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The Caribe Hilton Hotel: A New Facet For Puerto Rico’s Crown Jewel

The venerable Caribe Hilton Hotel begins its second half-century with a new look, a $20 million, 250-room expansion plan…and aggressive marketing to attract guests


January 18, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

After a nine-month, $60 million facelift, the Caribe Hilton is courting the thousands of guests who for years have loved it so much.

The Caribe Hilton was once the crown jewel of Puerto Rico’s tourism industry.

In 1999, the property valiantly underwent a nine-month, $60 million facelift to recapture the dazzling luster that once distinguished it as the gemstone of Puerto Rico tourism.

The effort The long renovation period, however, had its negative consequences, the most serious casualty being the loss of many of its original loyal clientele, who were reportedly turned off by the premature reopening of the hotel while much of the construction work was still going on.

Having now completed major construction, the 50-year-old dream of Teodoro Moscoso–Puerto Rico’s first Economic Development Administrator (Fomento) who built it in 1947 for $7.5 million–is striving to win back business that went to competing hotels.

CARIBBEAN BUSINESS sat down with David Michels, chief executive of Hilton Group plc, and Daniel Hughes, vice president of the Caribbean for Hilton International, for an exclusive interview in which they talked about Hilton’s plan for Puerto Rico’s most enduring tourism symbol.

Hilton is no stranger to Puerto Rico. "We were one of the first people to take tourism seriously on the island," said Michels, referring to a management contract Hilton has had with Caribe Hilton since its inauguration 50 years ago. Whatever it takes, Hilton is committed to make sure the historic property returns to its former glory as the island’s leading hotel.

More rooms to be added

Effective April 1, Hilton International, who bought the hotel from the government in August 1998 for $80 million in cash, will invest another $20 million in the Caribe Hilton to add 250 rooms on the adjacent seven acres that once belonged to the U.S. Navy.

"The new building, which temporarily will be called Las Casitas, is wonderfully designed because it’s staggered like a set of stairs, which gives each room an unimpeded view," Hughes said.

With these new rooms, Hilton will have invested a total of $160 million–which includes the $80 million to buy the hotel itself–and will have boosted the hotel’s room inventory to nearly 900 by 2002, making it Puerto Rico’s second largest hotel in terms of number of rooms, one of the largest properties, and also one of the most significant tourism investments in the Caribbean.

"Puerto Rico has been moving in one direction; more tourism," Michels said. "We feel comfortable with our investment in Caribe Hilton and its unique location. As we put the entire package together we know it will be a profitable deal."

Hilton also plans to renovate Caribe Hilton’s exhibition center some time next year to introduce a temporary casino, which would complete the package of amenities that Hilton believes are a necessity for a first-class hotel. Hilton has never owned a casino in any of its properties. When Caribe Hilton housed a casino a few years ago, both the hotel and the casino were government-owned, though Hilton managed it.

Special touches keep business clients happy

The Caribe Hilton has always been known as one of the top hotels for business people in Puerto Rico. Consequently, Hilton has made sure to keep its business customers in mind when refurbishing the hotel.

Hilton has added high-speed Internet access in all its bedrooms. The company is also in the final stages of launching a new product–Hilton Meetings–a state-of-the-art conference and meeting rooms center.

Hilton Meetings will have features for business executives who need computer modems on meeting room tables and a whole host of features like special indirect lighting and board room-type chairs, a fully staffed business support center, and full-time audiovisual technical personnel.

The Caribe Hilton’s Hilton Meetings executive conference center has 11 meeting rooms that were added on the second floor of the main hotel building. The center is connected to the banquet room floors by a glass and steel bridge that spans the new two-story lobby. The 7,400-square-foot high-tech conference center is dedicated to meetings and convention business and offers high-tech presentation capabilities.

In addition, the Caribe Hilton has two executive floors with lounges, and private check-in and check out areas catering especially to business travelers. The hotel also has an executive check-in counter located in the lobby area too.

Of the Caribe Hilton’s existing 645 rooms, close to 150 are designated business rooms, each equipped with in-room fax machines, if requested.

Another new element Hilton added as part of its expansion was Olas (Spanish for "waves") Spa and Health Club, the island’s first beachside spa, fitness center, and beauty salon.

The 12,000-square-foot spa’s blue color scheme reflects the hues of the Atlantic Ocean, only steps away. Olas Spa has 16 treatment rooms, several with ocean views; men’s and women’s locker rooms with sauna and steam room; a VIP spa lounge for couples’ rubdowns; a full service hair salon; and a state-of-the-art gym.

To satisfy a healthy appetite before or after a workout or spa treatment, guests can indulge at Olas Health Bar, which features gourmet spa cuisine and fresh fruit smoothies.

Re-polishing the antique jewel had its price

A month ago, extensive renovation work at Caribe Hilton’s main building was finally completed. All that’s left is minor fine-tuning such as completing the landscaping. The hotel’s upgrades include a completely remodeled lobby, redesigned and relocated public areas, restaurants, a new bar, a new ballroom, renovations in all of its guestrooms and expansion of the meeting rooms on the second floor.

The Caribe Hilton’s new entry and open breezeway to its lobby offers stunning ocean views through a clear glass wall, which has a separate group check-in area to keep bus and taxi arrivals away from the main lobby. The guest reservation area within the lobby was relocated to afford a view of the sea.

After closing for nine months starting in March 1999, the Caribe Hilton re-opened with great fanfare on Dec. 25, 1999, only to face low occupancy and poor reservations due to the ongoing construction work.

"People don’t like changes," said Hughes, referring to the renovation. "But we had to do it because the hotel was going on 50 years [old] and things were run down."

