Real Estate Rights in the Dominican Republic

The following information about buying real estate was provided by my attorney in the Dominican Republic, Sara V. Sicard Sanchez, partner at Sanchez Raful Sicard & Polanco.

The acquisition of real property rights by foreigners is not subject to any special condition, falling under the same legal regime applicable to Dominican nationals.

Registration System

Law 1542 of 1947 on Land Registration establishes the Torrens system of real property registration.

Real property rights registered under this system are deemed to be known by, and thus biding on third parties. Therefore, the presentation by the seller of a Property Certificate issued on his behalf by the corresponding Registry of Titles should in principle be enough to prove that the seller is entitled to transfer the ownership rights of the property. Any mortgages or charges would also be mentioned in the certificate.

However, it is always advisable to verify the status of the property directly at the Registrar’s offices, whose records are open to any interested party, and even obtain a written confirmation on the result of these findings, before purchasing the property. This is usually achieved requesting a certification on the status of the property in question to the Registry of Titles.

The Dominican Republic registration system protects the buyer against any sale or mortgage that, although previously signed, has not yet been registered when the buyer files its purchase agreement for registration.

For these same reasons, the prompt registration of the sale is very important.

In order to do so, the buyer must file at the Registry of Titles the following documents:

a) An original of the purchase agreement, which should be legalized by a Public Notary.
b) The Property Certificate issued on behalf of the seller, which will be canceled and exchanged for a new one on behalf of the buyer.
c) Certification stating that the Tax on Luxury Real Property and Empty Urban Lots (IVSS tax) has been paid, or that the property in question is exempt from such tax payment. Article 13 of the 2004 Tax Reform amends the first three articles of Law 18-88, extending the exemption of this tax from three to five million pesos, and from no exemption to a five million pesos exemption for urban lots.
d) Proof of transfer tax payment.

If the seller in question is a legal entity, the buyer will have to file additionally:
a) Certified copies of the shareholders minutes of the seller, designating its current Board of Directors.
b) Certified copy of the minutes of the Board of Directors approving the sale of the property in question and authorizing a person to sign on it behalf.

Transfer Duties

As mentioned above, the registration of the transfer of a real estate property at the corresponding Registrar of Titles requires the payment of the following taxes and duties:

3% of the market value of the property. This tax also applies to real property transfers for a value exceeding one million pesos that have been purchased with loans of financial entities. This amount is subject to inflation adjustments; and,
Stamps under Law 80-99, calculated as follows: market value minus 20,000 and the result/ 1,000 x 13 + 232.00. This value is subject to annual inflation adjustment.

These taxes amount to approximately 4.8% of the market value of the property.

Another aspect to take into account is Law 18-88 of February 5th 1988, on Tax on Luxury Houses and Urban Lots, amended by Law 288-04 of the Tax Reform, which establishes an annual tax on houses and apartments whose value exceeds five million pesos amounting to 1% of the surplus of such sum. The amendment enlarges the scope of this tax by including commercial properties and urban lots were previously excluded. However, property owners older than 65 years who have owned the property for at least 15 years and who do not have any other property are exempted from the payments of this tax. Furthermore, rural land used in agriculture, as well as equipment, machinery, generators, goods and other personal property located in the properties, is also exempted.

Politics in the Dominican Republic

When I mention that I am invested in real estate in the Dominican Republic, the first question I am usually asked is "what is the political climate there?". I think this is one of the biggest concerns most people have about investing internationally.

Recently, I-REIF's contributing writers were discussing eminent domain, the right for a government to buy or nationalize private property for public use. We were discussing how the fear of losing property to a foreign government is one of the reasons that investors might shy away from investing in an international market, even if the profit potential is extraordinary.

Janet Fish, who is currently developing two large resort real estate projects in the Cabo San Lucas area in Mexico stated "Let's not pretend eminent domain does not exist in the United States." Good point, Janet.

