For­get the days of pack­age tours and all-inclusives. With the recent open­ing of some very sophis­ti­cated hotels, the Domini­can Repub­lic is try­ing to com­pete with the Caribbean’s most lux­u­ri­ous destinations.

From June 2006

By Alexan­dra Marshall

It’s mid-afternoon in Santo Domingo’s Zona Colo­nial, an 11-square-block dis­trict of peel­ing, cheer­fully painted town houses and white­washed churches built in the after­math of Christo­pher Columbus’s arrival in 1492. Five hundred–plus years later, some might say that the Domini­can Republic’s UNESCO World Her­itage Site could do with a bit of a hose-down. The ornate scroll­work that trims so many of the Zona’s restau­rants, bars, and gov­ern­ment build­ings comes into pretty strong relief with a buildup of soot. But as the blaz­ing sun erases the effects of this morning’s short rain­storm, the birds are chirp­ing, a breeze is rustling the leaves of the shade trees, and it’s hard to find a real com­plaint about this exu­ber­ant, scruffy city-within-a-city. Not so about yours truly: at the door­way to the For­t­aleza Ozama, a 16th-century embank­ment look­ing out onto the city’s marina, I’m get­ting a good-natured scold­ing from a free­lance tour guide. The rea­son for his pique? I’ve just told him that of my 10 days in the coun­try, I’ve allot­ted only two to Santo Domingo. “This is where Colum­bus first landed!” he tells me in the consonant-free accent typ­i­cal of Caribbean Span­ish, with a wink and a smile that belie his scorn. “We’re the first city in the New World! Did you see the Museo de las Casas Reales two blocks away? We have the Alcázar de Colón, where Christo­pher Columbus’s son once lived. Two days! What are you thinking?”

I’m think­ing I’ve got a lot of coun­try to cover. After see­ing Santo Domingo, an afford­able, bohemian par­adise for history-lovers, I’ll drive about 150 miles north­west to Puerto Plata, one of the first areas to develop the all-inclusive tourism that has become syn­ony­mous with the Domini­can Repub­lic. It has just wel­comed a five-star bou­tique hotel that has the country’s bur­geon­ing hotel indus­try is buzzing. From there, I’ll head south­east to the Caribbean coast’s Punta Cana, now the fifth most pop­u­lar warm-weather des­ti­na­tion in the world, accord­ing to a recent study by the Amer­i­can Soci­ety of Travel Agents. En route, I’ll make a brief detour about 1 1/2 hours to the west, to Casa de Campo, the mega-resort and estate com­plex that, in the 1970’s, first attracted the monied leisure class to a little-known Caribbean island sit­ting pret­tily between its more famous neigh­bors, Cuba and Puerto Rico. Those other two Spanish-speaking island nations might have a larger place in our national con­scious­ness, but they’re not inter­change­able with this one, and Domini­cans are the first to tell you so. “Obvi­ously, I’m extremely biased,” says one of the nation’s famous sons, fash­ion designer Oscar de la Renta. “But we are very dif­fer­ent from most of the other islands in the Caribbean. We’re very proud of our his­tory and cul­ture. We know who we are.”

Domini­cans seem to be enjoy­ing a spe­cial boost of self-esteem lately, and they’re lur­ing fresh admir­ers. (Not all of these are base­ball fans, either, though the con­tri­bu­tions of Cy Young Award win­ner Bar­tolo Colón and All-Star Moisés Alou to the Domini­cans’ strong show­ing in the World Base­ball Clas­sic 2006 haven’t hurt.) The com­bined forces of a cur­rency now sta­bi­lized after a 2001 embez­zle­ment scan­dal; Hur­ri­cane Wilma’s crip­pling blow to com­pet­ing get­away Can­cún; $1.6 bil­lion in gov­ern­ment and pri­vate invest­ments last year; the con­struc­tion of badly needed new roads; a truly genial national cul­ture; and a smor­gas­bord of new resorts and hotels have led tourism to sur­pass sug­ar­cane as the Domini­can Republic’s lead­ing eco­nomic sec­tor. In a coun­try the size of New Hamp­shire, there are eight inter­na­tional air­ports to fly in the grow­ing crowd of yearly visitors—2005 saw 3.7 mil­lion, the largest num­ber yet. Amid a swirl of espresso steam and cigar smoke at the homey Zona Colo­nial diner Mesón de Luis, local real estate bro­ker Luis Fontánez tells me that prop­erty val­ues in the neigh­bor­hood have increased 70 per­cent over the past 10 years thanks to all the Euro­peans who want to buy town houses. Vis­i­tors are so impor­tant to the coun­try that Pres­i­dent Leonel Fer­nán­dez reg­u­larly trav­els through its 32 provinces to attend hotel ground­break­ings and ribbon-cuttings, many of which are broad­cast (with endear­ingly low pro­duc­tion val­ues) on government-run Chan­nel 4. At one such event, the inau­gu­ra­tion of a newly expanded 350-slip marina belong­ing to Casa de Campo, Fer­nán­dez con­fesses to me that he hopes the Domini­can Repub­lic will strengthen its push toward upscale tourism. “We should be mov­ing into a higher-quality, more sophis­ti­cated niche,” he says. (One needn’t be on assign­ment for an Amer­i­can mag­a­zine to get a word with Fer­nán­dez, by the way. At the marina, whose posh shops and pris­tine design make it a sort of Rodeo Drive by the sea, the pop­u­lar head of state stopped to chat and pose for pic­tures with dozens of locals and tourists too.)

