. The next edition will provide a comprehensive end-of-summer assessment and an early read on the 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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