Financiers more sceptical about backing tourism projects
Published:Friday | May 13, 2011 | 12:00 AM
Janet Silvera, Senior Gleaner Writer
WESTERN BUREAU:
With the global economic issues still seen as the most significant challenge facing the region's hospitality sector, lenders are now more conservative about backing tourism projects, says KMPG Jamaica's Raymond Campbell.
According to the KPMGpartner, the risk perception notwithstanding, good projects can still attract financing, and lenders are willing to restructure distressed loans.
"On the matter of existing loans, survey respondents indicated that lenders were open to assisting distressed clients in several ways, including restructuring loan facilities and the extension of loan maturities," said Campbell, referring to a survey done by KPMG Advisory Services.
Lenders also indicated that clients, who were experiencing difficulties, should implement changes to improve operating performance. The key expectation of lenders was prudent management of expenses and a proactive focus on liquidity and capital, supported by a proactive business plan, an effective marketing campaign and a creative sales strategy, he said.
Campbell was presenting the findings of the 2011 KPMG survey to delegates on first day of the Caribbean Hotel and Tourism Investment Conference, now on at the Iberostar Suites in Montego Bay.
Since the start of the recession in 2007, a number of projects in the region have been stalled owing to lack of funding, among them the Marriott hotel that was to be built in Kingston, the multibillion-dollar Harmonisation project in Trelawny, and the Four Season in The Bahamas, Financial Gleaner research shows.
The KPMG survey focused on financing trends, the outlook for the region and the identification of current changes in the lending environment.
Of the 19 lenders and financiers in some nine countries covered in the survey, only 36 per cent of the major banks and lending institutions were bullish on the prospects of the Caribbean tourism industry over the next 12 months, said the report.
"The global economic issues were seen as the most significant challenge facing the sector. Interestingly, other factors including social issues, the UK Travel Tax and quality of the hotel product were not seen as significant," Campbell told a room of some 120 participants, which included prospective investors, hoteliers and accountants.
For the first time, hotel financing brokers/consultants were also included in the survey, as they represent a new source of financing for the sector.
"The respondents represented an aggregate portfolio of US$2.8 billion in loan exposure in the region," Campbell said.
The makings of a successful hotel development, conference participants were told, includes a well-capitalised project and the presence of a global brand. There was no clear consensus on the importance of other factors, including airlift, beachfront location or the level of government support.
Survey respondents indicated that financiers have increased the spread of interest rates for loans to the hospitality sector, with the spread being the largest in the last five years of the KPMG Survey.