JLL report says P.R.’s hotel industry rebounding after back-to-back challenges
Following the negative impact caused by the events of the past few years — the Zika virus scare in the Caribbean and Hurricanes Irma and María — Puerto Rico’s hotel industry is facing a wide range of opportunities for development and growth.
That was the main conclusion reached by JLL Research in its “Hotel Destinations Report” for Puerto Rico, released by the Puerto Rico Tourism Company.
JLL is a professional services company specializing in real estate and investment management. In its report, it confirms hotels on the island are experiencing a new revival.
“As many as 3,200 hotel rooms were lost as a result of the hurricanes in 2017. By 2020, approximately 2,400 rooms will be re-introduced to the market and, coupled with the 850+ additional rooms underway, available lodging supply is expected to surpass prior supply levels by 2022,” according to the report.
“Air capacity to the island in 2019 will increase for the first time since 2016, which is expected to support lodging demand growth,” the report continues.
Despite the constriction of flights by the airlines over the past three years, demand for airlift into Puerto Rico has sustained. Puerto Rico’s 2018 load factor, defined as number of passengers divided by available seats, was the highest on record at over 85%, indicating continued demand, JLL said.
“Our strategic geographical location positions us as the ‘Connector of the Americas,’ boosted by our air and sea access facilities, modern infrastructure and our highly qualified bilingual workforce, along with unprecedented stimulus packages,” said Carla Campos, Tourism Co. executive director.
“The combination of these features and unique advantages make Puerto Rico the ideal investment destination right now,” said Campos.
In the report, JLL said despite the whirlwind of turmoil caused by the 2017 hurricane season, Puerto Rico was still the fourth most visited destination across the Caribbean region, “demonstrating its overall resilience.”
The report also listed the island’s available incentives designed to foster and diversify overall economic growth, namely the Puerto Rico Tourism Development Act (Act 74), Tourism Industry Support Act of 2016 (Act 137) and Individual Investors Act (Act 22).
Tourism and hospitality investors receive a 90% exemption rate on property taxes, as well as an 100% exemption on municipal construction and sales taxes. New tourism projects could be eligible for tax credits for up to 40% of project development costs
In addition, the designation of most of Puerto Rico as an Opportunity Zone allows qualifying investors that pay taxes in the U.S. mainland to invest capital gains taxes approved in qualified projects on the island.
As an example, the relaunching of the former Hotel Gran Meliá as the Hyatt Regency Coco Beach Resort, with an investment of $120 million, which was partially completed through tax credits granted under the Puerto Rico Tourism Development Act of, as well as through an Opportunity Zones agreement.
“While events like the Zika virus and the hurricanes, particularly Hurricane María, were devastating, Puerto Rico is showing clear signs of a much stronger revival,” said Ben Appelbaum, vice president of JLL.
“The number of opportunities throughout the island is notable — whether it’s a known market as San Juan or an emerging area such as Miramar, investors and owners rely on Puerto Rico’s commitment to rebuild and on its hosting market where they want to have a presence,” he said.
Lodging supply in Puerto Rico is primarily comprised of branded product, located in the San Juan area within the metropolitan area. More than 61% of total room supply on the island is in the metro region and 75% of the island’s internationally-branded room supply is in the San Juan area.
“As damaged properties like the Condado Plaza Hilton (189 damaged rooms), Coco Beach (486 rooms), and the Ritz-Carlton San Juan (416 rooms) are brought back online throughout 2019 and 2020, they will be joined by a handful of new properties currently under construction, including the Aloft Ponce (150 rooms), Aloft San Juan (177 rooms), Tru by Hilton Condado (88 rooms), Tru by Hilton Arecibo (92 rooms), and Four Seasons Cayo Largo (136 rooms),” the report confirmed.
“The renovated lodging product, coupled with the new additions to supply, should allow the island to recover rate in the mid- to long-term as these hotels stabilize and aim at surpassing historic rate levels,” it added.