DR Tourism Sector Overview

Having previously positioned itself as one of the leading all-inclusive resort destinations in the Caribbean, since the early 2000s the Dominican Republic started to evolve from a merely all-inclusive resort destination to a consolidated lifestyle destination with the development of a series of high end touristic real estate communities around world class signature designed golf courses and with a well-varied complementary offer of entertainment and amenities.

As of yearend 2023, with over ten million visitors and a hotel room inventory surpassing 80,000 rooms, the Dominican Republic tourism sector reached historical record growth. The DR was among the first countries to adapt to the challenges posed by the COVID-19 pandemic, implementing robust health and safety protocols that allowed for an earlier and more effective recovery of the tourism sector. By 2023, the country had not only recovered but surpassed pre-pandemic tourist arrival numbers, demonstrating resilience and adaptability.

Record tourist arrival numbers have come together with significant foreign direct investment targeting real estate development opportunities in the tourism sector, including hotels, resorts, and leisure oriented residential communities. The tourism sector was the largest recipient of foreign direct investment in 2023, surpassing other key sectors such as energy and trade. Under this context, the Dominican Republic’s real estate market has seen robust growth in recent years, driven by the booming tourism industry, economic stability, and government incentives for foreign investors, including tax breaks and residency benefits for property buyers. These policies make it financially attractive for international buyers to invest in real estate.

Why the Dominican Republic

Beaches and Natural Beauty: The DR is home to some of the Caribbean’s most stunning beaches such as Punta Cana, Bávaro, Miches, Bayahibe and others. The country offers a wide range of natural attractions, including the lush mountains of Jarabacoa, the pristine waters of Samaná Bay, and the colonial charm of Santo Domingo.

Year-Round Climate: The tropical climate provides warm weather throughout the year, making it an ideal destination for those looking to escape colder climates and enjoy a perpetual vacation-like atmosphere.

Cultural and Historical Sites: The DR boasts a rich history, evident in the Colonial Zone of Santo Domingo, a UNESCO World Heritage Site. It was the first permanent European settlement in the Americas, founded by Christopher Columbus’s brother, Bartolomeo.

Air Connectivity: The country has several international airports, with Punta Cana International Airport (PUJ) being one of the busiest in the Caribbean, handling over 7.6 million passengers annually (pre-pandemic).

Government Support: The Dominican government, through the Ministry of Tourism, has actively promoted the country as a top destination through various international campaigns. These efforts have been crucial in maintaining the DR’s position in the competitive Caribbean market.

Geographical Location: The DR’s location makes it easily accessible from major markets in North America and Europe. Direct flights from cities like New York, Miami, Madrid, and Toronto are frequent, making travel convenient for a significant portion of the tourist population.

Political Stability: The DR has remained politically stable relative to other countries in the region, providing a safe environment for tourists. This stability has been an essential factor in attracting both tourists and investors.

Branded Private Residences in the Dominican Republic

Branded private residences cater to an affluent demographic seeking the luxury of a five-star resort combined with the privacy of a personal home. The demand for these properties in the DR is fueled by high-net-worth individuals from North America, Europe, and increasingly, Latin America, who are drawn to the country’s idyllic settings and favorable investment climate.

Several high-profile branded private residence developments are currently underway in the Dominican Republic. Notable projects include:

Amanera Resort & Residences: Located within the 2,170-acre Playa Grande Golf & Ocean Club Development on the northern coast of the Dominican Republic, Amanera Resort & Residences offers an exclusive blend of luxury and natural beauty. The Amanera Resort is currently operative, featuring 24 one and two bedroom “casitas”, each thoughtfully designed to integrate with the lush tropical landscape and offering sweeping ocean views. Additionally, 6 Aman branded residence components are currently under development with an additional 18 units to be developed and integrated into the resort over the next few years. The Amanera Resort first opened to the public in 2015. Aman, the luxury hospitality brand, operates the Resort, while Discovery Land Company, known for developing high-end residential communities that emphasize privacy, exclusivity, and a strong connection to the surrounding natural environment, is the primary developer of the Playa Grande Golf & Ocean Club overall master plan. In addition to the Amanera Resort & Residences, the Playa Grande Master Plan contemplates multiple real estate products carefully planned to create different neighborhoods including golf villas, coastal villas, cliff estates, and others. The first phase of the Playa Grande master plan currently contemplates a total of approximately 90 residential units including 16 of the planned Amanera branded residences to be integrated to the resort. Amanera itself is the first golf-integrated Aman Resort in the world, centered around the world-class Playa Grande Golf Course designed by the legendary Robert Trent Jones Sr. Residents. Guests will enjoy access to the resort’s myriad amenities, including a wellness center, beach club, and multiple dining venues that showcase locally sourced ingredients.

