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Are extreme environmentalists controlling our economy?

Opposition to hotel development threatens tourism’s future growth


March 24, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

A temporary parking site adjacent to the Courtyard by Marriott in Isla Verde has unleashed a battle between the developer and environmentalists that has attracted widespread media attention. Unless an agreement is reached, the dispute could impact the future of hotel development in Puerto Rico.

The dispute between environmentalists and hotel developers in Puerto Rico has escalated in recent weeks with both sides clashing over a proposed hotel project in Isla Verde, adjacent to the Courtyard by Marriott.

Although the hotel is still three years from construction start-up, environmentalist groups who oppose the project took over a site in Isla Verde adjacent to the Courtyard where construction of a temporary parking lot was underway. The environmentalists further threatened to halt any future development on the site. The dispute has attracted widespread media attention, with local politicians and legislators jumping on the bandwagon calling for hearings, investigations, and the outright cancellation of the hotel project which had received the endorsement of various agencies over the past three years.

The battle over the Isla Verde temporary parking and future hotel site is just one example of tourism development projects facing opposition in Puerto Rico. Public pressure from environmentalist groups has intensified on other proposed projects, including two resorts planned for Luquillo and Fajardo, which are being pressured by the Sierra Club to cancel development plans, and Costa Serena, a tourism project proposed for the municipality of Loíza, which has faced opposition for more than two decades. Opposition to hotel projects is threatening the future of tourism development in Puerto Rico unless a balance between economic development and environmental protection can be achieved.

Ecology vs. economy

While ecology and economy are derived from the same Greek root word "eco" which means "home" and both claim to be looking out for the welfare and well-being of the people, they couldn’t be further apart when it comes to hotel development in Puerto Rico.

The fact is, however, that environmentalists and hotel developers are not far apart in their pursuit of protecting Puerto Rico’s environment and natural resources. The tourism industry has a vested interest in protecting Puerto Rico’s natural and cultural resources, which are at the core of its business. It is certainly not in the interests of hotel developers who invest hundreds of millions of dollars in properties in Puerto Rico to damage the beauty, natural resources, and attractions that will become the property’s allure.

The importance of tourism for Puerto Rico is undeniable. The industry generates about 59,000 jobs according to the Puerto Rico Planning Board and visitors to the island spent $2.6 billion in fiscal 2003. However, as CARIBBEAN BUSINESS has reported, the tourism industry is far from reaching its maximum economic potential (CB March 10). Puerto Rico has only added 511 new rooms to its inventory over the past four years and the island’s shortage of rooms is preventing the industry from growing and achieving its maximum potential, falling far behind other destinations in the Caribbean.

According to the World Travel & Tourism Council, over 100,000 hotel rooms were added to the Caribbean region from 1990 to 2000; a capacity increase of 66%, bringing the total number of rooms in the region to 252,300. The Caribbean Hotel Association reports that nearly half (48%) of the rooms are concentrated in Cuba, the Dominican Republic, and Cancun in the Mexican Caribbean. Only about 5% of the hotel rooms in the Caribbean are in Puerto Rico, despite the fact that the island has the largest international airport in the region with connections to major cities worldwide and is a safe haven under the U.S. flag with a foreign cultural flavor.

Earlier this month, Peter Dolara, senior vice president of American Airlines for the Caribbean and Latin America, told CARIBBEAN BUSINESS during an exclusive interview that Puerto Rico will continue to fall behind in tourism unless the island increases the number of its hotel rooms. Dolara also stressed the point in a subsequent meeting with Gov. Aníbal Acevedo Vilá. He made it very clear that many more tourists would come to Puerto Rico if we were to increase the room inventory.

Although tourism has the resources and potential to become one of Puerto Rico’s major industries, and doesn’t depend on tax incentives from the U.S. Congress to attract investment, it seems that developing hotel rooms in Puerto Rico is not an easy task. Not only must developers endure a lengthy and costly permitting process to get a hotel project started in Puerto Rico, opposition from environmentalist groups can prevent even those tourism projects that are duly permitted and have more than complied with all local and federal regulatory requirements for getting off the ground.

