With projections that a travel recovery could take as much as four years from now, experts urged investors and hoteliers in Central American countries to contain costs and preserve cash as much as possible.
GLOBAL REPORT—Short on cash and facing a prolonged recovery period, sources believe the next couple of months could be make or break for resorts and hotels across Central America.
Speaking during the “A spotlight on Central America” session during the CHRIS+HOLA Connect online conference, Fernando Poma Kriete, VP and managing director of Real Hotels & Resorts, said September and October are “crucial months” for hoteliers and investors across the region as countries reopen to some international travel.
“We’re starting to see the first signs of pickup in terms of the business,” he said. “So right now, I’d say what we can do is be extremely conscious of our cash position and try to save as much as possible.”
Cost cutting and maintaining cash will be incredibly important, said Gustavo Ripol, partner at InterAmerican Development, as the recovery period could be extended out as far as 2024.
In addition to cash, Ripol said it’s paramount to “preserve your talent” so that you have the best people when operations pick up again and to be continually on the lookout for “alternative channels” of demand.
“A lot of the traditional marketing channels are not going to be there,” he said.
Adam Greenfader, principal at real estate development and consulting company AG&T, agreed.
“We’re focused on revenues. We all have to find new revenues,” he said.
Both Poma Kriete and Greenfader pointed to Costa Rica as a particularly important destination within the region that remains to have long-term growth prospects and appeal.
Greenfader noted if demand can return in some way, Costa Rica is the right kind of destination to thrive.
“They’ve been able to capture tourists because of robust experiences,” he said. “They also have a 30% tourist retention rate, so tourists are coming back and back and back. I think, as we come through this COVID experience, people are going to want to travel longer and they’re going to want more experiences that they can really enjoy.”
That market typically sees longer lengths of stay than others in the region, he noted, and has done a good job positioning itself as “low density” for travelers.
“We’re really looking at locations that make people feel safe and locations that are able to extend the stay because maybe the (average daily rates) are not going to be where they were before, but if we can get our customers to come and stay longer and spend more on other activities, we’re going to be better off,” he said.
And while international travel has long been the bread and butter in the region, Poma Kriete noted that “the domestic market is already helping a lot.”
“I’m in Costa Rica right now, and there are hotels that are open and have been open, and they’re basically getting fed from the domestic market,” he said.
This is fueled in part by a greater portion of the population working remote and opting to use the opportunity to travel instead of staying home.
“A lot of people, including myself, are traveling every single week to a difference place,” he said. “I would rather be working on my computer on the beach or on a lake or river than in a small apartment.”
Ripol said it’s a continued struggle to get institutional capital and prominent financial institutions to work in Central America and “the biggest challenge in Central America is to get one country to agree with another.”
Because of that, finances vary greatly between nations, with strong investment vehicles in Costa Rica, but a cloud hanging over Panama, he said.
“You have the stigma of the Panama Papers, so everyone is staying away from Panama,” he said.
He said it’s vital to set common criteria to create financial vehicles and investment funds in the region.
Poma Kriete said among the countries in Central America, Nicaragua has had a unique path through the pandemic because it “never actually, really closed.”
“But it has behaved (like) it has closed in terms of occupancy,” he said.
He said there is hopefulness of a bounce back in that country because “people are social creatures.”
“Hopefully after this passes and we get more of a better feel and airports start opening, as people start living with this virus and there’s hopefully a vaccine, I believe all of Central America will start recovering,” he said.