Business

Dozens of small hotels go to auction block

By Shamille Scott Business reporter scotts@jamaicaobserver.com

Wednesday, May 07, 2014    

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Dozens of small hotels in Jamaica are currently on the auction block.

Checks done by the Business Observer show that at least 29 resort villas and small hotels, ranging from five rooms to 93, have already been listed for sale by local realtors.

When combined, the asking prices for the properties total US$84.4 million ($9.3 billion).

"In any industry, there's always opportunity for people to sell," said Evelyn Smith, president of the Jamaica Hotel and Tourist Association (JHTA).

As far as she is concerned, people are just looking for the next best option and it's a natural part of any business.

"Even some of the larger hotels have also changed hands recently," Smith said.

Still, much of selling of small hotels has to do with challenges and competing with larger all-inclusive hotels, she added.

Like everything, it comes down to economies of scale, the smaller hotels don't have the buying power, the marketing capabilities and the reach like larger hotels, said Anya Levy broker associate at Re/Max.

Monica Zijdemans, the proprietor of Mandeville's Villa Bella Hotel, says she put her 12-room hotel up for sale because it's time to retire.

But age isn't the sole reason she's calling it a day.

" I don't think the government understands small hotels, it's not all about the North Coast," she said.

The hotel owner says she's not getting calls on her business phone and she pays for Internet that doesn't work.

"Could I get those things, I'd be fully booked," said Zijdemans. "How I get business these days, is if guests are in the area and people send them up here."

Still, there's always a market for small hotels.

"Some guests will come, they like the coolness, no noise, no stress," she said.

Patrick Lawe, who owns Sea Splash Resort in Negril agrees.

"While some small hotels are being squeezed out by the larger hotels, there is still a market for them" he said. "The well-heeled guests love it, they want the privacy and want to be called by name."

He decided to put his 21-room hotel up for sale to focus on his other business. "I've just got too busy to focus on the hotel business and I've got a lot older too."

Levy figures that there are so many small hotel listings because the properties are overpriced.

But Deborah Cumming, managing director realtor at Century 21 says there is still a lot of buying interest in the boutique hotels.

"The ones who we are dealing with, they have a good product and have spent on renovating their properties," she said.

And now, many more small players in the hotel and hospitality sector are expected to get a leg up with the introduction of the new omnibus tax incentives regime, which, among other things, will allow them to write off the cost of buildings within the economic life of the building.

"For the first time, with the new tax regime, small hotels are getting duty free items, so that's a big plus," said Smith. "There's never been a mechanism to facilitate refurbishing, now there is."

And despite the challenges, such as maintaining operations with less than 40 per cent occupancy levels on average, Jamaican small hotels are some of the top ranked hotels on global travel websites, according to the JHTA president.

There has also been a marginal increase in occupancy levels -- it grew by four percentage points between 2010 and 2012.

Tourism director, John Lynch Small reckons that small hotels can do well depending on how they market themselves, and if they have a strong online presence, although they don't get so much support from tour operators who prefer to deal with larger hotels.

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