Fer­nan­dez doesn’t need to call a spe­cial ses­sion of the sen­ate to start rais­ing stan­dards. The Fraser Yacht com­pany has just set up an out­post at the marina and hopes to start char­ter­ing seven-day cruises around the island soon. Fans of Club Med–style vaca­tions have taken advan­tage of the Domini­can Republic’s many all-inclusive resorts for years, and more of them are pop­ping up all the time—including a new prop­erty in the works at Casa de Campo—but bou­tique is the country’s new catch­word. Playa Grande, a north coast golf course and soon-to-be artist’s retreat partly owned by the Amer­i­can money man­ager Boykin Curry, Moby, and Char­lie Rose will fea­ture a styl­ish inn by Aman­re­sorts. Jose “Pepe” Fan­jul, one of the prin­ci­pal own­ers of Casa de Campo, tells me he’s this close to clinch­ing a deal to open a sleek new prop­erty, com­plete with a “really top-rate spa.” And his friend George Hamil­ton, the actor, beau mondiste, and long­time Casa de Campo home­owner, who has been com­ing to the Domini­can Repub­lic “since shortly after Colum­bus,” has toyed with the idea of launch­ing a Domini­can bou­tique hotel of his own. “You hear ‘new hotel’ and imme­di­ately think of some mar­ble mon­stros­ity from the 1970’s, but that era is over with. Peo­ple want lit­tle, and charm­ing, and details, and first-class ser­vice,” says Hamilton.

At the new gen­er­a­tion of Domini­can hotels, ser­vice is the word man­agers repeat most often in their eager­ness to dis­tance their prop­er­ties from the down-market specter of behe­moth pack­age vaca­tion­ing. Any­one who has ever wit­nessed the push and pull between all-inclusive guests abus­ing their unlim­ited bar priv­i­leges and surly staffers try­ing to deny them knows that a higher thread count is not all that sep­a­rates the five-stars from the all-you-can-eats. In resort enclave Playa Dorada, just out­side of Puerto Plata, the 50-suite Casa Colo­nial has carved out a lushly land­scaped green zone between two old-style all-inclusives. Already sanc­tioned by such an arbiter of high liv­ing as Donatella Ver­sace, who vis­ited the hotel with her daugh­ter and entourage shortly after it opened at the end of 2004, Casa Colo­nial is all Frette linens, 27-inch flat-screen TV’s, an infinity-pool deck with four Jacuzzis, and an enor­mous full-service spa. Down at the wedge of golden-sand beach, you can just make out the strains of reg­gae lite enter­tain­ing the plas­tic bracelet–wearing hordes on either side, but not in the placid gar­dens, splashed with pink-and-white orchids grafted to the trunks of the palms. Book a deluxe suite, and your turn­down ser­vice includes a drawn bath sprin­kled with rose petals. In the pres­i­den­tial suite, that bath is drawn in an antique claw-foot tub on a pri­vate bal­cony over­look­ing a nat­ural lagoon.

A prop­erty with a sim­i­lar spirit, but slightly more focused on serv­ing the gourmet trav­eler, is Sivory Punta Cana, the last and most secluded resort on a long stretch of beach about an hour’s drive from the Punta Cana air­port. “If guests want to book a horse­back ride or water sports, we can accom­mo­date them,” says gen­eral man­ager Anna Lisa Brache, “but we don’t push it. Most just want to be left alone.” From the look of things dur­ing my stay, doz­ing pool­side, read­ing on the beach, and eat­ing are the most intense activ­i­ties under­taken by the mostly Amer­i­can cou­ples lodged on the grounds, which are dot­ted with still-young sea grape and oh-so-modern two-story terra-cotta vil­las. With only 55 suites served by a spa and three well-appointed restaurants—one Asian fusion, one con­tem­po­rary Mediter­ranean, and one nou­velle French—a guest really can’t feel crowded. This is espe­cially the case when the guest is lubri­cated by one of the almost 10,000 bot­tles from the wine cel­lar, full-size high­lights of which are on offer in a small refrig­er­a­tor in every spa­cious room. The dead-serious Domini­can som­me­lier, Juan Pierre, steered me toward a 2003 Carch­elo Altico Syrah. With no town in this neck of the woods, and neigh­bor­ing resorts more buf­fet than souf­flé, the hotel’s empha­sis on food is wel­come, even if the self-bestowed descrip­tion art cui­sine aims a bit high. Once ensconced here, most guests never leave the grounds until the taxi comes to take them back to the air­port, and peo­ple have to eat.

Not to be out­done by its new neigh­bor, the Punta Cana area’s first and best-known des­ti­na­tion, Pun­ta­cana Resort & Club, has just unveiled its own bou­tique prop­erty, Tor­tuga Bay Vil­las. Made up of 50 airy suites in 15 free­stand­ing vil­las designed by Pun­ta­cana Resort part­ner and some­time res­i­dent Oscar de la Renta, Tor­tuga Bay cre­ates a iso­lated oasis sim­i­lar to that of Sivory and Casa Colo­nial, some­thing that the much big­ger adjoin­ing main hotel com­plex at Pun­ta­cana can’t do. At Tor­tuga Bay, the only con­tact to the out­side world is a golf cart, a satel­lite TV hookup, and a cell phone con­nec­tion to a concierge. Should guests want to com­mune with the larger com­plex, includ­ing Puntacana’s neigh­bor­ing new golf club, the property’s two golf courses (one designed by Pete Dye and the other by Tom Fazio), eight restau­rants, and five bars, they’re as wel­come at the larger resort as the denizens of Puntacana’s three res­i­den­tial devel­op­ments and their vis­i­tors. But Tor­tuga Bay’s pin-drop quiet, powder-white beach, pool area, and on-site restau­rant are closed to every­one but its own guests. Per­haps this is why Pene­lope Cruz and Jake Gyl­len­haal have already availed them­selves of the place. “I didn’t even know Gyl­len­haal was here,” de la Renta says, with a laugh. (The same can’t be said of Uma Thur­man, who, he adds, is on her way down with her kids for a photo shoot as we speak.) Lumi­nar­ies who own houses at Puntacana’s Corales com­mu­nity are sim­i­larly happy to be left glo­ri­ously alone. “The place is being devel­oped in a very low-key way,” says inte­rior designer Bunny Williams of her estate, sit­u­ated near Pun­ta­cana part­ner Julio Iglesias’s giant spread and that of press-shy dancer-choreographer Mikhail Barysh­nikov. “It hasn’t been over­built, so we can get away and be private.”

