From Jamaica Gleaner

Lenders are cautiously optimistic about growth in hospitality business in the Caribbean, but now appear more willing to back projects.

Lending, to date, has been very cautious and generally restricted to “established brands in strong markets, with no apparent interest in greenfield developments”, said KPMG’s 2014 Caribbean Hospitality Financing Survey.

But having noting that asset quality has improved with some operations having closed down, the report said lenders are now moving from “virtually zero lending activity to ‘dipping their toes in the water’ again”.

The survey this year included not only banks but also equity backers, as well as non-bank financiers. KPMG said lenders showed high interest in Aruba as a stable market “with a government that has a vision”. Cayman Island’s also got mentions for similar reasons, while Turks and Caicos Islands and the Dominican Republic scored heavily because of strong airlift. For non-bank financiers, The Bahamas joined Aruba and Turks and Caicos as favoured jurisdictions, due in part to proximity to the US.

On the product-development side, lenders say they have received many “innovative” proposals, and suggested greater project emphasis on the history and culture of the region, ecotourism, sports tourism, lifestyle, health tourism, and music tourism.

While some lenders sniffed at the small size of deals in the region, others said that the outlook might change if national governments focus on improving infrastructure and technology. Jamaica was marked down for its long customs lines on entry at local airports.

KPMG notes that in terms of financing projects, non-banks tend to look for an internal rate of return of at least 20 per cent, and to use capitalisation rates/yields of at least 10 per cent in their analysis.

KPMG said more than half the banks surveyed think that meaningful growth will return to the resort market next year, although nearly a third say growth will not return until 2017 and beyond.

PHOTO: Two riders take in the view along the Negril shoreline from horseback. – FILE

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