Among the most significant projects currently underway is that of the Punta Cana Group and Marriott International with Mac Hotels for the construction of a W Marriott in Uvero Alto.
Our country has been a leader in attracting foreign direct investment (FDI) in the entire Caribbean and Central American region for several years now. Almost a quarter of that investment has been made in tourism and the projects approved by CONFOTUR so far this year suggest that this valuable input will continue to grow. Investment in tourism by our banks, stock exchanges, pension funds and individual entrepreneurs is also growing. It is therefore worthwhile to consider the pros and cons of the prodigious growth in tourism investment.
In the last decade our country has been in the sights of tourism investors. During the years 2010-2020 total FDI in tourism here amounted to US$11.8 billion, with US$5.7 billion in the 2016-2020 period alone (which accounted for 41% of total FDI). The mere fact that in 2019 CONFOTUR approved new tourism projects for a whopping 192,000 rooms is strong evidence that, before the arrival of the government of change, the country was very attractive to tourism investors, especially in hospitality. Of that total, 166,800 rooms would be located in La Altagracia, 6,496 in El Seibo and 6,476 in Maria Trinidad Sanchez.
In June 2022 the press reported the expected avalanche of tourism investments with impressive figures. “In the next four years the Dominican Republic’s tourism sector would be receiving investments of approximately US$34,331 million in mixed, hotel and real estate projects, contributing close to 9,026 rooms to the Dominican market.” But when scrutinizing other sources and news the impressive figures may fall short. It is well known that not all investment project announcements and/or approvals materialize, the historical experience being that only between 10 and 20% do.
According to the Central Bank in 2022 the country captured US$3,802 million in FDI, mainly in tourism, trade and industry, mining. (The historical high had been US$3,500 million in 2017.) But with the drop in overall FDI in Latin America in 2020 due to the pandemic, here too FDI in tourism fell to US$1,160 million. Still, this represented 25% of total FDI that year. Already in 2022, the tourism sector attracted some US$779 million, representing 21% of total FDI for the year. With spirited optimism, ASONAHORES had predicted that the year would close with more than US$1,000 million in investment.
Such figures include not only new construction and tourism developments, but also investments in the acquisition of existing properties and the modernization of tourism infrastructure. The 2022 figure, therefore, is a far cry from the annual average captured in the previous decade, suggesting that we have not yet returned to the pre-pandemic pace of investment in the sector. However, all indications are that we are moving steadily in that direction. The steady growth in the flow of foreign tourists is an encouraging element, but news of future investment is even more exciting.
The most dazzling announcements regarding tourism investment in our country were made by the Minister of Tourism at the 2022 and 2023 editions of FITUR. In 2022 he announced the attraction of investments estimated at US$2,000 and President Abinader, for his part, announced then that six hotel chains would invest in the Cabo Rojo project. (The latter seems that it will not materialize, in view of the fact that the government has decided to build the first three hotels on its own). On the other hand, the minister confirmed, already at FITUR 2023, more than US$3,645 million of investment in new hotel infrastructure and agreements with Spanish businessmen. According to the minister, US$1,645 million will be invested this year, which will mean more than 3,000 new rooms.
Among the most significant projects currently underway is that of the Punta Cana Group and Marriott International with Mac Hotels for the construction of a W Marriott in Uvero Alto (Marriott International contributes 3,744 rooms distributed in nine hotel brands). For Miches there are several hotel projects under construction, which represent a total investment of US$850 million and 3,250 rooms. On the other hand, the Larimar City & Resort project will be built in Punta Cana and will include 25,000 apartments, 6 hotels, a hospital, a casino and a university. But the largest project so far -although on hold- is the 11,000-room project announced by Annex Tour, a Turkish tourism conglomerate, for Nisibon.
Of special significance is the commitment to build the first Planet Hollywood hotel in Punta Bergantín (Puerto Plata) by Blue Diamond Hotels. Also noteworthy is the Air Park project for Nisibón by Grupo Viamar, which includes the development of a domestic airport and two hotels. Also noteworthy is the 127-room Hilton Garden Hotel in La Romana, a US$17 million investment by former baseball player Edwin Encarnacion. One of the attached graphs, from a social media meme, shows a list of all hotel projects currently planned or under construction.
The country with the largest investment in tourism here is Spain. By October 2020 Spanish companies in our country totaled 92 hotels, with more than 47,000 rooms. The 17 companies grouped in IVEROTEL, an association of Spanish hoteliers with interests in the region, have 70 of those hotels. In November 2022 it was announced that Spanish hotel chains are committed to “an investment plan of 944 million dollars for the next two years”, that is, in 2023-2024. (In another source the investment is only US$500 million.) The Bahia Principe chain will invest US$100 million for this and next year, plus US$40 million in Cayo Levantado. Meliá and its partner Falcon’s Beyond expect to invest some US$400 million. For the Caribbean and Central America region, the Spanish chains have announced a total investment of US$3.091 billion in 2023.
Also significant was the announcement that Ritz Carlton, a very high-end hotel chain, will plant its roots in the country with two luxury hotels. The developer is Dominican Yamil Isaías and the investment is estimated at some US$250 million by the Pioneer investment fund, with support from the AFPs and other investment funds. In addition, the Excel fund bought the Silver Sun Gallery and Embassy Suites by Hilton hotels and its president states that “the stock market has the possibility of contributing 20 to 30% with the investment needs of the tourism sector in the next 5 to 7 years, understanding that there will be an estimated demand of US$10 to 11 billion.” Such participation will be facilitated by the law passed in 2021 that allows the creation of public companies.
Pension funds, for their part, are also getting into the game. According to “the Superintendent of Pensions, Francisco Torres, 33.8% of the RD$65,838.8 million of the investment fund administrator (AFI) is consolidated by tourism. This means RD$22,250 million until February 2023, an amount aimed at supporting the development of the productive sectors.” For their part, multiple banks have increased their credit portfolio for the tourism sector. “Between 2020 and 2022, the ABA has noted that the increase has been 127%, going from 42,808 million Dominican pesos (about 720 million euros) to 97,131 million (more than 1.6 billion euros). The ABA has highlighted that the growth in the Tourism portfolio between 2016 and 2022 doubled the increase recorded in the total commercial loan portfolio.”
Tourism investments from the stock market, pension funds and multiple banks attest that national participation in the sector is growing. Obviously, a climate of greater confidence prevails for these investors and it is expected that investments will continue to grow. However, the government is sponsoring the development of two large projects that so far are not receiving support from national investors: Cabo Rojo and Punta Bergantín. For Cabo Rojo a “strategic partner” is being sought to invest some US$600 million, while the Integral Tourism Development Plan for Miches involves “a public-private investment of US$1 billion to develop 3,128 hotel rooms and 1,423 in residential complexes.”
In the short and medium term the above review suggests a rosy investment outlook for the tourism sector. (Just look at the list of projects approved this year alone.) It also suggests that the pros of that investment, ceteris paribus, far outweigh its cons. To strengthen their analysis and conclusions potential investors can consult the excellent “Dominican Republic Investment Guide” recently published (Sept.2022) by PRODOMINICANA. They can also consult the Tourism Investment Guide that was previously developed by the UNWTO for our country under the auspices of MITUR.
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