Though its easy to be unaware of the mul­ti­tudes inhab­it­ing Pun­ta­cana Resort and its neigh­bor­ing prop­er­ties, they’re there. The immac­u­late thatched-roof Pun­ta­cana Inter­na­tional Air­port is the Domini­can Republic’s busiest, and the region is respon­si­ble for 25 per­cent of the country’s for­eign exchange. Thirty-five years ago, the area was all vir­gin for­est and raw coast. Since then, growth has been so rapid that the resort’s par­ent com­pany, Grupo Pun­ta­cana, has had to build infra­struc­ture and pro­vide ser­vices for its employ­ees and guests; the gov­ern­ment sim­ply hands out tax breaks and hearty thank-yous for the effort. And so, hop­ing to pro­mote a model of sus­tain­able tourism and hang on to its 2,000 work­ers in an indus­try rife with turnover, Grupo Pun­ta­cana pres­i­dent and CEO Frank Rainieri and his part­ner, the New York–based labor lawyer Theodore Kheel, have donned their urban engi­neers’ caps with gusto. A genial baby boomer with the social con­scious­ness and dressed-down style, Rainieri is more than happy to be con­sid­ered, with Kheel, the Ben and Jerry of the Caribbean. In addi­tion to build­ing the road con­nect­ing Punta Cana to Higuey, where many of the resort’s work­ers now live, and co-running a school (pri­vate, but with tuition on a steeply slid­ing scale), Grupo Pun­ta­cana has erected an inde­pen­dent power grid; started a lovely, flower-strewn out­door shop­ping com­plex with middle-income hous­ing pop­ping up around it; built a waste– and water-treatment plant and a town church; and set up the Pun­ta­cana Eco­log­i­cal Foun­da­tion, a 1,500-acre for­est reserve and research facil­ity in part­ner­ship with nine inter­na­tional uni­ver­si­ties. Pro­duce from its organic gar­den sup­plies some of Pun­ta­cana Resort’s restau­rants and is also sold to area res­i­dents. La Cana Golf Course uses a hybrid grass that requires min­i­mal fer­til­izer and pes­ti­cide and can be irri­gated with sea­wa­ter. (Nearby res­i­den­tial resort Cap Cana and Casa de Campo’s Dye Fore golf course have both adopted the mate­r­ial, too.) “Tourism in the Caribbean is based on sun, sand, and sea, and if we don’t pro­tect that here, we’ll destroy our main asset,” Rainieri says, speak­ing to me in his spa­cious but not ter­ri­bly glam­orous office. “A friend recently vis­ited and told me, ‘I go to the most lux­u­ri­ous places around the world, and then I come here, where some­thing is being done to try to improve the area too, and my vaca­tion has a bet­ter taste.’” Not con­tent with spread­ing the green gospel to guests, Rainieri and Kheel have pub­lished a book, A Nat­ural Way of Busi­ness: How Frank Rainieri, Theodore Kheel, Oscar de la Renta, and Julio Igle­sias Helped Trans­form an Island Econ­omy. Bill Clin­ton, a fre­quent vis­i­tor who, Rainieri tells me, hopes to buy in Punta Cana one day, penned the foreword.

The down­side of seclu­sion can be seg­re­ga­tion, and for all the relax­ation that comes with her­met­i­cally sealed resorts, a trav­eler would miss some­thing really spe­cial by avoid­ing the towns that aren’t dom­i­nated by such gigan­tic prop­er­ties. No mat­ter where you’re stay­ing, it’s worth hir­ing a taxi and doing some explor­ing. (Do not con­sider, for one moment, rent­ing a car and dri­ving after dark, unless you have Le Mans–level con­fi­dence and skill.) A half-hour from Playa Dorada lies Cabarete, which is rapidly gain­ing atten­tion from wind– and kite-surfers for its high gusts and dynamic water. By night, its tiny strip of inde­pen­dently run restau­rants, with beach­side seat­ing under lantern-lit coconut palms, teems with Domini­can and for­eign vis­i­tors. Kick­ing off my shoes to walk the sandy stretch from one estab­lish­ment to the next (it’s often dif­fi­cult to tell where one ends and the next begins), I pick my way through bachata trou­ba­dours strum­ming acoustic gui­tars; ven­dors of Mama Juana (a dehy­drated mix­ture of spices and bark meant to be infused in rum and said to be an aphro­disiac); stray dogs; and chatty maître d’s com­plain­ing that the travel agents are send­ing too many tourists down south to Punta Cana.

