A recent study by KPMG shows that many Caribbean countries are in a ‘catch 22’ situation with regard to tourism.

That was one of the findings ninth annual Caribbean Region Financing Survey.

The survey said no region in the world more dependent on hospitality than the Caribbean.

“The percentage contributions of the hospitality industry to the GDP of many countries in the region rank amongst the highest in the world. For several countries there is no ‘Plan B’ — no alternative to hospitality.

It said many of those countries have large budget deficits “and the only way to remedy such deficits is to impose charges and taxes on participants in the hospitality industry, which then makes them less competitive which further weakens their economies — a classic “Catch 22” situation.”

The KPMG survey said those countries have to recognise the reality of the situation.


“There is no simple solution. The results of our survey show that continued patience is needed.

“The region’s hospitality industry has been in the doldrums for several years now as a result of the global economic downturn and volatility.

“Lenders are cautious and wary of uncertainties. However, so are developers, investors and governments.”

It added as people in the industry return to the market, it will be with a more cautious approach because they have suffered in recent years. 

“There are fewer lenders to the industry and those entities that are lending are doing so more cautiously with more demanding terms and conditions. 

“With this more conservative approach there will be a natural gravitation to perceived safe options based on established jurisdictions with strong airlift and modern infrastructure, hotels with established brands and less reliance, if any, on real estate pre-sales.”

It said the pre-sale model of financing condo-hotels may survive but it will look very different with larger stage payments etc.

“Timeshare and fractional developments may be perceived as safer investments compared to second home ownership.”

“It is not all doom and gloom though by any means.


There are relatively few new troubled assets being reported by lenders and there are signs of recovery and more stability.

There was a slight lag in occupancy which did not hit rock bottom until 2010 having previously been boosted by lower rack rates. So hopefully we are over the worst but we still have lots of hard work ahead of us before we return to the good old days of booming tourism and strong sales of real estate and second homes.”

The KPMG Caribbean Financier Confidence Barometer, however, gives cause for optimism.

 It rose for the fourth year in succession and lenders’ outlook for the Caribbean and Central American tourism over the next 12 months is more bullish than at any point since 2008. 

The Survey is based on interviews both with lenders who are physically represented in the Caribbean and other, non Caribbean based, institutions who are lending into the region. The combined loans to the Caribbean hospitality sector of the lenders interviewed approximates US$3 billion.