2017 Caribbean Hospitality Financing Survey Gary Brough Head of Travel, Leisure & Tourism, KPMG Islands Group
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Bank Confidence 10 9
8 7 6 5.15
5.17
5.18
Mar-10
Mar-11
Mar-12
5.89
6
Mar-13
Mar-14
6.5
6.67
6.83
Mar-15
Mar-16
Mar-17
5 4
3.5
3 2 1 0 Mar-09
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10
Non-Bank Confidence
9
8.17 8
7.56 7
7 6
5 4 3 2 1
0 Mar-15
Mar-16
Mar-17
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Bank vs. Non-Bank 10 9
Non-Bank
8.17 7.56
8
7
Bank
6.50
6.67
7.00
6.83
6 5
4 3 2 1 0 2015
2016
2017
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Confidence “Capital is available, but only on a very select basis.” “We still believe in growth for the Caribbean…” “The balance of debt/equity is still the critical factor, rather than the absolute availability of either source.”
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Readily available capital Banks
Non-banks
37% Agree
29% Agree Disagree
Disagree
63% 71%
©2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Bank appetite for issuing senior debt 80%
72%
70% 60% 50% 40%
30% 20%
14%
14%
10% 0% Lost my passport not interested!
Expecting some In the departure Ready for boarding Taking off - I'm turbulence - having lounge - high open for business confident enough to second thoughts - risk/high return - a go full throttle! unlikely little bit nervous will proceed cautiously
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Non-bank appetite for issuing senior debt 60%
57%
50% 40% 30%
29%
20%
14%
10% 0% Lost my passport - not Expecting some In the departure Ready for boarding interested! turbulence - having lounge - high risk/high open for business second thoughts return - a little bit unlikely nervous - will proceed cautiously
Taking off - I'm confident enough to go full throttle!
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Banks’ willingness to lend 100% Positive
Neutral
Weak
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Existing Hotels
Acquisitions
New Builds
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Non-Banks’ willingness to lend 100% Positive
90%
Neutral
Weak
80%
70% 60% 50% 40% 30% 20% 10% 0% Existing Hotels
Acquisitions
New Builds
©2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Other trends Banks
Banks
Non-banks
Non-banks
Airlift
Crime
Very important
Utility costs
Moderately important
New taxes
Not important
Government incentives
Outdated infrastructure
©2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Banks’ top countries for new lending 25%
20%
20%
15%
15%
10%
10%
5%
5%
10%
10%
5%
5%
5%
5%
5%
5%
0% Antigua
Bahamas Barbados Bermuda
Cayman
Curacao Dominican Guyana Republic
Jamaica
Trinidad Turks and Caicos
St Lucia
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Non-Banks’ top countries for new lending 20%
18.8%
18.8%
18%
16% 14%
12.5%
12% 10% 8% 6.3%
6.3%
6.3%
6.3%
6.3%
6.3%
Cayman
Jamaica
Puerto Rico
6.3%
6.3%
6% 4% 2% 0% Antigua
Anguilla
Bahamas Bermuda
Turks and Caicos
St Kitts St Maarten U.S. Virgin Islands
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Emerging landscape “Banks learned how difficult it is to enforce & then sell properties in the Caribbean, deal sizes and risk appetites have been reduced from previous levels. Future deal flow will be very selective.” “Lenders will come back as the region continues to remain stable/grow.” “...natural ebb and flow of different capital sources...”
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Emerging Landscape Non-banks
Banks
Fundamental and sustainable change
29%
Fundamental and sustainable change Temporary change
Temporary change
43%
57% 71%
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Emerging landscape • More players • Selected jurisdictions rather than regional dominance • Traditional financiers are part of new landscape but…….. • In a very different way - much more conservative • New landscape is fundamental change and not temporary change ©2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Target terms and conditions: Debt service coverage ratio 2.2 2 1.8 1.6 1.4 1.2 1 0.8 2007
2008
2009
2010
2011 Range
2012
2013
2014
2015
2016
2017
Average
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Target terms and conditions: Loan to value 100% 90% 80% 70% 60% 50% 40%
2007
2008
2009
2010
2011 Range
2012
2013
2014
2015
2016
2017
Average
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Target terms and conditions: Interest rate margin 800 700 600 500 400 300 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Range
Average
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Banks’ view on stage of economic cycle 100% 90%
80% 70%
67%
60% 50% 40%
30% 17%
20%
8%
10%
8%
0% Recovery
Approaching the peak
At the peak
Moving towards recession
In recession
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Non-banks’ view on stage of economic cycle 100% 90%
86%
80% 70% 60% 50% 40% 30% 20%
14%
10% 0% Recovery
Approaching the peak
At the peak
Moving towards recession
In recession
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Trump administration Non-banks
Banks
14%
27%
27%
Positive
29% Positive
Negligible
Negligible
Negative
Negative
46%
57%
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Cuba Non-banks
Banks
Less likely to lend to other jurisdictions in the region
11% 22%
No difference to approach of lending to other jurisdictions More likely to lend to other jurisdictions in the region
14% No difference to approach of lending to other jurisdictions
More likely to lend to other jurisdictions in the region
67%
86%
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Emerging opportunities “...America’s Cup 2017...potential catalyst for future investment...” “...Baha Mar finally opening...” “...better and more affordable air lift...”
“Expansion of air lift and airport expansions or infrastructure projects.” ©2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Thank you Gary Brough Head of Travel, Leisure & Tourism KPMG Islands Group Tel: +1 649 946 4613 gbrough@kpmg.tc
©2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.