Between Puerto Plata and Cara­bete is Sosúa, where soft-sand beaches tickle a calm bay pop­u­lar with scuba divers. Its hotels are mainly all-inclusives, but the cen­ter of town is col­or­ful, with small seafood restau­rants set up to serve the pop­u­la­tion of mostly vacation-home own­ers. Ten min­utes from Playa Dorada is Puerto Plata’s malecón, or board­walk, a tra­di­tional Sun­day after­noon hang­out for teenagers and fam­i­lies. It’s not uncom­mon to see four-to-a-moped cruis­ers pour­ing Pres­i­dente beer into plas­tic cups (one for the dri­ver, nat­u­rally) while whizzing past the indif­fer­ent police. Duel­ing boom­ing sound sys­tems, some as large as pickup-truck beds, blast merengue and reg­gae­ton to the crowds fly­ing kites on the hill­side at the For­t­aleza San Felipe, at the very end of the beach­side strip. Here is where you’ll see the side­walk ven­dors with alu­minum char­coal bar­be­cues. Some of the best food I’ve eaten in this coun­try came from a portable grill on Puerto Plata’s malecón: a citrus-marinated quarter-chicken and a side of steamed yuca with vinegar-marinated red onions for about $2.50. Right up there with it was a plate of whole fried mero (sea bass) mar­i­nated in adobo and gar­lic, accom­pa­nied by fried sweet plan­tains and crispy salted jack bread, which I pro­cured for about $2 from the row of stands near the shore­line of Boca Chica, a beach sub­urb a half-hour’s drive from Santo Domingo. Don’t let the lack of refrig­er­a­tion at the frei­durías, as the brightly painted stalls are called, scare you. The ladies who run them are sell­ing today’s catch (par­rot­fish and mero when I vis­ited). And so what if some of the goings-on in these towns are a lit­tle less whole­some than the family-style activ­i­ties at the larger resorts? Boca Chica’s placid, crystal-clear waters are chock­ablock with locals on the make, and the enclave’s rep­u­ta­tion for pros­ti­tu­tion is, pretty clearly, not unfounded—even in the mid­dle of the after­noon. But the only hec­tor­ing I expe­ri­ence while bikini-clad and solo on the sand, wait­ing for a Domini­can friend to rejoin me with some half-frozen Bohemia pil­sner, comes cour­tesy of three shoe-shine boys. (Are they look­ing to pol­ish my flip-flops?) Though they claim to be 15, they are 12 if they’re a day, and hilar­i­ously inquis­i­tive. Am I Ger­man? Am I mar­ried? Is that guy my boyfriend? Would he beat me if he found me talk­ing to them? Answers: No, No, Not really, and Cer­tainly not!

Sleepier towns have a more upright cast—for exam­ple Juan Dolio, a beach­side bed­room com­mu­nity 45 min­utes west of La Romana and about two hours from Santo Domingo. Con­sist­ing mostly of con­dos and free­stand­ing vaca­tion homes (includ­ing the offi­cial vaca­tion res­i­dence of the pres­i­dent), its down­town is just a row of espresso houses, Ital­ian restau­rants, and tiny bars lined up along a shady street, plus the road­side bode­gas on the thruway one long block away. The tourist trade in Juan Dolio has lost some steam; a few uncel­e­brated all-inclusives and an upscale Hilton are the only options for those who aren’t fans of a ram­shackle pen­sion. But the evening I spend here, a ways down the road from hip­ster night­club Aura Beach house, is among the best of my stay. Ensconced in a thatched-roof bar with no name, I get a les­son in danc­ing bachata from my Domini­can friend, while a cou­ple of res­i­dents look on and coo. The ice in my herb-laced Mama Juana has almost melted, which means the time to leave is draw­ing near. The bar­keep tosses me a plas­tic cup—why waste a drop?—wishes us a good evening, and off we walk into the night, the chirp­ing crick­ets com­pet­ing only with the sound of the waves, 100 feet away, and soft laugh­ter com­ing from another small bar down the road.

Not so long ago, Mexico’s Riv­iera Maya was a sleepy stretch of Caribbean coast­line. Now every hotel group wants in on the action. Michael Gross traces the evo­lu­tion of an “it” destination

From Jan­u­ary 2006

On Octo­ber 21, just a few weeks after Trop­i­cal Storm Stan wal­loped the Caribbean coast of Mexico’s Yucatán penin­sula, Hur­ri­cane Wilma blew in, wreak­ing havoc. Rains and 140 mph winds left most of the area with­out elec­tric­ity, tele­phones, water, or pass­able roads, and gov­ern­ment officials esti­mated that the area would lose $1.5 bil­lion in tourism income. Yet just a few days later, work­ers were swarm­ing every­where and the beach was alive with the sound of buzz saws.

Tor­ren­tial storms notwith­stand­ing, a gold-rush gid­di­ness ani­mates the so-called Riv­iera Maya, the cor­ri­dor that starts just below Can­cún and stretches south, along the coast, to the ancient Mayan ruins of Tulum. Man­darin Ori­en­tal is hard at work on a new hotel. So is Capella Hotels & Resorts, a new chain of bou­tique prop­er­ties run by for­mer Ritz-­Carlton exec­u­tives. The own­ers of  ­Tulum’s new Amansala, a boho-chic yoga retreat pop­u­lar with the fash­ion elite, are now busy turn­ing noto­ri­ous cocaine king­pin Pablo Escobar’s for­mer estate into a hotel. And speak­ing of Ritz-Carlton, the group is said to be look­ing for beach­front on which to plant its own flag, as are Regent and Four Seasons.

That’s just the small stuff.