"What bank is going to finance a hotel project if they know this could happen?" said Hugh Andrews, president of International Hospitality Enterprises Inc. (IHE). "It takes 10 years to obtain the permits, and even if you have 100% of the permits the media could allow one person to dominate the news without verifying information, who could potentially stop an entire industry."

Andrews, who has been developing hotels in Puerto Rico for the past 35 years, has played a key role in the growth of the island’s tourism industry, successfully renovating, expanding, and developing premier properties throughout the island that had been closed. Initially working for Williams Hospitality Management Co. and now with IHE, which is dedicated to the development, renovation, repositioning and management of hotels and resorts in Puerto Rico, Andrews has personally invested, or persuaded others to invest–even including a bank as far away as Japan–well over half a billion dollars in renovating and developing 11 hotel properties throughout the island. IHE’s recent project in Isla Verde has spurred public controversy, with extreme environmentalist groups halting work underway on a temporary parking site adjacent to the Courtyard that isn’t even part of the future hotel project.

While Andrews has the longest record in Puerto Rico of continuous successful hotel operations on the island, he is also no stranger to controversy when it comes to developing hotels. The experienced hotelier has faced more than his share of opposition in Puerto Rico despite being a key figure in successfully turning the local hotel business around.

In 1976, after four different names–the Ponce de León, the San Gerónimo Hilton, the San Gerónimo, and the Helio Isla–the 340-room hotel located in Condado, which was about to be closed, was acquired by Andrews and successfully repositioned as the premier commercial hotel in Puerto Rico under the name Condado Plaza Hotel & Casino. Two years later, the bankrupt and shuttered 250-room Flamboyán Hotel located across the street from the Condado Plaza was also purchased by Andrews’ group, renovated, and integrated into the Condado Plaza. Today, the Condado Plaza (both properties) employs 850 people, according to figures obtained by the Puerto Rico Tourism Co. and is one of the island’s most successful business hotels.

"The Condado Plaza had been bankrupt four times, the 200-room Flamboyán Hotel [now the Laguna Wing of the Condado Plaza] was closed and abandoned when we bought it in 1978 and built the bridge over Ashford Avenue to connect the properties and yes, the ambientalistas went crazy over this too," recalls Andrews. Yet, in all the years the bridge has been functioning, it has not caused any environmental problems. Today, 800 people work in the successful hotel property.

As the founder and president of Williams Hospitality Management Co., in 1984 Andrews purchased the 378-room El San Juan Hotel & Casino in Isla Verde. The bankrupt and closed property was renovated, repositioned, and inaugurated as the premier hotel in San Juan catering to the luxury leisure individual and group traveler, quickly gaining success and recognition as one of the finest resorts in the world.

In 1993, Andrews took over the bankrupt and abandoned 400-room El Conquistador Resort & Country Club in Fajardo, renovating and repositioning the property as the incentive-market luxury-destination resort. In order to adequately reposition El Conquistador, Williams added 350 hotel rooms, 60,000 square feet of banquet and meeting space, and a luxury five-star condominium component known as Las Casitas. This was the first time the concept of condo-hotel had been applied to finance hotel properties in Puerto Rico. The resort complex, now recognized as one of the most beautiful resorts in the world, employs 1,700 people.

"El San Juan had been closed in bankruptcy when we purchased it, and El Conquistador had also been forced into foreclosure and had stood abandoned and vandalized for more than 10 years when we purchased it in 1988-89," said Andrews. "Between the Condado Plaza, El San Juan, and El Conquistador, my old company [Williams Hospitality] created more than 2,000 hotel rooms and a whopping 5,000 jobs from 1976 to 1993. The current value of the Condado Plaza, El San Juan, and El Conquistador exceeds $750 million."

Other hotel properties acquired, renovated, and developed by Andrews’ IHE include El Convento Hotel, Hotel Pierre, the former Condado Beach, and La Concha, currently being renovated with an investment of $225 million, and the Courtyard by Marriott. "El Convento was a tragedy costing the government millions in losses a year until our group purchased it as the first hotel to be privatized by the Rosselló administration," Andrews said.