Another interesting topic of discussion was whether or not title insurance provides any protection against nationalization of private property. The answer is no. Title insurance only promises clear title at the time of purchase; it does not protect against the future as home owner's or car insurance does.

With that said, we all agree that exploring the political climate is an important part of due diligence when considering any real estate investment, domestic or international.

When I started investigating the Dominican Republic, I learned that the DR is a politically stable, free and democratic nation. I discovered that most people who know the Dominican Republic, believe that the stability of the DR government, combined with its close relationship with the United States make it a pretty safe bet as far as real estate investment.

The President of the Dominican Republic, Dr. Leonel Fernandez, served as President from 1996 to 2000, was elected with a large majority vote to a second term in 2004 and is up for re-election in 2008. On our last trip to the DR, I asked many Dominicans about their view of the upcoming election. Based on my casual polling, it seems Dr. Fernandez will very likely be re-elected.

Dr. Fernandez's political agenda has been one of economic and judicial reform and technological development. His administration has been recognized for its respect for human rights and civil liberties and for the economic growth that has occurred during both of his terms. A professor since 1979, Fernandez has lectured at numerous universities, including Yale, and has authored several books and numerous articles about politics, economics, communication, history and law.

Personally, I'm comfortable with the political climate in the Dominican Republic as it relates to my personal investments as well as developing real estate there in the future.

Economy and Industry in the DR

The growing Dominican economy has developed primarily due to a well-managed tourist flow and flourishing agricultural industries. "The country is growing at a rate near unparalleled in its recent history" Tom Blass reports in an article appearing in The Banker April 3, 2006. The GDP growth rate is presently almost 7.9% per year.

The currency is the Dominican Peso (DOP). The exchange rate is roughly 32 pesos to the US dollar.

US companies with a presence in the Dominican Republic include Johnson & Johnson, 3M, UPS, Abbot Laboratories, Baxter, Verizon, Citibank, Marriott, Hilton, Remax and Century 21.

The July 2006 implementation of DR-CAFTA (Central America Free Trade Agreement) will stimulate trade between the United States and the Dominican Republic because $1 billion in taxes and tariffs will be removed for American companies involved in trade with the Dominican Republic,

Tourism
The significant rise in tourism is a factor in the growing Dominican economy, and it's expected to continue to reach new heights in the coming years.

The Dominican Republic attracts the most tourist visitors of all the Caribbean islands. 2005 saw growth rates in excess of 7% higher than the previous year. Travel companies in the US and Europe are highlighting the Dominican Republic as a premier vacation destination.

Tourism Minister Felix Jimenez stated that the Dominican government will be investing $5 billion in tourism infrastructure through 2008.

Hotel occupancy in the Dominican Republic is currently 74%. There are only 70,000 hotel rooms available to accommodate more than four million tourists per year. In the next 8 – 10 years, ten million tourists are expected to visit the Dominican Republic, requiring 250,000 rooms. . During the high season (12/15 – 4/30 and 7/15 – 8/31) hotel occupancy rates are currently as high as 95% in beach destinations.

The majority of the tourists visiting the Dominican Republic come by air and stay for a minimum of one week. European tourists’ average stay is two weeks.

The major tourist destinations in the DR include Punta Cana, known for it’s large, upscale all-inclusive resorts; Puerto Plata, Sosua and Cabarete, tourist areas popular with wind surfers and college students; La Romana and Casa de Campo; and the focus of recent tourist attention, the Samana Peninsula.

The President-elect of the National Hotel & Restaurant Association, Luis Lopez, forecasts that Samana will become the new prime destination in the Caribbean with the opening of the El Catey International airport. The Dominican Secretary of Tourism is focused on the Samana Peninsula with the support of DR President, Leonel Fernandez, who recently signed a plan to develop and promote the area. The Samana Peninsula is the only region with a government plan in place.

A nature-lover’s haven with lush green mountains and beautiful white sand beaches, Conde Nast Traveler has called the Samana Peninsula one of the 25 best locations in the world.