Span­ish devel­op­ment and con­struc­tion com­pany Obrascón, Huarte, Lain has spent the last 10 years cre­at­ing Mayakoba, a mag­nif­i­cent jungle-and-beach resort a few min­utes south of Puerto More­los that, when com­pleted, will include hotels run by six name-brand lux­ury com­pa­nies: Fair­mont, Rose­wood, Banyan Tree, La Casa Que Canta, Viceroy, and one more to be announced. Mayakoba aims to raise the bar for eco-resorts. After eight years of bio­log­i­cal and hydro­graphic stud­ies, OHL uncov­ered a sys­tem of fresh­wa­ter canals and lagoons that had been hid­den for mil­len­nia beneath the Yucatán’s lime­stone crust; guests will get around on silent elec­tric boats, shar­ing these waters with herons, cor­morants, and man­a­tees equipped with GPS to pro­tect them. The devel­op­ers esti­mate that the place will cost a stag­ger­ing $1.5 bil­lion. Although the open­ing of the first hotel, a Fair­mont, has been delayed until this spring because of Hur­ri­cane Wilma, it won’t be long before guests at each of the prop­er­ties will be able to avail them­selves of the ser­vices of all, includ­ing an eco-sensitive Greg Nor­man golf course, with cenotes as water hazards.

Indeed, Wilma has been viewed as a mere plot twist in the larger story here, which is about how hotels have cre­ated a world-class travel des­ti­na­tion, and how a newly enlight­ened gov­ern­ment has stepped in to guide them and help them invent a new lux­ury travel brand.

A mere twenty years ago, when I first vis­ited Aku­mal, a div­ing vil­lage a half-hour’s drive south from Mayakoba, this coast­line was comatose. I ate an $8 grilled lob­ster in a dirt-floored restau­rant and stayed in a cinder-block hotel, where I left the shower feel­ing dirty. Nearby Can­cún, which had been cre­ated from noth­ing in the 1970’s, was a generic mass-market resort town—a row of con­crete boxes on the beach. Far worse, the reef just off­shore (part of the second-largest reef sys­tem in the world) was dete­ri­o­rat­ing, thanks to poor plan­ning and mis­treat­ment by devel­op­ers and overuse by tourists.

Though the stretch below Can­cún remained pris­tine, par­a­disi­a­cal, and vir­tu­ally untouched by tourism, there really wasn’t a Riv­iera Maya then—only the odd strip of thatched beach cabanas, a hand­ful of dive shops, the Mayan ruins at Tulum, and the national park at Xel-Há, a nat­ural aquar­ium for snorkel­ers. A 1983 guide­book noted that the area did not have “much to offer to vis­i­tors” and described some of the more desir­able accom­mo­da­tions as hip slums.

A cur­rent vis­i­tors’ map, dis­trib­uted gratis at the air­port, lists 87 hotels between Can­cún air­port and Tulum—and that sta­tis­tic is incom­plete. By 2025, offi­cials say, there will be 110,000 hotel rooms on Mexico’s Caribbean coast.

How did this thin strip of the coun­try rein­vent itself as one of the world’s great lux­ury des­ti­na­tions? The tale begins with Fonatur, Mexico’s 31-year-old national trust for the devel­op­ment of tourism, which has been respon­si­ble for cre­at­ing the resort areas of Can­cún, Los Cabos, Loreto, the Bay of Huat­ulco, and Ixtapa. In 1995, when Maroma—the first high-end resort on this shore—opened, the area was still known as the Costa Maya, or Mayan Coast. But that year, seek­ing to cap­i­tal­ize on (and to begin to con­trol) a process that had started on its own, Fonatur under­took exten­sive mar­ket research on what to call the cor­ri­dor. Accord­ing to one story, a pre­scient vis­i­tor, inspired by the Côte d’Azur, anointed the place the Riv­iera Maya. The name of that per­son has been lost in the decade since, but the title’s mag­i­cal allure has stood up to forces even stronger than Wilma’s winds.

Fonatur’s pres­i­dent, John McCarthy, says bluntly that the cre­ation of the Riv­iera Maya was “really accidental—it hap­pened by itself.”

Actu­ally, it had help from the pri­vate sec­tor, or more specifically, José Luis Moreno, who was a hip­pie (“I still am,” he says) when he came to the Yucatán in 1963. A diver and archi­tect, he began his career cre­at­ing schools, houses, and a night­club, in Isla Mujeres and Can­cún. He built lux­ury houses in Aku­mal, a white-sand beach town between Tulum and Can­cún; one of his clients, Pablo Busch, a Mex­i­can under­wa­ter archae­ol­o­gist and hunter, bought 10 miles of land there, on which Moreno built a hotel (it soon closed). Moreno later built a house on the beach north of Playa del Car­men. In 1988, after dis­ease killed the coconut palms, Moreno built another house, and before long the Maroma hotel was born. Soon, other inde­pen­dent lux­ury prop­er­ties fol­lowed, includ­ing the lav­ish Paraíso de la Bonita and Playa del Carmen’s ultra­hip Hotel Deseo. Like Maroma, they became mag­nets. “Qual­ity attracts the peo­ple who make des­ti­na­tions,” says Samir Saab, whose group Pro­ho­tel owns Ikal del Mar, which they man­aged to build in the jun­gle with­out cut­ting down the trees. Now, many credit Moreno as the area’s pio­neer, but the founder of Maroma, sit­ting on the ter­race of his house on its lush grounds, laughs at that. “It’s called civ­i­liza­tion,” Moreno says. “You can’t stop it.”

