Hotel Boom Continues as Room Supply Increases 16.8% in Caribbean/Mexico

According to the latest STR Construction Pipeline Report, hotel construction pipeline data for October 2019 shows 151 projects accounting for 30,809 hotel rooms in construction throughout the Caribbean/Mexico region. This represents a 16.8 percent year-over-year increase in the number of hotel rooms in the final phase of the development pipeline.

Most of the region’s rooms in construction are in three segments. Of those three, luxury projects represent the largest percentage increase (+10.6%) in activity year over year. Luxury: 7,270 rooms (+10.6%), Upscale: 7,221 rooms (+1.5%), and Upper Upscale: 6,341 rooms (+0.8%).

Four countries in the region reported more than 1,000 rooms in construction. Mexico leads with 16,303 rooms, which represents 3.9% of the country’s existing supply, followed by the Dominican Republic (5,738 rooms, 7.9% of existing supply), Jamaica (1,925 rooms, 7.7% of existing supply), and Cuba (1,128 rooms, 1.7% of existing supply).

Why all the new hotel supply throughout the region?

There has been quite a bit of capital investment in the region in the last few years for two reasons; one is the strong market performance – the Caribbean is up 8 percent year to date in average daily rate and 6 percent in revenue per available room. And, the second reason is investors are chasing yields. Post hurricanes, there is new product and renovated product and that benefits the overall quality of the investment.

Challenges still exist for some in the region. Mexico, and the Dominican Republic, following safety concerns; and the Bahamas, which is dealing with the aftermath of Hurricane Dorian and resulting loss of tourism.

What does that mean for Caribbean destinations?

As attractive destinations continue to grow, vying for the global travelers’ dollars becomes quite the feat. Deploying creative ways to differentiate their tourism products from the competition, such as fine-tuning digital and social strategies, will help destinations tap into rising global demand for “off the beaten path” experiences. The new generation of experience-based travelers are a huge opportunity for tourism worldwide and specifically for this region. Smooth-running airports and even well-paved roads and waste management are an integral component to keeping destinations competitive. Key travel infrastructure, including airports, parks and recreation, ports, roads, and transit usually need the most improvements.

It’s essential for destination stakeholders to explore ways to finely balance maintaining destination competitiveness, while minimizing existential risk to the destination.

Brooke Meyer is the managing partner of Caymera International, a Caymanian-owned hospitality and tourism consulting and advisory firm. Visit Caymera at https://www.caymeragroup.com/ or email info@caymeragroup.com for more information.