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Inter-Continental breaking ground with resort in Fajardo
The San Juan Star / January 22, 2001

By Larry Luxner

SAN JUAN -- Less than half a year after acquiring the San Juan Grand Beach Resort & Casino in Isla Verde for $75 million, the Inter-Continental chain plans to open a second luxury hotel property -- this one near Fajardo.

The 315-room Cayo Largo Inter-Continental Beach Resort, now rising on a breathtaking spit of land along Puerto Rico's eastern shore, is set to open for business in January 2002, with an official inauguration a month or two after that.

Bass Hotels & Resorts Ltd., Inter-Continental's London-based parent company, owns between 15% and 20% of the $118 million golf, boating and vacation complex. The balance is owned by the Shelley, Fuentes, Dubón and Suárez families, according to Daniel W. Shelley, president of both Cayo Largo Hotel Associates and Puerto del Rey Inc.

Of the project's total cost, said Shelley, $75 million has been financed through a Puerto Rican AFICA government bond issue, and the balance through equity. Room rates will average in the low $200s, putting Cayo Largo on par with two nearby resorts, the Westin Riomar and El Conquistador.

"We're developing this project based on architecture and history," he said. "Our hotel will have a sense of place. It's not a cookie-cutter resort."

The entire resort covers 800 acres, of which hotel and golf course will occupy over 300 acres. Overlooking the individual, oceanfront units, says Shelley, will be a "great house "boasting two round stone towers at either end "to invoke the feeling of colonial Spain."

Shelley, who developed Puerto del Rey into the Caribbean's largest marina, is a boating and antique-map buff who has been researching the history of nearby Cayo Largo for years. He's an expert on everything that's happened in the region since the U.S. naval occupation of Fajardo in 1824.

"This was a military base during World War II," said Shelley, leading this reporter on an extensive tour of the Inter-Continental construction site. "There was a plan, in case the Nazis invaded England, to create a British government in exile at the site of Cayo Largo. The Americans were going to build a causeway from Vieques to the Puerto Rican mainland for this purpose. Our golf course is called Cannon Hill after the cannons that would have protected the Royal Family."

Originally, Shelley and the other investors had an agreement with Buena Vista Hospitality Group to manage the future hotel. Eventually, Buena Vista signed a joint-venture with Inter-Continental, and it was decided that the Cayo Largo would be developed as an Inter-Continental.

Besides the hotel, Cayo Largo will also consist of a 66-unit condo-hotel project, set to break ground this summer and be completed in December 2002.

"The strength of Cayo Largo is based on the fact that it has so many excellent world-class things to offer, starting with a wonderful 18-hole golf course," said Shelley. "In Puerto Rico, golf courses are basically flat, very much like Florida golf courses. But playing on our course will be a different experience. It's not crafted artificially, but integrated into the environment like no other in Puerto Rico."

Shelley says Cayo Largo will also "have a spa like no other" in the Caribbean -- a 12,000-square foot spa with four salt pools containing curative salts from Germany's Baden-Baden and Israel's Dead Sea, among other places. In addition, the resort will be integrated with Shelley's marina, already the largest in the Caribbean. Once a $10 million expansion now underway is completed, the Puerto del Rey marina will have space for about 2,000 vessels, including 70 mega-yachts.

Another advantage of Cayo Largo is its proximity what Shelley calls the "Spanish Virgin Islands" -- Vieques and Culebra. One-day charter trips to these two offshore islands, which belong to Puerto Rico, will be offered to guests, along with scuba/snorkeling excursions and day trips to nearby El Yunque.

Shelley says his main market is leisure tourism from the northeastern United States.

"However, Inter-Continental is extremely strong in South America and Europe, so we expect a very strong European and South American component," he says. "I think the Brazilian market, for instance, should be excellent. Right now, Brazilians go to Miami, and they not only stay in hotels but also invest there. But Brazilians don't know Puerto Rico."

The only stumbling block to Shelley's plans comes from environmental groups opposed to further development of Puerto Rico's eastern coast, which has fragile mangrove swamps and is home to several endangered species including the rare leatherback turtle. Surfriders of Puerto Rico, in particular, has filed petitions urging the Commonwealth government to block hotels, resorts and other projects in the area.

