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Economic Outlook Uncertain For Hotel Projects In The Pipeline


October 4, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

For developers with projects in the pipeline, the economic outlook before the Sept. 11 terrorist attacks was already daunting.

Amid a slowing economy, finance concerns were mounting, particularly for new hotels, which are difficult enough to complete under normal circumstances. Now, with the stock market suffering, airplanes flying half-empty, and hotels with rooms to spare, developers see a panorama that has taken a turn for the worst.

"The situation is characterized by vast uncertainty," said a veteran developer, who spoke on the condition of anonymity, who has yet found financing for his multi-million dollar project. "Everyone is wondering what will happen next."

Samuel Rosado, deputy executive director of planning & development for the Puerto Rico Tourism Co., said the agency has been checking up with developers that have projects in the pipeline and none have said they plan to cancel or defer projects.

The Government Development Bank is looking for ways to re-capitalize its $50 million Tourism Development Fund loan guarantee program and GDB President Juan Agosto Alicea said the Bank is offering, if needed, attractive financing structure to make sure hotel development in Puerto Rico continues.

To date, the Tourism Co. has 21 hotel projects or 1,805 rooms under construction, some of which should open by year’s end.

The list of hotels includes Caguas Hampton Inn, Casa Careyes, Casa Taina, Cayo Largo Inter-Continental Resort, Coral Princess Inn, Costa Bonita, Costa de Oro Inn, Hacienda Punta Pozuelo, Hotel Promenada Plaza, Hotel Villas Piedras Blancas, Martineau Bay Resort, Paradise Village Resort, Paradisus Sol Melia (1st phase), Passion Fruit Bed & Breakfast, Plaza de Armas, Rincon Beach Resort, Rincon del Mar Beach, The Villas at Horned Dorset Primavera, Torres de la Parguera, and Villas de Costa Dorada.

With developers, lenders, and investors wary about hotel performance for 2002, PricewaterhouseCoopers expects 6% of hotel projects in the U.S. scheduled for completion in 2002 and 2003 to be cancelled or deferred.

Room completions in the States for 2002 are estimated to be 81,800 or 28% below 2001 completions. Room completions for 2003 will decline to 77,000, or 6% from 2002 levels.

According to PricewaterhouseCooopers, room completions in 2001 will decline 18.5% below the level expected in their July 2001 Lodging Forecast, and 16.2% below in 2003. Combined with higher numbers of room removals in 2002 and 2003, net supply growth for 2002 is now estimated at 1.5%.

"Most of the hotels on the Tourism Co.’s list won’t be ready to open for several years and there is always something that will happen in the tourism industry that makes a developer think twice about not moving forward with a project or accelerating it," said Horst Sicher, general manager of the San Juan Marriott Resort and Stellaris Casino. "After every rain, the sun reappears. Most developers plan to invest in Puerto Rico for the long range."

The Tourism Co. also listed 13 projects in the pipeline or 3,231 additional rooms to be under construction during fiscal year 2002.

The list of projects in the pipeline includes Carib-Inn, Caribe Village, Convention Center Hotel, Crowne Plaza, Dos Mares (1st phase), Fairmont Coco Beach, Fajardo Inn (3rd phase), Hacienda Tropico, Inn on the Blue Horizon, Luquillo Beach Hotel, Marriott Courtyard, Pichi’s, Villa Montaña (3rd phase), and Villas de Costa Dorada (2nd phase).

This Caribbean Business article appears courtesy of Casiano Communications.
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