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April 21, 2009
  • Bermuda looks to sustainability
  • Santo Domingo to host FCCA in 2010
  • Time to change the business model
  • Growth, infrastructure, and joint airlift
Bermuda looks to sustainability
Prime Minister Ewart Brown of Bermuda sent a message to his Caribbean colleagues when he emphasized sustainability when addressing attendants to the 13th Caribbean Tourism & Investment Conference held at the Fairmont Southampton in Bermuda last week. Addressing developers, financiers and businessmen, the Prime Minister spoke of how "a capitalist problem is requiring socialist solutions." He urged all to switch from applying formulas that are two parts pragmatic and one part creative, to those that are two parts creative and one part pragmatic. During the event, Brown announced what he described as the first hotel construction on the south side of Bermuda since 1972. The Grand Atlantic Hotel & Spa will be a public-private venture, with 100 hotel rooms and 125 affordable homes built for Bermuda citizens.
Brown called for governments to cut red tape, while fostering creativity and sustainability, "to never compromise the best interests of the people".
In his address, Brown praised the fractional model for real estate development, indicating that it has contributed to an increase in travelers. He said the government benefited from transactional fees but also the country gained because the model ensures that people are employed all year round, with more visitors coming in the soft seasons.
In his welcoming words, the Prime Minister stressed sustainability. "Our natural beauty comes with limited resources," he said. "All investment needs to be eco-friendly. He said Bermuda is now focusing on geothermal systems, recycling and green projects. "Hotel developers need to realize that guests are demanding green programs. Going green saves money in the long run."
Bermuda, a land with British, Portuguese, West Indian and African slaves heritage, and now with a population of 65,000 people, has the fourth highest per capita income in the world.
Santo Domingo to host FCCA in 2010
Santo Domingo is becoming a big cruise ship capital in the Caribbean, with the improvements and expansions of the Port of Santo Domingo. The other important ports are the La Romana Casa de Campo Port and the offshore port in Samana Bay.
For the event, more than 1,000 cruise industry partners will come together with 100 cruise executives from the FCCA member lines to share ideas and discuss industry trends. Round-table discussions will be held in the areas of marketing, shore excursions, and operations. The format of the meetings allow for pre-set meetings with select cruise executives on a one-to-one basis for pre-registered delegates. The event is an opportunity to meet with key players, analyze industry trends, and discuss current issues.
The FCCA is a trade association composed of 11 member lines: Carnival Cruise Lines, Celebrity Cruises, Costa Cruise Line, Cunard Line, Disney Cruise Line, Holland America Line, MSC Cruises (USA) Inc., Norwegian Cruise Line, Princess Cruises, Regent Seven Seas Cruises, and Royal Caribbean International. It was created in 1972 by the member lines operating more than 100 vessels in Florida, the Caribbean, and Mexican waters in order to discuss and exchange views on issues relating to: legislation, tourism development, ports, safety, security, and other cruise-industry issues.
Time to change the business model
During the Caribbean Tourism & Invesmtent Conference, several speakers highlighted the need to change the business model for the development of hotels and resorts. In recent years, a boom in vacation real estate sales lead many developers to rely on taking in deposits for condos and villas to finance hotel construction. But at the conference, many were skeptical that sufficient clients may be found for developers to be able to use real estate sales and the pre-sales model as the primary financing tool for new developments.
Tim Lorimer, vice president, International Corporate Finance for The Bank of Nova Scotia said: "The unfortunate experience of late deliveries has damaged the reputation for buyers demand, they will not give deposits and can no longer be relied on as a source of cheap capital. "Many projects never should have been started in the first place," he said.
He said consumers are likely to give smaller deposits and the rest only upon completion. While he advocated the unpackaging of leisure and real estate, he forecast that branded residences will continue to have a future. He said the Nova Scotia bank is lending, but now primarily for renovating areas.
Lorimer said that the difference in this crisis is that the economy is integrated, so that solutions have to be global. Nevertheless, he said the present crisis "gives a breather, an opportunity to retool and refresh."
He spoke of "a time to do a reality check, into the underpinning value of real estate, as the volume of people coming through is off". "For the present time the suitcase bankers have been weeded out, even though they may be back in 9 years," he commented.
Mark E. Young, Director Corporate Finance for FirstCaribbean International Bank concurs that there is a long way to go before confidence returns. "Condo sales are no longer a sustainable model for mixed use development. More will have to come from the equity side." He said that investors are likely to avoid risk, and not give into temptation of building a higher level of refinmenet than before. He said there is a need for more 3-star facilitis, in the US$100-US$200 ADR range.
Young said that the amount of construction that was underway "would have tested the supply chain even in the best of times". He explained that several projects were highly leveraged, and that "today financiers are ducking bullets and megaprojects". "The new model is to prefer smaller, more manageable projects," he said.
Milton Lawrence, Chairman, Caribbean Financial Services Corporation, foresees banks will be lending for new technology, renovations, marketing and for the construction of complementary services, such as entertainment services.
Warren Weissman, Division Chief, Inter-American Development Bank, said that destinations that offer greater linkages to the local economy will fare better, opposed to those offering isolated products.
Growth, infrastructure, and joint airlift
Jean-Claude Baumgarten, president, World Travel & Tourism Council (WTTC), forecast the Caribbean will continue to do well, despite the negative numbers posted for 2008 and 2009. He said that the long term travel & tourism prospects for the Caribbean remain healthy, with real GDP growth for the sector expected to average 3.3% per annum over the coming 10 years, despite a forecasted contraction of 7.9% expected in 2009.
"In 2009 everything is negative except for government spending," he said, acknowledging that governments "are always slow to respond." He commented that the Caribbean is the region in the world that is most dependent on tourism. He said that tourism in the Caribbean is 15% of the economy, compared to 12% in Europe.
Baumgarten also stressed investments in "infrastructure, infrastructure and infrastructure." "If your infrastructure is not good, you will not grow," he sentenced.
He urged the Caribbean to diversify market targets, reducing dependency on North American tourists. "A consequent shock on US consumer confidence is having an extreme impact on the Caribbean travel & tourism sector," he said.
He says that air access is the key issue in the Caribbean. Baumgarten's prescription to the Caribbean: "If you don't join forces, the airlines are just not going to come," he said.

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