Tourism looks for big 2016 spend, but sees security concerns

The general mood of tourism is upbeat, and the statistics support it: Arrivals are rising, construction is proceeding, employment is set to expand, and while economic recovery feels wobbly, optimism is guarded and hope springs. 

The amount of spending proposed is enough to make anyone sit up straight: The 343-room Westin resort plans a more-than-$20 million renovation, and that follows the $10 million the hotel spent in 2013; the 356-room Ritz-Carlton Grand Cayman last year completed a three-year multimillion-dollar rebuild, including reconfiguring the fifth floor into a set of meeting rooms, creating an interactive culinary studio, building the “Starfish Cay splashpad Cupboard,” expanding outdoor seating and opening a high-end retail shop – while 2016 plans include starting renovation of 100 Ritz-Carlton suites and residences likely to top $100 million. 

The 295-room Marriott Beach Resort was sold late in the year to the London and Regional global property investment group for at least $100 million following the property’s two-year, $15 million renovation. 

In early November, Miami’s Howard Hospitality Group, on behalf of Margaritaville Holdings, bought Seven Mile Beach’s Treasure Island, announcing a $70 million renovation, creating 280 guest rooms, restaurants and recreation areas and at least 110 condominiums. While the purchase price was undisclosed, the resort originally listed for $15.45 million. Opening is scheduled for late 2016. 

The 266 rooms in twin, 10-story towers – and 62 residences – at the Kimpton Seafire hotel at Public Beach will open in November, capping a two-year, $309 million investment.  

Developers and government in late September signed plans for a phase-one $200 million, 10-story, 200-room hotel – and 75 residences – in Bodden Town’s Beach Bay, scheduled for an early 2018 opening. 

Finally, Frank Sound’s $365 million Ironwood resort and golf course will cover 600 acres and include a hotel, conference center and sports village with homes for 2,000 people in as many as five subdivisions. 

Developers hope to open the initial phase – and the first of two planned golf courses – in January 2018, pending resolution of a complex battle about the $50 million construction of a 10-mile extension to the East-West Arterial highway. 

Elsewhere, expansion plans for the old Hyatt hotel are afoot; Dart Enterprises plans a new hotel on Seven Mile Beach as part of the company’s $1.3 billion Camana Bay expansion; Health City will spend roughly $25 million to construct the first of two 59-unit apartment blocks and a 24,000-square-foot commercial center, while designing a 185-room hotel and a number of medical-related additions such as a new oncology wing; and the September groundbreaking for a $60 million expansion of the airport terminal will culminate in the first half of 2018, adding nearly 190,000 square feet to the facility, enabling annual passenger throughput to grow from the original design capacity of 500,000 to 2.7 million. 

The projects augur well, not just for the island’s leading industry, but also for employment, government receipts and improved infrastructure. 

“Quiet optimism and ‘management of expectations’ can best be used to describe the mood in the boardroom for the Cayman Islands Tourism Association,” said Ken Hydes, president of the Cayman Islands Tourism Association. 

“Coming off of a record-setting [year], the department of statistics [government’s Economic and Statistics Office] would gauge our industry by the sheer number of arrivals. While this is one matrix, the impact on our economy can be more meaningfully tied to the spend per capita of the visitors arriving by air and cruise,” he said, pointing to Cayman’s highest-in-the-Caribbean average daily rate for a hotel room: US$358.70. 

Department of Tourism numbers for 2015 extend only through November, but indicate that both air and cruise-ship arrivals are likely to exceed 2014 totals, 382,800 for the former and 1.6 million for the latter. 

In his Dec. 31 New Year’s Message, Premier Alden McLaughlin predicted 387,566 air arrivals by the end of 2015, and 411,192 by the end of 2016, which he described as “dovetailing quite nicely” with anticipated, escalating demand. 

“I can say that our metrics are all up,” Westin resort General Manager Morty Valldejuli said. “We are embarking on another major renovation slated for 2016 that will encompass lobby, guest rooms, bathrooms, corridors and retail areas. 

“I see an excellent future in our industry – the Caribbean metrics are strong, feeder markets show no signals of slowing down and our pace is greater than 2015. With added [room] supply to the island, I trust that airlift will follow,” he said. 

Not everything is rosy, of course, and airlift remains a sticking point. Broad agreement exists that Cayman does not have enough, and terminal expansion, while welcome, does not enable larger aircraft. 

At The Ritz-Carlton, Catherine Leitner, area director for public relations, applauded the terminal developments. 

“We are excited for the airport expansion as it will encourage more travelers from a variety of key destinations to visit the island,” she said. 