The Riv­iera Maya is hardly the first place to have blos­somed from noth­ing­ness. In 1941, the El Ran­cho Vegas hotel and casino was built along a two-lane high­way between Los Ange­les and Las Vegas. By the end of that decade, the famed Vegas Strip was estab­lished. The birth of tourist Dubai is another case in point: in 1995, eye­ing dimin­ish­ing oil reserves, its ruler insti­tuted an aggres­sive tourism pol­icy, and today more than five mil­lion peo­ple visit the tiny emi­rate annu­ally. Bhutan fol­lowed a sim­i­lar course; in 2004, the gov­ern­ment invited Aman­re­sorts and Christina Ong to build two lux­ury hotels, instantly remak­ing the coun­try as the des­ti­na­tion du jour for the fash­ion and celebrity set.

In each instance, vision­ary hoteliers—gamblers, really—set things in motion, the gov­ern­ment saw what was hap­pen­ing and began facil­i­tat­ing devel­op­ment, a crit­i­cal mass was achieved, and, finally, a sec­ond wave of big-brand, big-money hotels arrived to seal the deal. But never has this hap­pened in quite as star­tling a man­ner as on the Riv­iera Maya.

As a result, some fear there could be trou­ble ahead for the Riv­iera Maya, even though the area’s resorts are far bet­ter planned and quite some dis­tance from one another. When the gov­ern­ment started sell­ing titles to vacant prop­er­ties, the coast was quickly bought up—and land prices soared. Now the pres­sure to pro­duce profits is as intense as it once was in Cancún.

“I saw the same pic­ture we are watch­ing today, then,” says Moreno, refer­ring to the 1970’s and the Inter-American Devel­op­ment Bank, which had been estab­lished in 1959 by the Orga­ni­za­tion of Amer­i­can States, and which Moreno says was formed to halt the spread of Com­mu­nism with cash. The IDB offered “rivers of money,” Moreno says, “on con­di­tion it be used to develop pri­vate enter­prise.” One result was Can­cún; built on vacant land, it grew expo­nen­tially. Out­side Can­cún, where Moreno and a part­ner owned their beach­front coconut plan­ta­tion, there was only one hotel for 20 miles in either direc­tion, and it could be reached only by boat.

Can­cún was over­built, some­times ille­gally, in part because “one of the prod­ucts of Mex­ico was cor­rup­tion,” Moreno explains. Also, hotel own­ers wanted big­ger prof­its, and the work­ers who’d built Can­cún “cre­ated pres­sure to gen­er­ate more jobs.” Then, in 1988, Hur­ri­cane Gilbert dev­as­tated the region, caus­ing hotels to lose income. Own­ers started sell­ing rooms cheap; package-tour oper­a­tors moved in to help fill them, and Can­cún began its relent­less slide from a high-end des­ti­na­tion to the set­ting for Girls Gone Wild.

Four years ago, the Mex­i­can gov­ern­ment admit­ted the error of its ways and asked tourism offi­cials to cre­ate rules and plans that bal­anced a desire for growth with the need to respect the envi­ron­ment. “The pop­u­la­tion is pri­or­ity num­ber one,” Fonatur’s McCarthy says. “Sus­tain­abil­ity is more than birds, bees, and fish. You must cre­ate wealth and respect the envi­ron­ment and cul­ture while doing that.” Most impor­tant for vis­i­tors, the new rules placed strict den­sity lim­its on the Riv­iera Maya.

Those rules were already being for­mu­lated when world events redrew the lux­ury map. Post 9/11, many tourists redis­cov­ered Mexico’s acces­si­bil­ity from the United States. All-inclusive resorts, most of them owned by Span­ish com­pa­nies like Iberostar, devel­oped a large pres­ence in the area. Direct descen­dants of the package-tour oper­a­tors who’d filled Cancún’s hotels after Gilbert, they were every­thing the new Riv­iera Maya does not want to be. Their big-box prop­er­ties flattened the nat­ural land­scape and wounded the jun­gle ecosys­tem. Worse, to some minds, they harmed the local econ­omy. Since all-inclusive vis­i­tors pay in advance, often in Europe, they deprive Mex­ico of des­per­ately needed tax rev­enues. Such chains some­times “break the laws,” Moreno says, and encour­age cor­rup­tion “at all levels.”

The new breed of hote­liers saw what the all-inclusives didn’t. Maroma’s suc­cess attracted other inde­pen­dents and they, in turn, attracted the big hotel groups. Rafael Micha, co-owner of Hotel Deseo and Básico, thinks a new cycle will begin, with what he calls lone-ranger hotels. “Some con­sumers will go to the mall for the big brands,” Micha says, but oth­ers will go “to the place with the feel of those who first built this.” “It starts and it spreads, and the hid­den jew­els are still there, but off the beaten track,” says Melissa Perl­man, who cofounded Amansala on Tulum’s beach after 9/11. “When I first came here”—in 1995—“it was really sleepy. This is still sleepy.” But with 900-pound-gorilla–like con­cen­tra­tions of lux­ury brands such as Mayakoba fill­ing in the beach­front to the north, and bou­tique hotels pulling the party peo­ple to Playa del Car­men, Amansala should be on the beaten track soon.

Today, the Riv­iera Maya is such a suc­cess that the hote­liers of Can­cún want to re-brand their city as part of it and catch some of its glow. That’s because the lat­est iter­a­tion of this des­ti­na­tion has proved to be a pow­er­ful mag­net, attract­ing not just vis­i­tors, not just invest­ment dol­lars, but also intel­li­gent devel­op­ers who have learned from past mis­takes. “We took the vision of the gov­ern­ment and tried to evolve it by invest­ing a lot,” Juan Aguilar, the exec­u­tive in charge of build­ing Mayakoba, says. “We are not Can­cún. We real­ized we can only earn back our invest­ment by going high-end.”

