There is a Barbadian saying that if you want to score runs you have to ‘roll the wicket’. The new Barbados government has certainly rolled the wicket and is ready to score some runs. There has been a paradigm shift in the governance of the economy which has had striking results. A fiscal surplus has been achieved, the country has a balance of payments surplus for the first time in many years, inflation is down to 2%, and foreign reserves are up to 15 weeks of imports, which protects the currency peg against the US dollar. The National debt has been restructured with longer tenors and lower rates and, as a result, over $500m in interest payments have been saved.
More than just correcting the management of the economy, the government has rolled out an economic transformation plan which is intended to make the country the most competitive in the region. As part of the plan, the Town and Country Planning Act has been reformed with simpler processes and faster turnaround times. Major real estate projects now have much greater clarity as to the requirements for approval.
This comes on the heels of five years of record tourism arrivals and a doubling of the room stock on the island, mostly by growth in numbers of rental villas and condo’s, which now exceed hotel rooms. This element of the market has been the fastest-growing segment, spurred by the growth of the Airbnb phenomenon. The government has levelled the playing field on how those different visitor revenues are taxed by introducing a ‘shared economy levy’ of 10%, whilst announcing the intention to increase VAT on hotel accommodation to 10% next year, a level of room tax which is still much lower than that which applies in our major tourism source markets.
This growth in tourism has also focused the government on its tourism assets and they have announced a search for an international airport management company to operate the airport. The bidders will have to commit to providing capital to renovate and enhance the physical plant and to improve the visitor experience.
Real estate developers are responding positively. The recent purchase of five buildings at the Pierhead in Bridgetown will result in over 400,000 square feet of mixed-use development, including a hotel, apartments, retail office, and restaurants.
The purchase of Apes Hill Golf Club by a wealthy investor who already had a significant economic footprint on the island promises an exciting re-launch of a magnificent asset for the island with new luxury residential options.
In the hotel sector, the Hyatt project will commence construction and Blue Diamond Resorts will be constructing a 200 room Royalton hotel on the site of the existing 90 room Discovery Bay Hotel. Blue Diamond is the fastest growing hospitality player in the region. Part of the Sunwing group, they plan over 10,000 new rooms in the region in the next few years. An Indigo hotel is planned for the old Caribbee Hotel site and the Beaches project, one of the Sandals brands, is likely to proceed in 2020.
Marriott Hotels have announced the acquisition of Elegant Hotels Group Plc, which owns and operates seven hotels on the island. This will be Marriott’s first foray into the Caribbean luxury all-inclusive market, and they intend to renovate the hotels and create an exciting new product.
I mentioned earlier the ‘Airbnb phenomenon’. It encompasses a wide array of industry online travel businesses, including VRBO, Owner Direct, Expedia, Booking.com, TripAdvisor, and others, and it has changed the way we book our vacations putting the power of choice in the hands of the consumer. This paradigm shift has spurred numerous new developments on the island, including Westmoreland Hills, Mullins Grove, Garden Grove, Zinnia, and Harmony Hall Green, to name a few. These appeal to the buyer who wants to earn a yield on his investment either by renting on those engines or in a ‘low frills’ rental programme. This sub-market has been the fastest-growing segment of the market and has changed even developments that have been around for 25 years, such as Royal Westmoreland.
We live in a new ‘uber’ world where the younger generation is less motivated to owning large assets and more attuned to controlling their exposure and varying their experiences. That is probably the biggest lesson to be learned by today’s developers.
Barbados is on the cusp of a new wave of development, driven by all of these very positive initiatives and encouraged by a well-managed business-friendly economy, a competitive low tax environment, and all of the island’s many natural attributes.
The next few years promise to be exciting times.