Courtyard battle

In 2003, IHE acquired the former Crowne Plaza hotel in Isla Verde, which was vacant and in foreclosure by the Government Development Bank and Citibank, which held joint mortgages on the property valued at $24 million. The Isla Verde property included a five-acre site next to the hotel. IHE invested $20 million in renovations to transform the 260-room hotel into a Courtyard by Marriott. It also tore down the wall that cut the property off from the beach and spent $50,000 in new palm trees and landscaping. Today, the Courtyard has approximately 300 direct employees and generates 100 indirect jobs including musicians, security guards, pool and beach concessions, parking, and contract landscaping workers, among others.

The Courtyard obtained permits for the temporary parking development adjacent to the property from the Regulations & Permits Administration (ARPE by its Spanish acronym) in October 2004; from the Department of Natural & Environmental Resources (DNER) in February 2005; and from the Environmental Quality Board on Feb. 22, 2005. Since work began on the temporary parking, however, environmentalists have been staging protests blocking the work; the project has since been halted by various commonwealth agencies; the Institute of Puerto Rican Culture fined the Courtyard $100,000 without an administrative hearing; legislators have voiced their intentions to investigate the project; and the mayor of Carolina is calling for the project to be halted altogether and the site turned over to the municipality. Barring IHE’s development is in effect a way of confiscating the developer’s assets and making it difficult for any future project planned for the site to obtain the necessary financing.

The site for the temporary parking was reported by the local media as being fenced off, closing the public’s access to the beach. Not true, says Andrews, who explained that the black vinyl fence placed in the area was actually required by local environmental agencies to prevent any dirt from the site under construction from going into the beach’s sand and to help control erosion. "The black vinyl was placed to protect the beach. In spite of this, environmentalists in the name of protecting the beaches have been tearing down the vinyl fence which is a protective fence," stated Andrews.

"The permits for the temporary parking took six months," added the hotel developer. "We’re not building a hotel. The hotel project has been endorsed but it will be built during the next three years. It has taken several years and thousands of dollars invested to get these permits. If any developer knows the permitting process in Puerto Rico inside out, that’s me. I’ve been doing this for decades. We sit here wondering why we have fewer rooms in Puerto Rico than any location in the Caribbean from Cuba to Cancun. No developer from the outside wants to go through this. Puerto Rico has more serious issues to address than to investigate a project that has complied with all of the government’s regulations."

Andrews says he is not privatizing the beach. On the contrary, when IHE acquired the Courtyard a 20-foot wall was demolished to open up the hotel’s beach area to the public. "How does adding public parking that is being used by beach-goers privatize public beaches? We’re taking hotel properties and opening them up to the public," stated Andrews.

Nonetheless, José Aponte, mayor of Carolina, who admitted to CARIBBEAN BUSINESS that he had endorsed IHE’s hotel project in Isla Verde, now opposes it because he believes there have been violations in the process. "We have always established that we support a project of this nature as long as it has the approval of all regulatory agencies. We said we would endorse it if it complied with all requirements of all government agencies. We endorsed the project with this stipulation," Aponte said. "However, I have visited the site and from my point of view, there are several violations in the process. The developers are depositing filling material, and I am under the impression that they were exceeding the area limitations. I believe the contractor began the construction of a temporary parking as a strategy. They build the temporary parking before initiating the hotel construction, they impact the land, and when the time comes to solicit permits for the construction of the condo hotel they can argue the site is already impacted."

The Carolina mayor has contracted a law firm to conduct a complete legal analysis of the regulatory agencies and the process they may have undertaken. The law firm is expected to submit its findings in the next few weeks, says Aponte. The mayor admits the public dispute over the Courtyard’s temporary parking could have an affect on future attempts to finance hotel projects in Puerto Rico.

