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Years In The Making, Dan Shelley’s Multimillion-Dollar Tourism Vision About To Be Realized

The $120 Million Inter-Continental Cayo Largo Resort Will Open By Year’s End, The First Phase In A $500 Million Resort/Residential Community On Fajardo’s Oceanfront


October 24, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Dan Shelley, president of Puerto del Rey Inc., was one frustrated executive in the late 1980s. He had fallen head over heals in love with 100 acres of raw agricultural land in Fajardo called Finca de los Cañones (Farm of the Cannons), just north of his Puerto del Rey Marina, but no one seemed to know who the landowner was.

His goal, at the time, was to purchase the land and build a destination resort with a golf course and a small, independent flagged hotel near his still-unopened marina.

It took six years, but Shelley’s persistence paid off. He learned that the local government owned the land and completed the purchase transaction.

Cayo Largo Resort is born

Today those 100 acres are the site for Shelley’s planned $500 million, oceanfront resort/residential community. The resort is slated to have a soft opening by year’s end, with a formal grand opening sometime next year.

Six Continents Hotels, parent company of the Inter-Continental brand, owns a 35% stake in what is now called Cayo Largo Resort. It also owns the Inter-Continental San Juan Resort & Casino in Isla Verde. Shelly is the majority owner of Cayo Largo, with a 65% stake.

The first phase of Cayo Largo’s $120 million resort includes a 314-room hotel; a 7,000-yard, 18-hole, Ron Garl-designed golf course, and a 15,000-square-foot, full-service European spa. It also has two swimming pools and two separate beach areas–one for families and the other for adults. Construction of an 1,800-square-foot golf club is also underway.

"We hope to open by Christmas," Shelley said. "It all depends on the contractors and the operator. We’re just trying to finish the hotel as soon as possible."

The resort’s opening has been delayed in part because of the hotel’s change from an independent flag property to one under the Inter-Continental brand. The delays have cost the owners $16 million.

Cayo Largo is a 2,000-acre oceanfront resort community with 1,000 acres of forest on Puerto Rico’s northeast coast, just 70 minutes away from Luis Muñoz Marin International Airport. The Cayo Largo reef has a natural sandbar that stretches nearly 1,000 feet below the ocean during low tide. It’s the idyllic spot for a wet bar, where guests can walk through the shallow water to sit in the middle of the ocean while having a drink.

"This is really a luxury hotel that is designed with a sense of place off the east coast of Puerto Rico," Shelley said. "The name comes from the old Cayo Largo settlement on the east coast of Puerto Rico, with the Great House and scattered houses around the waterfront village."

Phase II, to open in late 2003, consists of a 70-villa oceanfront community with hotel amenities and personalized concierge services. The $35 million Inter-Continental Villas at Cayo Largo will have its own private clubhouse and pool, a grocery valet, a staff of private chefs, and housemaids. The one-, two-, and three-bedroom villas will range in price from $899 to $1,999 per night.

"We are working on Phase II right now because we want to start building it soon," said Shelley, whose other plans for Cayo Largo include residential homes and condominiums and a school.

"Our hotel is smaller than our competitors," noted Louis Philippe, general manager of the Inter-Continental Cayo Largo Resort. "We won’t be competing head to head with them because we will target small groups and individual travelers and because our prices will be higher."

Cayo Largo Resort’s business plan indicates that its guests will be 75% individuals and 25% group business. The target market is said to be willing to pay for good service.

"Inter-Continental has made its mark in the world by catering to business travel," said Philippe, who previously was general manager of the Inter-Continental Miami Airport West. "Our company has a history of strict management contracts [management without exposure], obtaining wholly owned properties, and limited franchising.

"Six Continents is a financially sound company that seeks opportunities where others might balk," Philippe continued. "It decided to buy hotels when investors were hesitant to do so because of the economic situation and because hotels are cyclical."

As befits a luxury resort targeted at businesspeople, rates at the Cayo Largo Resort will average $235 per night, though in winter (high tourism season) they’ll range from $349 to $2,000 per night. Also depending on the season, the resort will have 400 to 500 direct employees and will generate 1,500 indirect jobs in goods and services.

