Santo Domingo, DN Dominican Republic (PressExposure) February 10, 2012 -- For a company that isn't quoted in the stock market, Riu Hotels & Resorts has a remarkable sense of market timing, since it picked the perfect moment to expand to the Caribbean.
The world was still feeling the aftershocks of the invasion of Kuwait and the first Persian Gulf war. Spain's hotel industry was characterized by market saturation and escalating prices. Sun and surf seeking tourists were ready for new destinations. The Caribbean -- and the Dominican Republic in particular-- had laid the groundwork for a brisk expansion.
For the Riu family, it made perfect sense to draw on the D.R. as the springboard for its Latin American expansion. After all, five centuries back, Christopher Columbus had successfully conquered the New World for the Spanish Crown, launching his expeditions from what is now the D.R. But that's where the similarities end.
While the Great Admiral was so ill equipped that he ended up halfway around the world from his intended destination, Riu Hotels & Resorts knew exactly where they were going and why.
Founded in 1953 with the acquisition of a small hotel in Palma de Mallorca, Spain, the Riu family promptly entered into an alliance with the German tour operator TUI, bringing the first charter flights to Mallorca and thus helping to even out the seasonal fluctuations which caused unwanted employee turnover, while at the same time helping stabilize the island economy.
Over the next two decades, the company grew its inventory in Mallorca and in the 1980's, it expanded to the Canary Islands, where it now owns 23 hotels.
Arrival in the D.R.
The 1980's were a decade for the exploration of new destinations. In the last half of the decade, Riu was ready to venture into the Americas and had its sights on the Dominican Republic. The senior Luis Riu had acquired a 200 acre site there. For a while, he tried fruitlessly to develop the family's first hotel. It was a virgin site, inaccessible by road and lacking water, telephone and electric service.
So he turned over the project to his son who bears his same name. For the younger Luis, it was the greatest challenge he had ever faced in his career. As he recounts it, he and his wife had to work incessantly from a trailer to oversee construction. All communications were by radio; they used battery power and drank bottled water.
After many months of toil in this tropical rain forest, and thanks to his wife's support and the assistance of some local hoteliers, Luis Riu Jr. eventually succeeded in opening the chain's first property in the Americas. This was a momentous event in the company's history and a tribute to the family's hard work and perseverance.
Since then, the chain has expanded consistently in the DR and now owns 9 hotels strategically located in two clusters, one on the North Coast west of Puerto Plata and the other on the East Coast in the Bávaro-Punta Cana area.
From the Dominican Republic, the chain then expanded to Mexico, Costa Rica and Cuba. All of their Caribbean properties are wholly owned - except those in Cuba - and operate on the all-inclusive concept.
Opportunities and Challenges in the D.R.
According to advisor-delegate, Mrs. Carmen Riu, the Dominican Republic has some of the world's best beaches, which combined with the joyful nature of its people, make up the perfect combination for a memorable vacation.
The chain's presence in the country has not been without challenges. Puerto Plata has suffered from lack of confidence by the tour operators due to issues of insecurity and hygiene. While the chain has taken proper measures to address these issues within its own properties, stresses Mrs. Riu, the local authorities are called upon to take additional measures to create a clean and secure environment that is inviting both to visitors and investors. The recently-announced construction of a $65 million dollar cruise ship port in the vicinity should give the Puerto Plata region a big boost.
Punta Cana's tourism has been more stable thanks to its superior air connections and airlift capacity. She adds that while the road works being carried out by the government represent a considerable added value to the region, greater attention must be given to spatial order, environmental sanitation and conservation. The area is showing signs of strain, so the sustainability of its tourism industry depends on it.
Above all, it is Mrs. Riu's opinion that the country needs to diversify its tourist product from the all-inclusive sun-and-surf concept to one where the visitors go out of their hotels, mix with the locals and enjoy the country's unique culture and history. She praised the initiative to revitalize the capital city's Colonial Zone through a program of extensive improvements and a high speed highway linking it to the East Coast resorts.
Slower but Confident Growth
Worldwide, Riu Hotels & Resorts boasts a portfolio of 105 hotels totaling 41,544 rooms. 70% of the properties are wholly owned, 28% under management and only 2% are franchised. When the company manages or franchises a property, it seeks partners with similar values and vision as to how a hotel should be operated.
It has always been Riu's policy to seek long-term commitments, to consolidate a relationship with the destinations, create jobs and to support the local economy.
85% of its properties in Latin America operate on the all-inclusive. The company believes the concept will continue to be successful in that part of the world.
Questioned about the world economy, Mrs. Carmen Riu stated that the crisis has a domino effect whose adverse consequences focus on the financial markets. Riu continues to be a family enterprise that is not traded publicly. The Riu family considers this a great advantage in that it is not as vulnerable to the market ups and downs as public companies are, and it allows them greater autonomy in making strategic decisions.
"Economic crises come and go", added Mrs. Riu, "but tourism will always prevail. The secret is for the hoteliers to work with the tour operators to adapt to changing market conditions by providing tourists new options and innovative products."
Riu Hotels & Resorts continues to grow in a confident, sustainable manner. If anything, the present global crisis has slowed down the rate of growth but not discouraged them from making new investments.
The company keeps investing and believing in the potential of Latin American destinations where it has a presence. It will continue to explore new destinations and products, as it did in 2009 through the creation of the Riu Plaza brand and its first urban properties in Panama (2010) and Guadalajara (2011).
And there is no better evidence of its continued confidence in the Dominican Republic's hotel industry as a solid investment than the opening in late 2011 of the 610-room Riu Palace and the total refurbishment of the 362-room Riu Naiboa in Punta Cana.
"Veinte años no es nada" (twenty years is nothing) says an old song made popular by Argentinian singer Carlos Gardel. This hardly applies to Riu, though. Its twenty years in the Caribbean have witnessed major achievements and transformed this once small family-owned enterprise into one of the world's most successful hotel companies.