Chris Cahill, the pres­i­dent and chief oper­at­ing officer of Fair­mont, is bet­ting mil­lions that Aguilar is right. “The dif­fer­ence is den­sity,” Cahill says. “When a des­ti­na­tion is ruined it’s because of heavy, heavy con­cen­tra­tion. I think every­one rec­og­nizes the unique­ness of this area and no one wants to repli­cate Can­cún. I think it will have stay­ing power.”

Mayakoba will have only 1,200 rooms, even though 3,900 are allowed under den­sity rules. With its dif­fer­ent yet com­ple­men­tary hotel brands and an envi­ron­ment that’s been care­fully planned and engi­neered, Mayakoba, says Aguilar, will let “guests feel the jun­gle,” while remain­ing close to the man-made—the links, the spas, the bars, the restau­rants, the indoor-outdoor show­ers, the plasma-screen TV’s. It truly is a grand experiment.

On my last night at the eco-conscious hide­away Ikal del Mar, a week before Wilma hit the region, I had din­ner with Dario Flota, head of the Riv­iera Maya tourist board, which not only pro­motes the region but tries to keep the gov­ern­ment and pri­vate inter­ests in tune. “Our main prob­lem is social,” Flota told me. “Where will work­ers live? Where will chil­dren study and play?” Playa del Carmen’s pop­u­la­tion is grow­ing by 16 per­cent a year. The state of Quin­tana Roo is an eco­nomic engine, pro­duc­ing a third of Mexico’s tourism income. A high-speed rail­road or a sec­ond air­port at Tulum are being con­sid­ered. Every move Flota makes is ques­tioned. And the Mex­i­can gov­ern­ment is look­ing ahead and begin­ning to develop an exten­sion it calls Grand Maya, south of Tulum. But—ominous music should play here—“the Span­ish are already there, buy­ing every­thing,” says Moreno.

The smart Mex­i­can money is look­ing even far­ther down the coast, toward Belize, says Car­los Gos­selin, another Mex­i­can archi­tect who worked on Can­cún and years later opened an inde­pen­dent lux­ury hotel, Paraíso de la Bonita. The land he bought for that prop­erty, just out­side Can­cún, cost a mere $1.50 per square meter in 1974. Now it’s worth 250 times that, he esti­mates, sound­ing more wor­ried than elated.

“There’s no more land in our coun­try!” Gos­selin cries. “It’s going to be a big disaster.”

“We’ll run out of world soon,” agrees Moreno, who three years ago sold 75 per­cent of his hotel to Ori­ent Express in order to expand it. But he isn’t giv­ing up on the Riv­iera Maya, either. “I still have more land,” he says, with a twin­kle in his eye. “The Span­ish want to buy it but we don’t want to sell. We are going to keep fighting.”

Flota, too, wor­ries about the all-inclusives that have cor­rupted the process, ignor­ing the rules and get­ting away with eco-murder. “They own air­lines, tour oper­a­tors, and local trans­port,” he tells me. One huge new hotel was recently judged in court to have been ille­gally over­built, yet it remains open, Flota adds. Still, he is philosophical—and hope­ful. “All des­ti­na­tions expe­ri­ence this,” he says as we wash down nou­velle Mex­i­can cui­sine with French red wine. “It’s part of a cycle.” He ges­tures toward the beach, vow­ing, “We will take great care to save this.”

Real estate demands in China and India draw inter­na­tional crowd

Mon­day, July 16, 2007

Inman News

The U.S. real estate indus­try has increas­ingly global ties, accord­ing to a report by researchers at the Uni­ver­sity of Cal­i­for­nia, Berke­ley, with res­i­den­tial bro­ker­age com­pa­nies, devel­op­ers and oth­ers pur­su­ing inter­na­tional expan­sion in fast-growing markets.

“Glob­al­iza­tion of the real estate indus­try is now a fact of eco­nomic life,” accord­ing to the report. “U.S. firms, along with firms from many other coun­tries, find them­selves fac­ing major oppor­tu­ni­ties and chal­lenges in the sud­denly global real estate market.”

Pro­duced by researchers at the university’s Fisher Cen­ter for Real Estate & Urban Eco­nom­ics, the report notes that glob­al­iza­tion increas­ingly has involved the ser­vice sec­tors in the past decade, “and the var­i­ous sub­sec­tors of the real estate indus­try have been enthu­si­as­tic par­tic­i­pants in this global surge.”

“Builders, bro­ker­age firms, con­sult­ing and ser­vices firms, real estate finance firms and investors have extended their area of oper­a­tions beyond local mar­kets to a world­wide base,” accord­ing to the “Glob­al­iza­tion and Real Estate: Issues, Impli­ca­tions, Oppor­tu­ni­ties” report.

“Even res­i­den­tial real estate bro­ker­age firms have fol­lowed an increas­ingly mobile expa­tri­ate pop­u­la­tion into the inter­na­tional arena, forg­ing alliances with com­pa­nies through­out the globe to pro­vide relo­ca­tion ser­vices and world­wide access to res­i­den­tial mar­kets. Addi­tion­ally, the emer­gent middle-class in Asia and else­where with their pent-up demand are boost­ing res­i­den­tial and retail real estate activ­ity, pro­vid­ing a new range of oppor­tu­ni­ties for forward-looking U.S. firms.”