Four Seasons Resort and Residences at Tropicalia: located on a 60-acre site along the pristine beachfront of Playa Esmeralda in northeastern Dominican Republic, along the southern shores of Samaná Bay. The property will include a 95-key resort and 25 Private Residences of three- and four-bedroom units, all located steps of the beach. The project is being developed by Cisneros Real Estate, combining the globally renowned hospitality and service of Four Seasons and Cisnero’s decades of business and investment in the Dominican Republic, Latin America and the United States. Featuring a tropical modernist design by Brazilian architect Isay Weinfeld, Four Seasons Resort and Residences Dominican Republic at Tropicalia will set a new standard of natural, sustainable elegance for sophisticated travelers from around the globe A site of breathtaking natural beauty, Tropicalia is the private estate of the Cisneros family featuring a diverse ecosystem of white-sand beaches, crystalline aquamarine water and coral reefs, mountains, forests, mangroves, lagoons and rivers, a working coconut plantation and an organic farm. Adriana Cisneros, Chief Executive Officer of Cisneros, notes that the company’s nonprofit Fundación Tropicalia has dedicated more than a decade to the region’s well-being through an array of educational, socioeconomic and community programs. With construction underway, the project is expected to open in early 2026.

St. Regis Cap Cana: The St. Regis Cap Cana project is an expansive 16-acre beachfront development located within the Cap Cana Community featuring a gated entrance and 800 linear feet of private beach, offering unparalleled luxury and exclusivity. The property will include a 200-key resort and 70 Private Residences. Guests will be able to indulge in a dramatic beachfront pool and a dedicated children’s pool, all while enjoying personalized beach and poolside butler service. Other amenities include a Signature St. Regis Iridium Spa and a fitness center with personal trainers available to cater to guests’ wellness needs. Dining experiences are elevated with grill and dining areas, complemented by the Signature St. Regis Bar and a unique cigar and rum lounge. For entertainment, a family movie theater and library offer cultural enrichment, while art gardens, courtyards, and a tidal pool create a serene atmosphere. Additionally, the project provides direct access to the Punta Espada Golf Course, equestrian facilities, and the world-renowned Marina Cap Cana, ensuring a comprehensive and luxurious experience for all visitors. The project is a collaborative effort between Campagna Ricart & Associates, a leading DR real estate developer with extensive experience delivering residential projects to local high net worth clients, and Pioneer Investment Funds, the first local investment management company to invest in the tourism sector. The resort and residences are expected to welcome their first guests and owners by the end of 2024, with construction already in the advanced stages.

Ritz Carlton and The Luxury Collection Resorts at Yanuna: The Yanuna project located in Playa Macao, Punta Cana is a significant luxury development seeking to deliver a total of 4,213 hotel rooms and 1,640 residential units expanded over 47 acres with a total projected investment of over $2.375 billion USD when fully completed. The master plan features a 250-rooms resort with 50 private residences branded under Ritz-Carlton. Additionally, it includes a 300-room resort under The Luxury Collection brand. The development is designed to offer world-class amenities and experiences, including luxury all-inclusive services provided by The Ritz-Carlton, marking the brand’s first all-inclusive property in the Caribbean region. The project’s strategic location and the reputation of its associated brands are expected to contribute significantly to the region’s tourism appeal, driving economic growth and creating new employment opportunities. The sponsors of the project include Pioneer Investment Funds and AFP Popular (Pension funds management entity of Grupo Popular, one of the largest and most respected financial groups in the country) in collaboration with Marriott International, which oversees the integration of The Ritz-Carlton and The Luxury Collection brands into the development. The project promises to deliver a blend of opulent accommodations, fine dining, wellness centers, and recreational facilities, with an expected opening of its first phase by 2026.

Financial Challenges

Tourism has long been one of the more dynamic sectors in the DR when it comes to activity in different forms of capital investment and financing. In 2023, the tourism sector in the Dominican Republic generated foreign direct investment (FDI) of 1,182.1 million dollars, which represented 26.9% of total FDI in the country. Likewise, the credit portfolio from the local banking system directed to tourism reached US1,822 million representing 10.6% of the total private commercial credit portfolio of the system. In this sense, there is a significant track record on equity investment deals and proven typical financial structures directed to all-inclusive resorts and urban hotels developments. As of conventional for sale touristic residential developments, typical interim construction financing has been available with periods of challenges due to the aftermath of the 2008 financial crisis, which affected many developments that where aggressively advancing when the crisis hit. This caused many local banks to lose appetite for touristic residential development deals for several years, 2008 – 2015 more or less, period when developments stood stagnant and there was little to no new activity on this type of projects.

