Caribbean, LatAm reopening presents challenges, rewards
 
Caribbean, LatAm reopening presents challenges, rewards
06 JULY 2020 8:04 AM

Hotel executives, bankers and analysts shared their expectations for the Caribbean and Latin America region as more hotels reopen and tourism demand begins to return.

GLOBAL REPORT—Hotels and resorts in the Caribbean and Latin America are beginning to reopen, and hoteliers are mostly optimistic that the region’s appeal will drive a return in demand.

On the “CHRIS/HOLA 6x8: Recovery top of mind episode 2” webinar hosted by The BHN Group, industry executives, bankers and analysts weighed the factors contributing to hotel recovery in the Caribbean and Latin America, including operational changes due to COVID-19, the state of the lending environment and what hoteliers can be optimistic about going forward.

Playa Hotels & Resorts’ properties in Mexico and Jamaica reopened 1 July, and Chairman and CEO Bruce Wardinski said his company plans to reopen its Dominican Republic resorts in late July. Playa’s portfolio had been closed since mid-March.

Wardinski said in the past few months, Playa sold two non-core hotels in Jamaica to raise capital, and has adjusted operations to meet health and safety requirements of each country and state.

He said the all-inclusive segment’s labor model is “better-suited” to operate amid and after COVID-19.

“For example, elevators: Every hotel anywhere in the world is going to have to be going in every hour and wiping down the elevator,” Wardinski said. “Well, we do that every hour anyway because people are coming in with wet feet and sand. We’re probably doing our elevators every half hour to begin with. In many ways, the fact that we are labor-intensive is helpful to us.”

Playa also didn’t have to make significant changes to restaurant spaces at its properties, Wardinski said.

“Fortunately, our resorts are big, they’re airy,” he said. “We have a lot of outdoor areas, almost all of our restaurants have an outdoor seating area to begin with. What we’re trying to do is really make it enjoyable. People can have private cabanas, people can have private dinners on the beach, whether it’s a couple or a family. What we really tried to focus on is how do we make that balance between fun and safety. That’s the biggest challenge.”

Scott LePage, president of the Americas for Wyndham Hotels & Resorts, said much of Wyndham’s portfolio in the Caribbean and Latin America has remained open throughout the pandemic. He added he’s been encouraged by the creative ideas his team has brought to the table.

“This is a unique, hopefully once-in-a-lifetime scenario that we’re all going through,” LePage said. “There’s really no rulebook to find out or to figure out how to successfully run our businesses and support our hotel customers throughout this time period. We’ve got the people on the ground that are coming up with the unique ideas and doing the work to find out: Where’s that business? Where’s it coming from and how do we get it into our hotels?”

Wyndham has also prioritized communication with its franchisees in the region.

“There are a lot of owners that are waiting to hear the right time to open, and we want to make sure that they don’t miss this key window,” LePage said. “We’re out there working with them, talking to them about what business is coming back, how best to get their hotel ready to open, what type of customers are out there.”

Lending environment
Although the Caribbean and Latin American region has evolved in the past two decades, its level of institutional capital is still behind the U.S. and Europe, said Ilan Marcoschamer, SVP of commercial real estate, hospitality and tourism at Banco Sabadell. The pandemic has caused even more of a strain.

“The level of ‘institutionality’ is still relatively small, and so liquidity even in good times is still something that is not as easy to come by,” he said. “It’s not as easy to capitalize deals and, therefore, in a crisis situation, it’s become quite dire. The first casualties that we’ve seen are in the airlines. We’ve seen local and regional airlines (including Aeromexico, Chile’s LATAM Airlines Group and Colombia’s Avianca Holdings) file for bankruptcy for obvious reasons. While in the U.S. there are remedies available through government help and through emergency financing facilities, in Latin America and the Caribbean, it’s quite a different story.”

Rogerio Basso, head of tourism at IDB Invest, said the region needs government aid and an “injection” of liquidity.

“What’s really important here is that reopening does not equate to recovery,” Basso said. “There is going to be a mismatch between revenues and expenses. If there is any trepidation on the way that demand picks up, which is very likely, there’s going to be a solvency liquidity issue in a lot of these businesses, especially when you look into Q4 and Q1 of next year. If there’s a way that we can inject liquidity into the system, knowing that the businesses are going to be quite fragile, that is going to be quite important.”

Reasons for optimism
Despite uncertainties about COVID-19 and tourism globally, hoteliers in the Caribbean and Latin America have reasons to be optimistic, speakers said.

Patricia Boo, area director for Central and South America at STR—parent company of Hotel News Now—said the desire to travel to the region remains high.

“Intentions to travel are very strong. … Latin America has so much to offer. It’s probably going to take longer than what we all would like to see, but it’s definitely going to come back,” Boo said. “I also see a great opportunity for more domestic and inter-regional travel and collaboration.”

John Fareed, managing director and chairman of North America at Horwath HTL, said the latest American Hotel & Lodging Association survey is encouraging, showing that 44% of U.S. travelers are looking to take a trip in 2020. However, that’s domestic travel.

“We also have to remember that a lot of these consumers in the very beginning of COVID got burned. They got stuck in a destination for an extended period of time or they got stuck on a cruise ship and friends and family saw this,” he said. “A lot of people who had travel that was planned and got canceled are still waiting on the deposits to come back. Here we are in July, they’ve still not received their deposits from trips that were scheduled in March or April from the airlines and the cruise lines and (online travel agencies).”

Fareed added the level of pent-up demand for beach destinations and the Caribbean and Latin America resort destinations could indicate a quicker path to recovery than in other global regions.

“We’re going to see a return to normal business more quickly than we would expect,” Fareed said.

The time for innovation in the hotel industry is now, and Basso said collaboration and sharing of ideas—even among competitors—is encouraged.

“My call to the industry right now would be if you come up with an innovative idea that can save lives that can accelerate the recovery, share that with others, because we simply cannot afford not to do that at this stage,” Basso said.

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