Despite years of hard work and dedication by Miguel A. Domenech and his staff at the Puerto Rico Tourism Company, the dream of expanding the island's hotel industry is beginning to fade. Indeed Puerto Rico has 1,230 fewer rooms today than it had in 1980, while during the same period the rest of the Caribbean added 53% more.
Tight credit policies, the recession, bureaucratic delays in acquiring permits and sluggish (or nonexistent) government response to pleas for economic assistance have made hotel development in Puerto Rico a nearly impossible task. Industry analysts and investment experts predict that, with the possible exception of El Conquistador Resort & Country Club, the island will not see another new hotel property for at least three years unless the Commonwealth government aggressively supports tourism.
It has not been lack of interest on the part of developers that has hindered tourism projects in Puerto Rico. In 1989, there were at least 15 hotel projects scheduled to open during 1992. Since these projects were first announced, however, the U.S. economy entered a severe recession and the list of potential investors and bank financing dried up.
"The fact is, since Mitsubishi Bank agreed to provide the letter of credit for El Conquistador two years ago, the market has changed substantially," explained an investment banker familiar with the deal. "Today, no bank will provide financing for major hotel or real estate projects. Even Japanese banks, which were willing to come into this market with letters of credit, have seen their profits shrink at home and bankruptcies soar."
"Financing is a worldwide problem," added Domenech, executive director of the Tourism Company. "An estimated 60% of all hotels on the mainland are in her hand of banks because of financial problems. However, as I explained the Mitsubishi Bank officials, Puerto Rico does not have the same problem of hotel overbuilding as the U.S. does. Here we have a shortage of rooms."
"Banks on the mainland have had bad experiences with hotels," stated another investment …