Following 2015 and beyond, touristic residential developments have reengaged with significant growth both on the demand and supply side, especially post-pandemic (2020 up to date). Under this new period, branded residences focused developments have successfully emerged with a luxury and personalized service value proposition, targeting a high-net-worth demographic from conveniently air travel connected source markets. However, several challenges arise when structuring financing from traditional local sources for this new type of value proposition, see examples below:

• Understanding the market: convincing risk assessment analyst at financial institutions that this high-net-worth clients (mainly foreign) buy at a significant premium compared to traditional local real estate prices they are used to.
• 2 in 1 mixed structure: not a typical standalone residential interim construction loan and not a typical structured long term resort loan either.
• Unfamiliar key metrics and structuring indicators: traditional metrics used by financial institutions do not meet the specific requirements of the financial profile, commercial strategy, and timing of cash flows.
• Franchise requirements and restrictions that impact the structuring metrics (i.e., restrictions on the use of presales cash inflows)

Nevertheless, as of today, major branded residences developments financing deals have been structured with local banks as well as multilateral financial institutions. On the equity side, these projects are showcasing strong sponsors including renowned international investors, as well as local investment funds managing institutional funds. Therefore, equity structures can vary according to the influence of the international players and their experiences, as well as specific requirements from local sourced capital.

Sales Impact and Value Proposition

For branded residences projects in advanced stage of development or already in operation in the DR, sales price appreciation from the early founders’ phase to construction completion has been of up to 30%, compared to a traditional no more than 10% in conventional residential developments. This additional value created throughout the development is a key driver when choosing the most appropriate commercial strategy to maximize return on investment. While in conventional residential projects the developer could be motivated to maximize early sales to meet financial institutions pre-sale requirements, for these branded projects doing so might result in leaving significant value over the table. This potential for price appreciation also motivates additional sales looking to capitalize on a future flip. However, for those holding property for the long term, investing in branded private residences in the Dominican Republic offers several benefits:

1. Rental Income: Owners can generate substantial rental income by leveraging the property’s brand affiliation and resort-like amenities.
2. Appreciation: The growing popularity of the Dominican Republic as a luxury destination suggests strong potential for property value appreciation.
3. Tax Incentives: The government offers various incentives to foreign investors, including tax breaks and residency benefits.

Pricing

The pricing for branded private residences in the Dominican Republic varies significantly based on location, size, and the level of luxury offered. Prices range from $1 million to over $10 million. For instance, a two-bedroom residence in a premium development might start at $1.5 million, while larger, more opulent villas with extensive amenities and prime locations can command prices upwards of $10 million. However, compared to other markets in the region on a per square feet basis, current prices in the DR show up competitive, further fueling the interest of buyers when compared to other long established branded residences destinations.

Consumer Lifestyle and Experience

In the Dominican Republic, as in many other destinations, Branded Residences Resorts are developed over the most exclusive and exotic pieces of land available, carrying impressive natural beauty, views, privacy, and access to exceptional amenities. Meeting this condition sets the stage, right from the very first development step of site selection, to be able to offer a unique experience. Once the site is secured, the brand choice will further complement the concept around the resort and define its target niche market.

The brand represents somehow the client profile and lifestyle choice, ones preferring sophisticated luxury with quick access to the general community lifestyle of the broader destination (It is usual for this type of traveler to go outside the resort to the broader community and explore), while others seek more secluded luxury integrated to nature and prioritizing privacy. Clients usually feel identified with the brand, with many of them owning property of the same brand in more than one destination and/or visiting different destinations on a regular basis throughout the year.

Branded private residences in the Dominican Republic offer an array of world-class amenities that set them apart from traditional real estate options. These include:

1. Personalized Services: Owners benefit from bespoke services such as private chefs, butlers, and concierge services that cater to their every need.
2. Exclusive Facilities: Residents have access to top-tier amenities like private pools, spas, fitness centers, and gourmet dining options.
3. Security and Privacy: Enhanced security measures and secluded locations ensure a safe and serene living environment.
4. Recreational Activities: Many developments feature golf courses, tennis courts, water sports facilities, and private beach access.
5. Maintenance and Management: Professional property management services handle maintenance, rental management, and other logistical aspects.

Conclusion

The Dominican Republic’s branded private residence market presents an enticing opportunity for luxury real estate investors. With their unique blend of high-end amenities, personalized services, and investment potential, these properties cater to discerning buyers seeking a sophisticated yet relaxed lifestyle. As new developments continue to emerge, the Dominican Republic is poised to solidify its position as a premier destination for branded luxury living.

Freddy Peña

Executive Director

SILVER Financial Advisory