"The public discussion of this issue affects all parties. On our island we will always have a conflict between economic development and the protection of the environment. This conflict is necessary to balance both interests," Aponte said, adding that the beach would still be public even if the developer built a hotel on the site.

Mayor Aponte admits he has not met with Andrews and says he will not meet with any of the parties involved until his lawyers complete their analysis of the project’s permitting process. "Our lawyers will not communicate with Hugh Andrews. They will work with the information they have," stated Aponte.

Andrews, on the other hand, says his dealings with Mayor Aponte and the municipality have been very cordial for the past three years in regards to the Courtyard project and before that. "Mayor Aponte was a key player in the private-public sector partnership that allowed us to reopen the El San Juan in 1986, which in turn spurred the renaissance of Isla Verde…indeed was the catalyst for making Isla Verde the center of our island tourism that it is today," Andrews said. "A lot of residents in the area still remind me that real-estate values in adjacent condominiums doubled in the 12 to 18 month period after the El San Juan reopened. This is exactly what will happen in Condado when we reinaugurate the Vanderbilt and La Concha hotels."

On March 8, the Council for the Protection of Archeological Land Heritage of Puerto Rico, which is ascribed to the Institute of Puerto Rican Culture (ICP by its Spanish acronym), emitted an order stopping the project and issued the Courtyard by Marriott a $100,000 fine. The ICP never held an administrative hearing nor did the agency give the Courtyard’s owners the opportunity to present evidence in their favor. The director of the agency said the project was moving terrain without their authorization.

"The ICP is invalidating permits given by ARPE and DNER. It has done so without one site inspection. The director just read the newspapers and emitted a cease-and-desist order. They are overruling agencies in charge of the permits process based on what they read in the newspapers. Where does that leave the system?" Andrews said.

Archeologist Jaime G. Vélez, who inspected the Isla Verde site previously, says he conducted the tests and didn’t find anything. "In this case I inspected the project, did the tests, and didn’t find anything, only a few pieces of ceramic. I presented the study to ICP and they asked me to document an archaeological study. I told them there is no need for one and extended to them an invitation to go and see the site, but they refused to do so," Vélez said.

"The important thing is to clarify that I inspected the site and found no movement of land. I did find there was some sand extraction but it is difficult to determine who is responsible. The characteristics of the zone make the site prone to sand extraction due to natural causes like the wind, erosion, etc. What the Marriott has done hasn’t affected in any way the integrity of the terrain," he pointed out.

Vélez says when construction companies received a cease-and-desist order from ICP, they decided to pay the fine because it is more expensive to wait for a public hearing. "The ICP issued a decision without going to the site. I believe they have an erratic way of imposing fines without valid proof to sustain their arguments. A company can go bankrupt during this process. For the past three years, the ICP has increased the number of fines it imposes. We are speaking of a lot of money."

The Puerto Rico Legislature is investigating the controversy over the Isla Verde site and Roberto Arango, chairman of the Senate’s Commerce, Tourism, Urbanism & Infrastructure Committee, is heading the effort. "I don’t understand why the ICP fined Marriott Courtyard without making a visual inspection, and this will be part of our investigation. If the fine isn’t justifiable, our committee will do all that is in our hands to eliminate the fine," Arango said.

"Our committee is undertaking an investigation and has solicited all the related documents from the regulatory agencies involved. If the permits were given in a legal and correct manner, and the developer has built following those guidelines, we must be extremely careful. If the developer violated the guidelines, then it will have to pay the consequences," said the senator.

"We must be careful when stopping projects that have already started construction with official approval from the local and federal government agencies. The developer should not be responsible for mistakes made by the agencies. If the agencies made a mistake in this case, they should pay through legal action," added Arango. "We must be careful because economic development and environmental responsibility go hand in hand. It isn’t wise to cancel permits to developers who are constructing by the book."

ARPE Administrator, Luis Vélez Roche admits the agency approved the preliminary development and the draft of the project. "ARPE did approve an expansion. Right now we are studying the different applications they [Marriott Courtyard] have given us."

