Over the past few months I’ve covered many topics related to the central theme of this site which is the beach, but more specifically the structures surrounding the beaches such as resorts, timeshares and condos. The latter has been a hot topic of interest for many people visiting this site as the most used keywords to land onto this site are related to condos such as Oceania Residences, Acqua Condominium and Pearl Condominiums.
In several post I’ve questioned the lack of vision by this island’s officials to present a coherent plan on the direction they envision for this island’s economic growth and more importantly on the amount of condominiums they are going to allow to be build in the short term.
Condominium developments are in very early stages, additionally there are several projects in the pipeline, nonetheless the condominium industry in Aruba is still small. It is even smaller if you compare it to the timeshare industry.
Despite the fact that many of these condominium project were given permits that gained approval on the projects’ own merits, and not part of a master plan, I couldn’t imagine that current developers are eagerly waiting for others to enter the market the same way.
Years ago officials talked about introducing zoning legislation for the whole island and plans have been presented in draft by some experts but it never became law due to the complexity of it and perhaps the cost in relation to this new law.
In a previous post I’ve suggested that perhaps I could do a report on these condominium projects, however that is next to impossible for me as I do not have enough data or access to investigate. The best I can do is offer an analysis in general terms.
Together with the exploitation of the SSS (sun, sea and sand) in the early nineties, the importance of building timeshare resorts next to regular resorts was critical to Aruba’s success. Timeshare owners tend to visit their newly purchased property more frequently than regular resort guests. This helped Aruba to become a much repeated destination for vacationers in the Caribbean.
Timeshare resorts are indeed highly successful for Aruba’s tourism and very profitable for the resort owners and investors, perhaps too profitable according to some critics. A point of criticism for example is the lack of tax revenue of normal business activities by timeshare resorts. While many people believe that resorts are heavily taxed this is not quite correct. Fees that appear on the final hotel bill, such as AHATA-contribution, government-tax or room-tax (resorts can choose whatever wording in order to explain what the fees are in regards to), don’t flow back to the island’s national budget.
AHATA is Aruba’s hotel and tourism association where the majority of hotels, restaurants and tour operators are members off and are the beneficiary party to receive the AHATA-contribution. The majority of AHATA’s budget is spent on marketing for Aruba. The government-tax or room-tax flow back to Aruba’s Tourism Authority.
Another criticism on timeshare resorts is that the money trail sometimes doesn’t flow to or through Aruba with a purchase or sale of a timeshare unit. Payments are made elsewhere consequently millions of dollars in tax revenue are missed as a result. Unfortunately there isn’t an air tight fiscal legislation with teeth to stop these activities, unlike other countries.
Comparing condos with timeshares for the sake of comparing is not going to bring the result I’m looking for. The comparison is merely to illustrate the next “big” thing in Aruba’s tourism as I believe the two are completely different.
Condos tend to be smaller projects and seem to rely more on local contractors and financing. The intended clients for these condominiums are people with deeper pockets. A base timeshare unit might start around $9,000, while a base condominium starts around $120,000. Condo owners might have a longer stay on the island, perhaps three months, and are more likely to profit from it by renting it out or even selling it down the road.
We haven’t seen the last condominium rise just yet in Aruba, in fact expect to see more of these projects to rise in the coming months and years. To channel this demand in development and the even further urbanization of the island, competent authorities need to step up and come up with some rules, this will prevent confusion and unnecessary criticism. This way developers and investors know exactly where they stand as do the people. Aruba has a very open economy and accepts investors from all over the world and has to keep it that way, there is just need for some rules for the game.