Some major U.S. res­i­den­tial real estate bro­ker­age com­pany brands — includ­ing RE/MAX and Realogy’s Cen­tury 21, Cold­well Banker and ERA fran­chise brands — have world­wide oper­a­tions, for exam­ple. RE/MAX has oper­a­tions in 65 nations, while Cen­tury 21 has oper­a­tions in 46 coun­tries and ter­ri­to­ries, and Cold­well Banker has oper­a­tions in 31 nations.

The report also cites a study of U.S. real estate firms that found res­i­den­tial real estate bro­ker­age and man­age­ment com­pa­nies were the least likely to be inter­na­tion­ally focused com­pared to other types of U.S. real estate busi­nesses, such as con­struc­tion and devel­op­ment com­pa­nies, real estate financ­ing com­pa­nies and real estate invest­ment trusts.

And based on a study of data for a sam­ple of 326 real estate indus­try firms, “only 13 per­cent of the large real estate firms listed … had global oper­a­tions beyond the United States,” and most of the com­pa­nies were more likely to be active in Europe, Canada or Mex­ico than in Asia, the report states.

A sep­a­rate analy­sis of 44 large real estate finance and ser­vice firms con­ducted by the U.C. Berke­ley cen­ter found that Asia was the region most fre­quently men­tioned for future regions under con­sid­er­a­tion for expan­sion, fol­lowed by Mex­ico and Canada. This group of com­pa­nies was most likely to already have inter­na­tional oper­a­tions in Europe and Asia, the report noted.

The future of the U.S. real estate mar­ket is increas­ingly tied to con­struc­tion activ­ity in Asia, the report states. “China has become both a lead­ing pro­ducer and con­sumer of many build­ing mate­ri­als, and ques­tions exist as to whether growth will lead to excess capac­ity or excess demand in com­ing years. Either could sig­nif­i­cantly affect the build­ing process and real estate prices in the United States.”

For­eign direct invest­ment in U.S. real estate and U.S. direct invest­ment in real estate abroad is under­es­ti­mated by offi­cial data, the report states, though both cat­e­gories have been grow­ing for at least the past four years.

Non-U.S. enti­ties own about 15 per­cent of total U.S. equi­ties out­stand­ing, accord­ing to the report, and also “play a big role in U.S. credit mar­kets,” with more than a 14 per­cent share of total U.S. credit mar­ket debt held by non-U.S. enti­ties as of 2006.

Out of a total of $6.6 tril­lion in over­all out­stand­ing agency debt and secu­ri­ties issued by government-sponsored enti­ties such as Fan­nie Mae and Fred­die Mac, about 18 per­cent is held by for­eign enti­ties, the report states.

Among the top-10 for­eign hold­ers of U.S. agency bonds as of June 2005, China had the largest for­eign share at 20 per­cent, fol­lowed by Japan with a 15 per­cent share and Rus­sia with an 8 per­cent share.

And for trea­sury bonds, Japan had the largest for­eign share at 35 per­cent, fol­lowed by China at 16 per­cent, Tai­wan at 4 per­cent, and South Korea and the United King­dom at 3 per­cent apiece.

Tech­nol­ogy cen­ters are grow­ing up in Ban­ga­lore and Hyder­abad in India, the report states, and in sev­eral cities in China.

“The off-shoring of white-collar jobs from the United States to India has gath­ered steam in the last decade or so, join­ing the out-migration of blue-collar man­u­fac­tur­ing jobs to China. This has impli­ca­tions for real estate on both sides of the off-shoring divide,” accord­ing to the report. “The increas­ing pos­si­bil­i­ties of global sourc­ing more broadly have the poten­tial of impact­ing urban space, form and struc­ture, and con­se­quently, the demand for real estate.”

The demand for res­i­den­tial real estate is surg­ing in urban areas of India and China, the report states, as the major­ity of the pop­u­la­tion in those coun­tries resides in rural areas — a con­trast to other major indus­tri­al­ized nations.

“U.S. real estate devel­op­ers, ser­vices and con­sult­ing firms have pig­gy­backed on the major foray made by U.S multi­na­tion­als into India and China,” the report also states, “and have been instru­men­tal in deal­ing with demand for all cat­e­gories of real estate, both for purely busi­ness pur­poses, as well as for hous­ing require­ments of (expatriates).”

U.S. con­struc­tion firms have had only a lim­ited role so far in India and China, the report states, and the devel­op­ment boom has attracted com­pa­nies more from the Asian region, though “the past cou­ple of years have seen a sig­nif­i­cant increase in U.S. inter­est in the region.”

Finan­cial reforms in India and China “have resulted in greater avail­abil­ity of mort­gages at the rel­a­tively low, global inter­est rates” in those nations, accord­ing to the report, and experts in some Asian nations are look­ing to the model of the U.S. mort­gage mar­ket, includ­ing its range of mort­gage prod­ucts and its sec­ondary mar­ket for mortgage-backed securities.

A sep­a­rate paper that is now in the works by U.C. Berke­ley researchers explores the impacts of for­eign financ­ing on U.S. inter­est rates.

“There is a gen­eral con­sen­sus that the major pur­chases of credit mar­ket instru­ments by for­eign investors have been a fac­tor in keep­ing U.S. inter­est rates low, but there is a range of opin­ion regard­ing the poten­tial vul­ner­a­bil­ity of the U.S. finan­cial sys­tem, in gen­eral, and the future course of the dol­lar, in par­tic­u­lar,” cen­ter researchers reported.