ARPE is also examining the site where the developer plans to build its temporary parking lot. "We are verifying the project’s plans because it will guide the evaluations we will make. If the area is temporary parking, that’s part of the analysis we’ll make," Vélez said.

Impact on tourism’s future

The success of the island’s tourism industry is dependent to a large extent on its natural resources and attractions. Tourism won’t flourish in areas that lose their attraction to visitors; therefore, it isn’t in the financial interests of hotel developers to have a negative impact on Puerto Rico’s natural resources. Collaborative efforts from governments and all sectors of the industry are needed in order to realize Puerto Rico’s tourism industry potential and secure long-term future development, while still protecting the island’s environment and natural attractions.

"The El Conquistador Resort would not have been possible without the support of former Govs. Rafael Hernández Colón and Pedro Rosselló. It took 10 years to build El Conquistador," said Andrews, stressing the importance of collaborative efforts between the public and private sectors in developing tourism.

Hotel and tourism development isn’t the enemy of the environment as it is often publicly portrayed by the local media. While the development of the temporary parking site near the Marriott Courtyard has been debated in the daily press for several weeks now, Andrews says he has not been contacted once by any media for his input or to discuss the project.

"No one has bothered to ask me what is happening at the site. They [the media] have reported that we are extracting sand. That’s not true. There were mountains of garbage on the site, we cleaned it, and we have not taken sand out at any time," Andrews said.

"The false perceptions regarding this project could cause great harm to Puerto Rico’s tourism industry. When a hotel developer who has complied with all the regulations, and has been developing properties on the island for decades, can’t get a project off the ground, how can we expect outside investors to come to Puerto Rico and invest in new development," he added. "The real story behind this is how environmentalists can use the press to stop projects that have complied with all regulations."

Andrews added that when J.W. Marriott, Chairman & CEO of Marriott, visited Puerto Rico in February to announce that La Concha would become a Marriott Renaissance hotel, it was embarrassing to hear the negative comments that were lashed at him. "I managed to convince the CEO of the largest hotel company in the world to visit Puerto Rico on his way to his vacation in the Caribbean and he is insulted and treated like he’s doing something illegal at the Courtyard. Bill Marriott had no idea what was going on and it was extremely embarrassing," Andrews said.

The international hotel company, which is also expected to manage the J.W. Marriott Dos Mares Resort planned for Fajardo, is receiving pressure from the Sierra Club to abandon the project despite Marriott’s commitment to protecting the environment and employing a biologist to work on site and help protect a nesting site for turtles. The Sierra Club has further been inundating the fax lines at the main office of Four Seasons Hotels & Resorts, which plans to manage the San Miguel Resort in Luquillo, demanding that the resort not be built. The Sierra Club wants both resort sites preserved as an ecological corridor. Developers of the tourism-residential project San Miguel Four Seasons in Luquillo have invested over $4 million in researching and planning the resort project. More than a dozen experts have contributed to the research, including scientist Peter Pritchart, an authority on sea turtles.

The battle with environmentalists and the canceling of validly issued permits can also have serious impacts on Puerto Rico’s future economic development and the growth of the island’s tourism industry. In the 2002 Strategic Plan for Tourism & Transportation, the industry called for a dynamic development process to facilitate investment in the tourism industry, including accelerating the permit process. Both the Popular Democratic Party and the New Progressive Party stated in their political platforms that they would comply with the strategic plan destined to transform Puerto Rico into the principal Caribbean tourism destination by 2020.

Sen. Arango says he is also preparing legislation to accelerate and consolidate the permitting process. "I am preparing a legislative bill that will order the consolidation of the permitting process and will establish time limits for regulatory agencies to expedite permits. If the agencies fail to meet these deadlines, they will be penalized," Arango stated.

Efforts by tourism industry developers and Puerto Rico legislators, who perceive the economic benefits of a growing environmentally friendly tourism industry on the island, are certain to be met with major opposition from extreme environmentalist groups.

Tamara Estrada Del Campo contributed to this story.

This Caribbean Business article appears courtesy of Casiano Communications.
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