HVS Market Pulse: Antigua
Antigua, the largest island of the nation of Antigua and Barbuda, is gaining increased presence as an icon of Caribbean tourism and recreation. The island's coastal geography makes it ideal for yachting and sailing, and its deep harbor accommodates massive cruise ships, as well. The opening of the state-of-the-art VC Bird International Airport in 2015 has allowed for even more passenger traffic to Antigua, helping to raise the island's profile among destination markets in the Caribbean.
The following article provides an overview of economic drivers and hotel market dynamics in Antigua, including an innovative route to financing the development of new luxury hotels.
Gateway to Citizenship Provides Funds for Caribbean Hotel Development
Traditional financing for hotel developments has always been more challenging to obtain in the Caribbean than in the United States. To overcome the hurdles, developers from several Caribbean islands have found a way of raising money toward their overall hotel capital stack through the Citizens by Investment Program (CIP).
Five island nations in the Caribbean participate with the CIP, which has reportedly been substantial to the development of hospitality projects in St. Kitts and Nevis, Dominica, Grenada, St. Lucia, and most recently Antigua and Barbuda. The program allows investors to contribute to real estate developments by purchasing a passport. Foreign investors thereby gain citizenship in the respective nation and legal passage to travel visa-free to approximately 130 countries.
The investments from the CIP in turn assist the respective island nation with funding for infrastructure projects, private development, and tourism. The CIP also helps developers fund a portion of their capital stack for the construction of new hotels and major hotel renovations, directly spurring economic growth. This has been especially evident in Antigua.
Growth as a Tourism Destination
Antigua lies in the middle of the Leeward Islands, west of St. Kitts and Nevis and north of Guadeloupe. The island famously features 365 beaches, "one for each day of the year," and tourism is by far Antigua's biggest economic driver.
Based on data available through November 2016 from the Antigua Hotel and Tourism Association, visitation has grown at a compounded annual average growth rate of 3.0% over the last seven years, with the vast majority of tourists arriving from the U.S. and Europe. The opening of the new $97-million VC Bird International airport, which was completed during the summer of 2015, increases the capacity for passenger traffic by 50% versus the previous airport.
When compared with the same period of 2015, tourist arrivals increased approximately 7.5% in the year-to-date November 2016 period, as shown in the following chart. This trend is expected to continue as increased tourist demand to Antigua prompts airlines to provide additional lift and developers to build new hotels.
Antigua's Hotel Supply
Antigua's hotel supply comprises a mix of luxury, upper-upscale, upscale, and midscale hotels in both the all-inclusive and traditional European Plan models. As of year-end 2016, Antigua had an estimated 33 hotels or 3,000 saleable hotel rooms, averaging fewer than 100 rooms per hotel.
In terms of hospitality accommodations, Antigua is best known for its iconic, highly rated luxury hotels such as Jumby Bay, a Rosewood Resort; Curtain Bluff; and Carlisle Bay. These hotels, however, represent only a portion of a limited supply of luxury hotel rooms on the island, as illustrated in the following chart.
New Hotel Development
Due to the increased airlift at VC Bird International Airport, access to the Citizens by Investment Program, and expansion in Antigua's tourism industry, developers are flocking to increase the available hotel inventory on the island.
Though many projects are still under consideration or in the pre-development phase, many luxury hotel projects have broken ground or are close to that stage in Antigua. More than 50% of the newly planned hotel rooms are in the luxury segment. Notably, international hotel brands are gaining representation in Antigua, as exhibited by the following developments.
Orange Limited is developing Pearns Point, a $300-million, mixed-use project on 137 acres along Antigua's west coast. The project's five-star signature luxury hotel will be branded as a Setai.
Callaloo Cay is a marquis development in the Global Citizenship Industry, developed by an international team of world-class developers and investors in a unique partnership with the Government of Antigua and Barbuda. It has been reported that the property will be operated by a globally recognized luxury brand of superior quality standards. The $200-million, 100-room Callaloo Cay hotel and residential project is reportedly on schedule to break ground in February 2017.
Most recently, Marriott International broke ground on a 70-room Autograph Collection hotel on the site of the former Coconut Beach Club. The newly built resort will be the first Marriott hotel in Antigua and only the second internationally branded hotel on the island (the other being the Rosewood Jumby Bay).
Looking Forward
The presence of several international hotel brands will only help raise Antigua's prominence as a tourism destination in the Caribbean. Notably, these developments come at a time when demand is increasing along with the capacity to bring visitors in by air through the new airport. The continued use of the Citizens by Investment Program should encourage additional hotel development in Antigua and help expand the island's tourism growth over the long term, leading to a cautiously optimistic outlook for Antigua's economy and hotels.
