Sandals Looks to Wall Street for Caribbean Expansion
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 per year and keeping debt right down.
CEO Adam Stewart, who runs Sandals with his father, Gordon “Butch” Stewart, said the closely-held company is not for sale and has no immediate plans to go public, contrary to rumors. Instead, it’s looking beyond the regional Caribbean banks it has traditionally used, to fund the biggest expansion in its history.
“We’re open to taking on more debt to build more than on hotel at a time. We want to build three or four hotels a year,” Stewart said in a telephone interview. “We are trying to look for bigger capital to grow. We know exactly what to do and how to do it. But up until now we’ve been restricted by the balance sheet of regional banks.”
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The company, which owns and operates 23 resorts across seven Caribbean islands, is in talks with Deutsche Bank and others to raise money as it weighs the new projects, including four hotels it plans to build next year, Stewart said. While he declined to say how much he is seeking to borrow, the company next year is spending about $375 million to build a 580-room Barbados hotel and around $500 million to construct a resort on the island of Tobago in the southern Caribbean.
With its expansion, Sandals is aiming to capitalize on a Caribbean tourism boom. A record 29.3 million tourists visited the islands last year, according to the Caribbean Tourism Organization. And 41,000 new rooms are under construction or being planned in the region, said STR, which tracks the industry, up more than 40 percent from a year earlier.
The increase was led by several major 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 the Caribbean tourism has attracted interest from private equity and some of the hotel industry’s biggest names.
While the company does not disclose revenues, Stewart said the company is “very sound,” with a ratio of debt to earnings before interest, tax, depreciation and amortization 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 the 2-star or 3-star level of 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 around $550, according to Stewart. It’s 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.