"We aren’t getting price resistance," Philippe said. "Occupancy in Puerto Rico is getting back to normal even though rates are a little behind, but I don’t see that as resistance."

A critical component to Cayo Largo Resort’s success is instilling the Inter-Continental culture in its staff, which means providing extraordinary, discreet, and efficient service to guests.

How does Inter-Continental plan to do this? Through year-round, intensive training, said company executives. There are approximately one dozen Inter-Continental managers already onboard, with another two dozen department heads and supervisors to be borrowed from the U.S. mainland and Latin America.

"The key to having some kind of continuity is getting and retraining employees," Philippe said. "We are looking for people with outgoing attitudes."

Philippe has worked for the Inter-Continental chain since 1985. He was general manager at Miramar Inter-Continental in Panama, resident manager at Del Lago Inter-Continental in Venezuela, and executive assistant to the manager at Inter-Continental Hotel in Medellin, Colombia.

"Puerto Rico is a great destination with one of the best airlift connections in the world," Philippe said. "It is also a beautiful island with international presence."

. New hotel developments stalled in Puerto Rico and U.S. mainland

Economic and political uncertainty and difficulty in obtaining attractive financing options have put a damper on the development of new hotels in both Puerto Rico and the U.S. mainland and have delayed the completion of those already under construction.

The number of properties in the Hotel Development Pipeline—all hotels under construction on the U.S. mainland, those scheduled to start construction in the next 12 months, and those in the early planning stage—decreased by 99, or 4.8%, in the third quarter (3Q) of 2002. The reduction brings the total number of projects to below 2,000 for the first time ever, according to Lodging Econometrics, the research division of National Hotel Realty that reports and updates U.S. development activity, such as projects, room counts, and percentage growth rates.

What’s more, 52 hotel projects, which together have 7,667 rooms, previously scheduled to start construction in the next 12 months are now said to be only in the early planning stage.

The picture isn’t much brighter in Puerto Rico.

According to the hotel project development report compiled by the Hotel Development Corp., a subsidiary of the Puerto Rico Tourism Co., 1,968 rooms should be added to the island’s current inventory of 12,886 no later than 2003. Of those new rooms, approximately 531 should be ready by the end of this year.

The figure for 2003 could grow by 1,096 rooms with the entry of the 156-room Martineau Bay Resort in Vieques (if it gets a new owner soon), the 225-room Carib Inn (still closed), the 255-room Marriott Courtyard (formerly known as the Crowne Plaza), and several other small hotels being planned.

"We have noticed that the interest to develop hotels in Puerto Rico is good. However, financial institutions now have stricter parameters for lending money," said Milton Segarra, executive director of the Tourism Co. "On the positive side is that every week more small and midsize hotels fall in the early planning pipeline, which shows that Puerto Rico is an investment opportunity."

Lodging Econometrics (LE) reports that the total room count in the Hotel Development Pipeline in the mainland U.S. fell 2.9% from 280,434 in 2Q 2002 to 272,301 in 3Q 2002, making it the second straight quarter below 300,000. That figure is 50% less than the high reached in 3Q 1998 and 22% lower than a year ago.

"The continuing declines virtually guarantee that net new guestroom additions will be near a 1.5% low in both 2003 and 2004. That’s good news for the industry, which is still recovering from the recession, the effects of 9/11, and restrictive business travel policies," said LE President Patrick Ford.

Only 176 new projects, totaling 16,294 rooms, opened in 3Q 2002, the fewest in the current cycle. LE estimates that a total of 82,000 to 84,500 rooms will open in 2002, with those numbers likely to fall below 80,000 in both 2003 and 2004.

Pipeline activity in the top 25 U.S. markets was essentially even with 2Q 2002. Third-quarter activity decreased in 13 markets but increased slightly in eight. Among the 12 largest markets likely to lag behind are Boston, Miami, Chicago, Seattle, and San Francisco.


This Caribbean Business article appears courtesy of Casiano Communications.
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