In 2008, visitation to the Caribbean dropped by 4%. However, Smith points out that airlines have been offering more discounted fares to the islands and that, along with rate reductions by the hotels, have helped the properties gain some measure of occupancy, although the level has as yet to reach the pre-recession levels of 2007. Indeed, occupancy fell 7.8% between May of this year and May 2008, going from 72.8% to 67.2%, reports STR.

Not only has the recession stopped travelers from venturing to the Caribbean, it has also halted several construction projects on the islands, particularly those that combine lodging with a residential component. "They don't have the funding necessary because the development model was based upon selling residential units and using that as a financing mechanism to complete the project," Smith said. "So they are sitting there 75% complete, some without any infrastructure--utilities, water or sewer--that need to be completed before they can even open up."

In one instance, a major resort discontinued operations. In May, the Four Seasons Resort Great Exuma at Emerald Bay in the Bahamas closed its hotel to guests. According to a release posted on the Four Seasons' website, in June 2007, EBR Holdings Limited, the owner of the 500-plus-acre master development that includes a marina, a golf course, private homes and lots, a third-party-operated hotel and a Four Seasons Resort, "was unable to meet its debt obligations" and the master development was placed in receivership with PricewaterhouseCoopers. Unable to secure a new owner, the property was subsequently shuttered on May 26.

Still others are more hopeful. Island Outpost, owner of the GoldenEye resort in Jamaica, recently announced a $30-million expansion effort that includes adding 18 beachfront cottages and a restaurant. Completion is targeted for late 2010. The resort features the home of Ian Fleming, author of the James Bond series.

According the Jenan McClain, international marketing manger for Island Outpost, financing has been secured from the Development Bank of Jamaica and a syndicate of local and regional banks led by FCIB and First Global. Priced between $900,000 and $1.2 million, six of the cottages have been pre-sold. "All our properties offer a unique experience that has allowed us to be resilient to the downturn and enjoy high occupancies across our portfolio," she says. "We are beginning our marketing efforts in the US, UK and Canada this fall to sell the remaining 12."

Meanwhile, PKF's Smith envisions better times ahead, just not this year or next. "The Caribbean will become a favored destination once the US and Canada, their primary demand generators, come out of the recession," he says. "In two or three years, owners and operators should see significant increases in occupancy, ADR and operating results. Unfortunately, it's going to have to wait, since 2009 is going to be worse and 2010 will be flat at best. In 2011 and 2012, you should start seeing some increases in tourism to the Caribbean. It's just a matter of holding on and maintaining your property."

Yet while bargain-hunting vacationers can take advantage of reduced rates, investors can snap up some good properties at discounted prices in the Caribbean, although they have yet to do so in great numbers. "They are hesitant right now," Smith says. "People with equity are looking at US properties because they have less risk. I wouldn't see people starting to re-invest in the Caribbean until further into 2010 or 2011. It's going to be a while unfortunately."