Puerto Rico lodging market poised for comeback
JLL’s Puerto Rico Hotel Destinations Report reveals dynamic factors impacting market recovery and rebuild
SAN JUAN, JUNE 17, 2019 – Puerto Rico’s lodging market abounds with opportunities, following crises over the past several years. According to JLL’s Puerto Rico Hotel Destinations Report hotels across the Caribbean island have come back online after renewed capital investments and paired with economic incentives and strategic efforts of the Government of Puerto Rico and the U.S. Government, the island is primed for a hotel market comeback.
Air capacity to the island in 2019 will increase for the first time since 2016 and to meet this demand, by 2020, approximately 2,400 hotel rooms will be re-introduced to the market, along with more than 850 new rooms currently being developed. These figures will place available lodging supply ahead of prior supply levels by 2020. Additionally, GDP is projected to increase by 3.9 percent in 2019 and numerous investor-friendly policies are fueling strong lodging market performance.
“Spurring tourism development is a priority of the Government of Puerto Rico. The Island’s “Open for Business” policy, strategic geographic position, air and maritime access, modern infrastructure, and highly skilled bilingual workforce coupled with unprecedented incentives packages make it a fertile environment for hospitality industry investors. In addition, Puerto Rico is under the U.S legal system with financial sectors regulated by the FINRA, SEC and FDIC and part of the U.S. free trade zones and custom system. The combination of these characteristics and unique advantages make Puerto Rico the ideal destination to invest in right now”, states Carla Campos, executive director of the Puerto Rico Tourism Company.
Tourism and hospitality investors receive a 90 percent exemption rate of property taxes, as well as a 100 percent exemption on municipal construction and sales taxes. New tourism projects could be eligible for tax credits for up to 40 percent of project development costs, compared to 10 percent in the past.
Additionally, Puerto Rico’s designation as a Qualified Opportunity Zone enables investors paying U.S. taxes to invest recognized capital gains in qualified projects in Puerto Rico on a tax-advantaged basis, creating a compelling environment for development or major renovation projects like the El Conquistador.
For example, Puerto Rico Governor Ricardo Rosselló recently announced the $120 million transaction of the former Gran Meliá Puerto Rico Hotel, which will re-launch as the Hyatt Regency Coco Beach Resort and was completed partially through tax credits granted under the Puerto Rico Tourism Development Act and also qualifies as an Opportunity Zone deal.
“San Juan is one of the most stable lodging markets in the Unites States from a RevPAR perspective and investors are taking notice of this stability,” said Andrew Dickey, JLL Executive Vice President. “In general, Puerto Rico’s pro-investment environment particularly in tourism and hospitality, along with limited supply growth over the last 20 years, has set the stage for a strong lodging market and long-term fundamentals.”
Locations comprising Puerto Rico’s Metropolitan Area host most of the island’s lodging supply: San Juan has 61 percent of total room supply and is known for its historic sites, cultural activities and vibrant entertainment and night scene. The city is also home to the Port of San Juan and the Puerto Rico Convention Center (PRCC), both of which drive demand. Additionally, Carolina is home to Puerto Rico’s international airport, which handles more than 90 percent of total commercial passenger traffic. Carolina also features diverse demand drivers as the municipality is known for its renowned beaches and industrial center.
Markets to watch include the Convention District, where in addition to the PRCC, will soon be home to The District! Entertainment complex and an upcoming film complex, as well as the up-and-coming neighborhood of Santurce, which features trendy restaurants and bars and an artistic atmosphere.
“While events such as the Zika virus and hurricanes, particularly Hurricane Maria, were devastating, Puerto Rico is showing clear signs of an even stronger rebound,” said Ben Appelbaum, JLL Vice President. “The amount of opportunity across the island is remarkable – whether it’s a well-known market like San Juan or an emerging hot spot like Miramar, investors and owners are confident in Puerto Rico’s commitment to rebuild and it’s a lodging market where they want presence.”
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JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totalling more than $63.2 billion worldwide. The group’s 350-strong global team in over 20 countries also closed more than 5,420 advisory, valuation and asset management assignments. Our hotel valuation, brokerage, asset management and consultancy services have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.