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THE NEW LUXURY CAPITAL OF THE CARIBBEAN: THE DOMINICAN REPUBLIC

More reasons to choose the Dominican Republic

   
We will take a look at how the Dominican Republic has evolved from an all-inclusive market position in regional tourism to a luxury Mecca and discover why this trend has occurred in the current economic climate.


How Tourism Began in the Dominican Republic:

By the late 1960´s sugar cane was the gold of the Caribbean, and the DR was not the exception, but world economics required more diversification to protect the country’s economy from the wild swings of sugar prices. This required new considerations and a full evaluation of the various possibilities. While Jamaica and Puerto Rico had established reputations for tourism in the 1970´s the DR, with more land and beaches than both islands combined, failed to take advantage of its own natural beauty and most of all, failed to introduce the charisma and gentle nature of the Dominicans themselves as a viable product in to the tourism industry.

It was in the late 1970´s that the government decided to pass some laws that could favor the establishment of tourism in the island. With the approval of the laws and incentives, tourism development took off. Some of the incentives included exemptions for: income taxes, capital gains taxes, property taxes and import duty exemptions, to list a few. Those incentives remain today and continue to be a major boost to the industry.

It took about 20 years for the island to notice the benefits of the incentives passed in the 70´s and to understand the true potential of tourism as one of its main pillars for economic development, since it provides additional demand for all local production. From fruits to rum, from tourism services to transportation, the increased consumption from over 4 million visitors a year (aside from the 9 million locals) provided the base for improved production locally and a better standard of living.

In the last 15 years the Dominican Republic became the Caribbean island with the most  hotel rooms, mostly under the ¨all inclusive¨ plan, where it ranks 1st in the world. This success in the ¨all inclusive market¨ perhaps influenced luxury investors to not consider the island, thinking that its image was a marketing barrier to the success in the luxury market.

In the last 5 years, this all started to change, with developments that are among the best in the world, with a strong support from many factors among them: improved infrastructure, very low development costs, a short permit process, plenty of labor and homemade construction materials. When you put into the mix the lowest land costs in the area, superb beaches and the great warmth of the locals the combination has transformed the country into luxury development heaven.

The reasons behind the change:

1. New local luxury developments: What comes first, the development or the ¨positioning?¨ In the case of the DR, many top developers believed that since the country was largely known for economic hotels with all inclusive facilities that the ¨luxury investor¨ would not like to own a property in the island mainly due to the fact that the demands of the luxury market are totally different. Luxury requires an experience, top entertainment, golf, yachting, great dining, the possibility to mix with the local culture and to taste the real local atmosphere. Those were requisites that had no compatibility with the ¨all inclusive¨ label, where most of the experience was largely limited to the resort premises.

But some local developers put economics before ¨positioning¨ and they decided to invest in luxury, since the returns were better than in any other Caribbean island for the following reasons: The development costs for top luxury real estate in the DR are about US $900 to $1,200 per-m2 (the lowest in the area) and land values are also among the lowest in the Caribbean. By selling the end product at competitive prices in the world market, the returns would be phenomenal. This possibility of extraordinary returns was the reason behind the first burst of local investment.

After the local success, came the international names, since the ¨positioning¨ had already been established by the names of: Cap Cana, Punta Cana Resorts, Casa de Campo, Metro country club and many others.

 

2. Improved infrastructure: The government understood the importance of the new luxury industry and started to invest in new airports, private toll roads that reduced transportation times and new aqueducts. The results are evident: Samana has a new international airport ready for the developments that will be made there. The new toll road from Santo Domingo into Samana, saves 3 hours of travel, making Samana closer than Punta Cana from the capital.  New roads have been announced to connect Punta Cana and Santo Domingo, and the private and public sectors keep looking for possibilities and ideas to add value to the most important industry in the country.

But infrastructure is not only good for investors who want to move faster within the island, it also allows for produce to be transported faster and better from the country into the hotels, markets and homes of the consumers. One of the advantages of the island is that it produces most of the food, fruits and drinks that are demanded by its visitors, even the most demanding of them.

The island also has more entertainment and cultural diversity than most Caribbean islands due to its larger size and the dense population of its capital (over 3 million people) where you can find many of the flavors of a large city. Many visitors overlook the great cultural heritage in Santo Domingo as the first capital of the new world. Santo Domingo,with its many museums, theaters, opera and musicals makes for a great weekend break from the typical relaxing atmosphere of a luxury resort. Add to all of that a wealth of great shopping malls, all with international brands, and you can see why the new developments have been so successful with investors and buyers in general.

Along with that, the DR has received investments of a top Spanish international hospital chain Hospiten, with two facilities, one in Santo Domingo and another in Bavaro, close to Punta Cana. Santo Domingo has very good cardiac facilities and most of the equipment that you may find in top cities around the world. This is an important island feature, in order to attract the baby boomer generation.

Adapted from an article by Guitze M. Messina in "Caribbean Property Magazine", March, 2009.

More to follow.

West Indies Real Estate are well equipped and experienced to help individual buyers and developers enter this market.  Please click here to see a selection of the properties we have available.

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