The error of reopening Caribe Hilton before finishing construction caused the hotel to lose a fair amount of market share. "We made a mistake to open our doors too early when there was still construction noise going on," Michels said. "And we surely paid for it."

This past summer, Caribe Hilton witnessed an average 42% occupancy rate. Fortunately for Hilton, the number rose this month and is maintaining a steady 80%. "It seems word has gotten around that the construction is finished and that the hotel is better than ever," Hughes said.

Falling in love again

Hilton wants to seduce its old clientele. To make sure occupancy numbers remain high, it will invest heavily in marketing. Locally, Caribe Hilton has hired the services of advertising firm Premier Maldonado & Associates to organize promotional and social events.

"We [Hilton] are very committed to and involved with the community," Hughes said. "That’s why we have moved money from direct marketing to public relations."

As for the food and beverage business, Caribe Hilton was once known locally as the place where local social events happened.

"We want that tradition to continue," Michels said. As a result, Caribe Hilton has built another ballroom to host even more events.

"It’s true that we are focusing heavily on the food and beverage business at Caribe Hilton because we want to reposition the hotel to the world-famous high standards it had for years," said Hughes.

To promote the 12 Caribbean hotels and resorts, including Puerto Rico, in the U.S., Hilton hired advertising firm The Advantage Group of Florida and public relations is handled by Quinn & Co. of New York. "It’s much more cost effective to promote 12 destinations than just one," Michels said.

An aggressive Caribbean expansion

Hilton has adopted an aggressive approach to expand its product to 12 in the Caribbean so its presence is felt in the market.

"Most big hotel companies do not cover the Caribbean properly," Michels said. "We are trying to move more in that direction in the last three years than we ever had. Our objective is to own 12 properties in the Caribbean because it’s easy to transport our European clients to the locations," said Michels.

Currently, Hilton manages and/or owns eight properties in the Caribbean: one each in the Bahamas, Jamaica, St. Lucia, Trinidad, Tobago, and Venezuela (Margarita), and two in Puerto Rico–Caribe Hilton and the Ponce Hilton–which the government of Puerto Rico recently sold to the Serralles family. (CB Dec. 21) However, the Ponce Hilton, which will be renamed Costa Sur Resort Ponce Hilton, will continue to be managed by Hilton International.

Hilton is studying the possibility of acquiring and/or managing hotels in Turks & Caicos Islands, the British Virgin Islands, Antigua & Barbuda, Dominica, Barbados, St. Vincent & the Grenadines, Grenada, the Dominican Republic, Cayman Islands, Aruba, and Cuba (once the trade embargo is lifted).

The company has three categories of hotels–pure resort, business resort, and Caribbean commerce. Pure resort refers to hotels on beautiful locations, while business resorts are hotels with ample meeting space, swimming pools, and private beaches such as the ones found in San Juan and Ponce. Caribbean commerce refers to city-centered hotels with a Caribbean flair.

Luring even more guests

Hilton has entered into agreements with a number of other hotel companies to create Internet sites to enable consumers and industry professionals to book hotels directly.

An alliance with Hilton Hotels Corp (HHC)–the U.S. Hilton chain–continues to develop. Their joint website––accounts for 4% of bookings through Hilton Reservations Worldwide. Following HHC’s acquisition of Promus, Hilton’s joint guest loyalty program –Hilton Hhonors–has increased the total number of members from 6.5 million to 8.5 million with the expectation that this number will reach 11 million by year’s end.

Hilton’s company profile

Hilton International is a subsidiary of London-based Ladbroke Group plc. The group owns the Hilton brand name outside the U.S., and is an entirely separate company from the HHC, although associated with it.

Hilton has 250 hotels in 60 countries around the world. Hilton spun off from California-based HHC in 1964. Ladbroke acquired Hilton and its 92 hotels in 1987 for $1.1 billion. Much of Ladbroke’s income is derived from gaming operations in Europe, such as casino gambling and off-track betting.

Caribe Hilton’s history

When Moscoso first envisioned the Caribe Hilton, critics doomed the project to failure. They derisively called the hotel "Moscoso’s Folly."

The reasons for the criticism were numerous. Many feared a flashy hotel with a casino would bring to San Juan some of the less desirable elements that had made Havana a bustling tourism haven. Others considered tourism and hospitality jobs demeaning. Most significantly, privately owned hotel properties already on the island were failing miserably.

It didn’t take long for Moscoso to prove critics wrong. Hilton opened the then 300-room hotel in 1949 as its first property outside the U.S. mainland, even before it opened the Havana Hilton. The price tag: $7.5 million. The Caribe Hilton quickly became the flagship for Hilton International and within a few years was making a profit.

"It became Fomento’s biggest source of income from its investments," wrote A.W. Maldonado in his book Teodoro Moscoso and Puerto Rico’s Operation Bootstrap.

Maldonado’s detailed account of the hotel’s development credits Caribe Hilton for giving birth to Puerto Rico’s tourism industry. "After the hotel’s inauguration, tourist expenditures exploded from $3.5 million in 1952 to $29.4 million in 1960," Maldonado wrote. Of course, the Cuban Revolution and closing of hotels in the neighboring tourist mecca helped greatly. At that time, Cuba was the Caribbean playground for Americans.

Sitting on what many consider the best piece of real estate in San Juan, perhaps no hotel is so Puerto Rican in its essence as the Caribe Hilton.

The Caribe Hilton’s impact on tourism can still be felt in the more recent wave of major hotel and resort chains–such as The Ritz-Carlton, Westin, Sol Melia, J.W. Marriott, Inter-Continental, and Four Seasons–which have opened or will soon open properties on the island.

This Caribbean Business article appears courtesy of Casiano Communications.
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