Sandals plans hotels by the dozen
Sandals Resorts International is looking to Wall Street to help finance as many as a dozen new Caribbean hotels as the luxury resort manager ditches its conservative strategy of building just one project a year and keeping debt down.
CEO Adam Stewart, who runs Sandals with his father, Gordon “Butch” Stewart, said the company was not for sale and had no plans to go public, contrary to rumours. Instead, it was looking beyond the regional Caribbean banks it traditionally used to fund the biggest expansion in its history.
“We’re open to taking on more debt to build more than one hotel at a time. We want to build three or four hotels a year,” Stewart said. “We are trying to look for bigger capital to grow. We know exactly what to do and how to do it. But until now we’ve been restricted by the balance sheet of regional banks.”
The company, which owns and operates 23 resorts across seven Caribbean islands, was in talks with Deutsche Bank and others to raise money as it weighed the new projects, including four hotels it planned to build in 2018, Stewart said.
While he declined to say how much he was seeking to borrow, the company was spending $375m in 2018 to build a 580room Barbados hotel and $500m to construct a resort on the island of Tobago in the southern Caribbean.
“We’re not looking at $200m any more,” he said.
Sandals is aiming to capitalise on a Caribbean tourism boom. A record 29.3-million tourists visited the islands in 2016, according to the Caribbean Tourism Organisation.
About 41,000 new rooms are under construction or being planned in the region, said STR, which tracks the industry, up 40% from a year earlier. The increase was led by projects such as a 2,000-room casino hotel in Montego Bay, Jamaica, and a 934-room beach resort in Varadero, Cuba, STR said.
Tourism is the biggest source of foreign currency earnings for many countries in the region. Stewart said growth in Caribbean tourism had attracted interest from private equity and some of the hotel industry’s biggest names.
While the company does not disclose revenues, Stewart said it was “very sound”, with a ratio of debt to earnings before interest, tax, depreciation and amortisation of less than one.
“The Marriotts, the Hiltons, the Hyatts, institutional capital and private equity, they’re all looking to get a piece of the action in the Caribbean,” he said. “It’s at an inflection point. I expect to see a massive boom in two or three-star hotels.”
Sandals, the biggest private employer in Jamaica, targets the luxury vacation market. The average daily rate across its portfolio of 6,000 rooms is $550, according to Stewart. It is opening over-the-water suites in Jamaica and St Lucia, which come with a dedicated butler and around-the-clock service, for as much as $3,000 a night.
“We’re easily among the most expensive and we’re proud of it,” Stewart said.
WE ARE OPEN TO TAKING ON MORE DEBT … WE WANT TO BUILD THREE OR FOUR HOTELS A YEAR