A bill recently passed in the U.S. Virgin Islands Legislature would allow the Government of the Virgin Islands to guarantee up to $20 million of hotel developers’ leases for up to 25 years, a move that supporters cheered as a boon to the islands’ economic development.
Under the legislation, the Public Finance Authority would have the power to issue loans backed by the full faith and credit of the Government of the Virgin Islands. St. Croix, in particular, stands to benefit from the legislation, as the island is suffering from a lack of new hotels despite there being a number of incentives for new hotel construction.
Some lawmakers had expressed concern about what should happen in the event of a developer failing to pay. However one of these officials, Sen. Janette Millin Young, says she was reassured that there would be sufficient preliminary measures established to prevent the government from having to spend unnecessary money on this program.
The construction of new hotels should provide a welcome economic boost to the U.S. Virgin Islands, as the economy is heavily reliant on tourism. On average, 680 cruise ships stop in the Territory each year, carrying 75 percent of the Territory’s 2.6 million annual visitors on shore. But because hotel construction has stalled lately, there are only about 5,000 hotel rooms available on the islands, putting considerable strain on the hospitality industry.
Tourism contributes to the local economy indirectly, as well. For example, rum taxes paid by visitors bring in another $80 million each year. However, much is dependent on the ability of hotels to accommodate these visitors, and it is hoped that the lease guarantees provided under the new legislation will jumpstart the much-needed development in the hospitality sector.
Although St. Croix is the largest island in the Territory, its local focus on smaller, more intimate tourist lodging leaves it in particular need of additional hotels. Adding to the strain has been the closure of the HOVENSA oil refinery in 2012, the economic effects of which still linger on the island. The 2011 Hotel Development Act was expected to spur major development activity, but a $500,000 annual fee included in the law proved to be restrictive to all but the largest hotels.
Between the lease guarantee and a change to the fee structure that will be more conducive to smaller and medium-sized hotels, it appears the days of insufficient hotel development on St. Croix, and throughout the Virgin Islands, may be approaching an end.
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