The Caribbean is undoubtedly the most tourism dependent region in the world. According to the World Travel and Tourism Council (“WTTC”), six of the 10 most tourism-dependent countries globally in terms of GDP contribution, are Caribbean nations. Seven Caribbean nations feature in the top 10 for the direct contribution of tourism to employment figures. Now more than ever the findings from our annual Caribbean Hospitality Financing Survey are of importance to stakeholders in the industry so as to keep them informed of current issues impacting inward investment in the region.
This year, confidence levels of banks in the Caribbean tourism industry are at an all-time high. The confidence of non-banks - being private equity, family offices and developers – was almost as high. There is also strong confidence in future tourist numbers and the region’s real estate market. The deal flow for the majority of bank respondents is stronger than in 2023 and most non-banks told us they had made significant new investments in Caribbean tourism projects during the last year, and anticipate making further investments in the year to come.
At surface level, one would assume that all things ‘Caribbean tourism financing’ are full of optimism. However, there are also some emerging challenges which we cannot afford to ignore.
"The insurance market in 2023 was the hardest in recent memory. Coverage was severely restricted as the Caribbean market was perceived by insurers to be too 'risky'.
Concerns about the lack of insurance coverage available is one of the most newsworthy findings of our survey. Historically, insurance availability was often taken for granted, seen as a mere formality. In 2023 however, the availability of insurance coverage was severely limited as typical insurance providers to the Caribbean market deemed it too risky from their perspective. Ironically, it was not a busy Caribbean hurricane season that triggered this reduction in capacity. A lack of insurance coverage was the major concern expressed by non-banks. From a developer’s perspective, this restricted access to insurance coverage could hinder their ability to secure financing.
Last year, inflation was the major concern of investors with its potential negative impact being illustrated by it being a contributary factor to a series of major bank failures. This year, these concerns have dissipated somewhat but it remains the main concern of banks.
"Whilst inflation remains a concern for financiers and primarily for banks, the worst-case scenarios appear to have bene avoided for the time being, fingers crossed, and a sense of relief has contributed to the increase in confidence.
There were a few topics that we’ve been monitoring closely given they were highlighted in previous year’s reports. One of these is the rise in activity of family offices in the region. This year, we have seen further interest from this group, which can be seen in the relevant sections of our report.
Our survey findings on all-inclusives received a lot of attention last year, but this year, results are very similar and have validated the results. Whilst many respondents expect further growth a similar sized group think the all-inclusive business model may have peaked and that the number of practitioners may stay the same.
A concerning trend that we continue to see is the increase in respondents who believe it is becoming more difficult to conduct business in the Caribbean, another sentiment that we delve into deeper in our report and will continue to monitor going forward.
As always, we are very grateful for our engagement with the active financiers of tourism projects in the region. Without them, we would not have such rich findings to share.
We look forward to working with all key stakeholders in the regions tourism industry to address the challenges outlined in this report. If any motivation is required to find solutions, we need only remind ourselves of how important tourism is to the region.
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