However, Shelley claims Cayo Largo is different.

"We don't have any nestling turtles on our property," he says. "I can see why there would be opposition, but there has to be a balance between environment and development. If a project has a negative effect on the environment, it should not go forward. In our case, it just so happens that we have these hills which block the Fajardo River. So there isn't much there in terms of wildlife."

Last August, Bass, Inter-Continental's parent company, paid Puerto Rico Opco L.T. $75 million to acquire the San Juan Grand Beach Resort & Casino. The 16-story luxury hotel had started life in the early 1960s as the Americana, and for years afterward was known as the Sands; in 1995 the resort changed hands again and was renamed the San Juan Grand. It is now the Inter-Continental San Juan Resort & Casino.

Peter K. Sahora, general manager of the Inter-Continental San Juan since its rebranding, says hotel occupancy has been running at 85% or better, thanks to what he calls "a pretty sophisticated clientele." Room rates average just under $300 a night, and considerably higher between September and March. Suites at the Inter-Continental go for $800 or more in peak season.

"This hotel has been profitable," said Sahora, noting that annual sales exceed $30 million. "We paid a good amount of money for this property, because we saw some long-term benefits. It's certainly in a great location."

Sahora knows his business. The 49-year-old, Austrian-born hotelier recently converted California's Cabaña Hotel -- owned by actress Doris Day in the 1950s -- into the Crowne Plaza Cabaña Palo Alto. He also managed five-star Bass properties in Atlanta and Seattle before coming to Puerto Rico last July.

Besides its original investment, Bass also expects to spend up to $17 million on improvements, according to a recent press release.

"We don't plan on adding rooms, but rather renovating the property itself," said Sahora. "The original hotel dates from the early 60s. It was renovated in 1997, but now it must be brought up to Inter-Continental standards."

In addition to renovating the guest rooms, Sahora is also implementing service training and acquiring new uniforms for all 450 employees and refurbishing the hotel's 18,000 square feet of meeting space, as well as phasing in physical-plant improvements not likely to be noticed by guests.

"As we move forward, we will make this a true Inter-Continental resort hotel. It's not there yet," he said. "It will take some time to transition. Other changes will go on throughout the year so that the physical product, facilities, services and performance of the concessionaires meet or exceed Inter-Continental standards. We need to fine-tune things in order to enlarge the base of appeal to a true Inter-Continental clientele."

Interestingly, the adjacent Wyndham El San Juan Resort & Casino used to be an Inter-Continental, but that was back in the late 60s. Since around 1970, Inter-Continental has been noticeably absent from Puerto Rico -- until now.

About four years ago, the chain began negotiating with the Commonwealth of Puerto Rico to buy the so-called "Condado Trio" -- consisting of the Condado Beach Hotel, the El Centro Convention Center and the La Concha Hotel. But by the time Bass had acquired the brand, those talks fell through, and Inter-Continental instead began focusing its efforts on Isla Verde. The deal to purchase the San Juan Grand was concluded in less than a month.

According to Sahora, only 30% of the Inter-Continental's guests are leisure travelers on vacation. The other 70% are executives with business to conduct in Puerto Rico -- a major center for banking, pharmaceutical manufacturing, shipping and telecommunications. Of those business travelers, 80% come from the U.S. mainland, and the remaining 20% from Venezuela, Germany, Spain, Holland and elsewhere.

The hotel's highly profitable casino, on the other hand, is patronized mainly by locals. Sahora estimates that at any given time, 70% of those playing the casino's 212 slot machines, two roulette tables and two craps tables are Puerto Ricans. "These days, there are so many casinos throughout the States that for mainland Americans, it's no big deal anymore," he said. " Our U.S. guests come here to lay on the beach, not play in the casino."

In addition to the two Inter-Continental properties, Bass may decide to reintroduce the Crowne Plaza brand to Puerto Rico.

"There.used to be a Crowne Plaza in Isla Verde, but it was destroyed by Hurricane Georges in 1998. The empty building is just sitting there," says Sahora, who doesn't rule out the possibility of Bass opening a third Inter-Continental property in Puerto Rico, though that's much further down the road. The chain would consider such a move, he says, "only if the market can sustain it."

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