Resort operators in Jamaica face a devastating category 5 hurricane

[Jamaica]
Pawel Gaul/iStock via Getty Images

The powerful Category 5 hurricane that made landfall in Jamaica on Tuesday could impact investors in the hotel sector. Hurricane Melissa is the most powerful storm to impact Jamaica since official record-keeping began 174 years ago. As a Category 5 hurricane, Melissa arrived with sustained wind speeds reaching 175–185 mph, immense rainfall, and storm surge levels of up to 13 feet on Jamaica’s southern coast.

The hurricane's immediate effects include widespread operational disruption, emergency closures, and evacuation of guests, resulting in lost bookings and decreased revenue for public hotel chains and independent resort operators. Extensive physical damage to property may require long repair periods or complete reconstruction, which in turn could depress earnings for the upcoming quarters. Typically, insurance claims should provide partial relief, but premium increases and delays in reimbursement could challenge cash flow for impacted properties.

Among the prominent international hotel chains impacted, Marriott International (NASDAQ:MAR [https://seekingalpha.com/symbol/MAR]) owns and manages a diverse portfolio, including properties under its Autograph Collection and through partnerships with Blue Diamond Resorts, which operates Royalton-branded hotels. Best Western Hotels & Resorts has also recently expanded its presence in Jamaica with properties like Terra Nova All-Suite Hotel joining its Premier Collection. The Spain-based Palladium Hotel Group directly owns and operates multiple large resorts in Jamaica, while Palace Resorts, controlled by the Palace Group, has major capital invested in Moon Palace The Grand – Montego Bay, a project now at risk of delays and storm-damage costs.

Both Hyatt Hotels (NYSE:H [https://seekingalpha.com/symbol/H]) and Hilton Worldwide (NYSE:HLT [https://seekingalpha.com/symbol/HLT]) and Hyatt Hotels (NYSE:H [https://seekingalpha.com/symbol/H]) will be impacted by the hurricane. Hyatt (H [https://seekingalpha.com/symbol/H]) operates two major resorts in Montego Bay through its Inclusive Collection, while Hilton's (NYSE:HLT [https://seekingalpha.com/symbol/HLT]) footprint in Jamaica includes the Hilton Rose Hall Resort & Spa, which sits close to Hyatt’s Montego Bay resorts and is also likely to be exposed to storm disruptions.

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