Ritz-Carlton, Grand Cayman General Manager Marc Langevin said, “There is no question the terminal expansion is necessary, and we are behind the ball on that one. Improvements are necessary and customers are paying a heavy price…” 

Valldejuli said airlift had declined or at least remained flat last year, and “this impacts overall occupancy into the island.” He agreed with Leitner that a larger terminal would attract more visitors, but warned of inherent limits. 

“Government and DOT are working diligently to improve the airport,” he said, looking forward to “much improved facilities” if not for another two years, “but [we] still need a longer runway. ” 

Still, underlying economics are good, although recovery remains a little wobbly. The Pew Research in December reported that for the first time middle-class Americans had dropped to a minority of the nation’s population, and then there is the recent tumble in the markets. The U.S. is by far the greatest source of Cayman tourism, providing more than 76 percent of air arrivals in 2015. 

Valldejuli acknowledges that Cayman is reliant on the U.S. economy, but he is largely undaunted by flat growth from 2014 to 2015: “We have seen a robust comeback [from 2014], especially in the group segment, and we will see that continue into 2016.” He did express concern about security issues in the wake of the mid-November Paris attacks. 

“Given our location – we have not seen an adverse effect, but we maintain vigilance – safety and security is most important to us, to our employees and guests,” he said. 

Both Leitner and Heidi Nowak, The Ritz-Carlton’s director of sales and marketing, agreed. 

“More people are traveling than ever before,” Nowak said, citing a 2015 total of more than 1 billion trips globally. “As a general policy, we evaluate information from local and national authorities in determining local threat-condition levels for all of our hotels around the world. As always, the safety and security of our guests, employees and properties remains a top priority. 

“At this time,” she said, “it’s too early to assess or predict any impact on our business.” 

Leitner said The Ritz-Carlton is attentive to “the overall global economic picture, as well as potential challenges we may face in light of the recent events in Paris and whether or not the issue of safety becomes an issue for travel in 2016.” 

Both said the company is “cautiously optimistic” about the coming year. Neither, however, would discuss competition, either locally or regionally, preferring to cite The Ritz-Carlton as consistently superior. 

Valldejuli, for his part, said the new Kimpton hotel is likely to have an impact locally, and the eventual opening of Nassau’s troubled Baha Mar resort giant would be felt throughout the region. 

Just last week, however, a Bloomberg report cast long shadows across the $3.5 billion 2,200-room Baha Mar project, the largest in the Caribbean. 

Conceived in 2005, developers said Baha Mar could contribute as much as 12 percent to the country’s gross domestic product. The 2008 financial crisis, however, forced both Nassau and the developer to seek outside assistance from Chinese contractors. 

A liquidator has been appointed while the developer is suing the U.K. government and continues to negotiate with the Chinese, who say they have a Chinese conglomerate as a new investor. 

“I believe they [Baha Mar] will get off the ground once all the legal matters get settled,” Valldejuli said. “In my opinion, [the resort] will be the most competitive hospitality threat to not just the Cayman Islands, but the Caribbean in general – they will definitely shift share, especially if airfare is more attractive, particularly in the group segment.” 

He remains confident, however, that the Westin will prevail. “The challenge will remain for the Westin to continue to be relevant in very changing market conditions. We are – and remain – extremely competitive and in tune with all industry trends.” 

The Kimpton, he said, would bring more visitors to Cayman, although “our demographics may be a little different. I believe with increase in airlift, there’s enough share for all.” 

Airlift is crucial to the 2016 outlook, however. “Our industry must work closely with all airlines to figure out how we can increase travel in off-season and make it more attractive to come to Cayman rather than competitive islands.” 

At The Ritz, Nowak said competition benefits everyone. “We continue to support the active and ongoing efforts of our fellow hoteliers, as the destination continues to grow and we welcome more and more visitors. 

“Our business outlook remains positive for business travel, leisure travel and group meetings in 2016,” she said. Leitner referred to repeat business “as well as group meetings, special events and a strong local clientele. 

“We see continued opportunity to increase our group/meetings business for 2016. Having more large groups choose to host their meeting at our hotel, or any other hotel on the island for that matter, is good for the entire destination,” she said. 

In summary, CITA’s Hydes said the industry looks forward to the new year.  

“As we enter 2016 we do so with the knowledge that exciting times are ahead as we look toward to the opening of the Kimpton Seafire Resort and Spa in November of this year (the first major opening in over 10 years), which will add to our already dynamic product mix. 

“We also can boast a robust and productive work relationship between the Ministry of Tourism, Department of Tourism and our association which makes any challenges ahead that much more surmountable.” 

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The Ritz-Carlton, Grand Cayman this year will begin renovation of 100 suites and residences likely to top $100 million.

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Construction is well under way at the Kimpton Seafire Resort and Spa.

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Ken Hydes

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