Puerto Rico Steps Up
Development Efforts
The island’s tourism agency is seeking to increase the number of
rooms—including turning abandoned jails into high-end resorts
Reuse of abandoned or outdated buildings is common
practice these days in commercial real estate. Yet in an
unusual twist on that trend, the Puerto Rico Tourism Co.
is currently promoting the conversion of several sites that once
housed correctional facilities into high-end resorts.
According to Jaime L. Vazquez-Bernier, deputy executive
director, tourism development area for PRTC, the jails have
long since been closed and the areas where they once stood are
ripe for a new, less ominous use.
“In the ’40s and ’50s, many minimum security facilities were
built around the island and they just happened to be in these magnificent locations,” Vazquez-Bernier says. “The government’s
evaluation of these under-used or abandoned properties identified
a number of them as ideal for tourism development. That’s where
we came in.”
In fact, PRTC, a public corporation established in 1970 to promote and regulate the commonwealth’s tourism industry, has
identified eight sites where it hopes to see resorts built. They range
from secluded beachfront locales to two districts in San Juan.
RFPs have been issued for two of the locations—Punta
Guanajibo in Cabo Rojo and Punta Lima in Naguabo. Recently,
15 potential investors/developers took an official tour of Punta
Guanajibo, which is in the southwest part of the island. Possible
investors are being sought not only from the island and the US,
but Europe as well. The sites will either be sold outright to developers or, if it is on government land, such as a national forest, the
parcel will be ground leased to the development entity.
PRTC has always had a hand in facilitating development
through a subsidiary, the Hotel Development Corp. Yet in the
past, the agency took a rather passive role in that capacity,
Vazquez-Bernier says. Now it wants to be more proactive. “We’ve
changed from waiting to receive proposals to actively seeking
them and bringing together possible investors, developers, architects and banks to get deals done,” he says.
To do that, the agency uses a mix of tax credits, tourism worker
training programs, expedited entitlement procedures and cooperative marketing plans with the hotels, Vazquez-Bernier details.
Furthermore, HDC makes capital available to developers.
Recent investments include $12 million for the 150-room Bahia
Beach St. Regis in Rio Grande and $18 million for the 252-unit
Mandarin Oriental Hotel in the master-planned community of
Palmas del Mar in Humacao.
The overriding objective is, of course, to multiply the number of
hotel rooms in Puerto Rico, a goal that was set when Governor
Aníbal Acevedo-Vilá took office in 2005. “In the four-year period
that ends next December, we originally planned to add 5,000 new
rooms,” Vazquez-Bernier says. “We have reached 6,124.”
Even with those new keys, Puerto Rico is far from oversupplied,
says Luigi Major, project manager with HVS International in
Mexico City. “Hotels there tend to perform better than the US,
both in terms of occupancy and ADR,” he states, noting that the
current occupancy rate is around 80%. “The reason is that the market has had very little increase in supply over the last few years.”
Smith Travel Research pegs Puerto Rico’s year-to-date occupancy rate as of June at 75.5%, with average daily rates during the
same period leveling at $210.09. RevPAR stood at $158.71.
Because of the island’s history as a manufacturing hub, most of
the existing hotels were geared toward the business traveler. But
that changed in 1996, when the US Congress repealed Section 936
of the IRS Code, which had given tax breaks to US companies
operating in Puerto Rico. (The benefits expired in 2006.) “That
brought to light the need to expand the type of visitor we receive,”
Vazquez-Bernier says. “Many of these hotels were designed for the
business traveler rather than the leisure or the convention traveler.”
Yet Vazquez-Bernier points out that PRTC is not exclusively
seeking five-star resorts. “Of the 6,000-plus new hotel rooms,
about 65% are medium and small properties,” he says. “Those
appeal very much to European visitors, who are not necessarily
interested in staying in a big hotel in San Juan with a casino.
They want to experience the local culture and amenities the different regions of the island have to offer.”—Maria Wood
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