Process for Buying Real Estate in the DR

The process of buying real estate in the Dominican Republic is fairly simple and somewhat similar to the process in the United States.

A Contract of Sale is signed by both the buyer and the seller, before a Dominican notary (Notaries in the DR are required to have a law degree) or may be certified through the Dominican Consulate in the US. The buyer normally posts a deposit for the property, usually not less than 10% of the total purchase price of the real estate in question. The Contract of Sale is submitted to the Dominican Internal Revenue Office for assessment and payment of the transfer taxes. Then, with financing in place, and all the conditions of the Contract of Sale met, the Contract of Sale and the Certificate of Title are submitted the Title Registry Office for the recording of the sale. A new Certificate of Title issued in the name of the buyer is supplied by the Title Registry Office.

As is the case in many markets, there is a risk of fraudulent real estate transactions. With the immense interest in Dominican real estate, there are cases of one property being sold to multiple buyers, property being sold by individuals who do not in fact hold title, and land that cannot be developed being sold to prospective developers. Caution is advised.

Real Estate Taxes, Fees, and Financing

In the Dominican Republic there is a transfer tax of 4.8% of the appraised value of property, which is due at closing. Title insurance is available through Stewart Title at 1.0 to 1.5% of purchase price as one-time charge.

The property tax rate in the Dominican Republic is very attractive. Property valued under RD$ 5,000,000 pesos (approximately $165,000 US) are not subject to property tax. Property valued in excess of $165,000 (US) are taxed at a rate of one percent of the value above $165,000: A property valued at $265,000 will be assessed a tax of one percent of $100,000––$1000 annually).

The Dominican capital gains and income tax rate is 25%. Holding real estate in a corporation offers the advantage of allowing related expenses to be deducted.

Property may be held as an individual, a Dominican SA (Dominican corporation), an off-shore company, or a US LLC. For all real estate held in a corporation, documentation must be submitted in Spanish to the Mercantile Registration in the Dominican Republic.

In terms of financing, 90% LTV is available from both US and Dominican banks. The origination fees range from 0 – 1% with Dominican banks to 3.5% with some US lenders. US lenders generally require cross collateralization of US property equity. Dominican Banks generally loan for a maximum of 20 years, where 30 year loans are available through US lenders. Some lenders will finance the transfer tax, and possibly furniture and appliances as well.

Dominican Republic attracts wave of U.S. investors

This is the transcription of one of several news stories about investing in the Dominican Republic that aired on television last summer.

Dominican Republic awash in investors
Caribbean's pristine Dominican Republic attracts wave of U.S. investors

By Kerry Sanders
Correspondent, CNBC
Updated: 3:21 p.m. PT July 21, 2006

The Caribbean's Dominican Republic is a land of colors with its red, white and tropical blues. But it's all about the green that has people buzzing these days.

The island nation may have been an undiscovered country to Americans just three or four years ago, but today it is paradise found. Real estate projects in this Spanish-speaking country are sprouting like palm trees.

“The United States market is now beginning to identify the values and the opportunities that lie here in the Dominican Republic, particularly in a project like Cap Cana, which is aiming to the highest end of the world market,” said Ellis Perez, president of Cap Cana.

Cap Cana, a project hugging the island's southeast coast, will be the country's largest private community — a mammoth 30,000 acres — with plans for five hotels, five golf courses and thousands of homes. It's just beginning to take shape with hundreds of millions in foreign dollars, 33 percent of which is American.

Real estate in the Dominican Republic is so hot that even before they broke ground at the project Roko Ki they had sold $100 million in properties, 90 percent to Americans — that too, all in one day.

Roko Ki's natural beauty is undeniable. Investors are banking on another seaside jaw dropper, with jungle bungalows for the rich and famous, signature golf courses and fancy villas, signaling even more American interest. The hotel chain Starwood Resort Worldwide is building a Westin.

“In between 10 and 15 years we expect Roko Ki to have 8,000 residences and about 6 to 7 high end, five-star hotels,” said Nick Tawil Fernandez, president of the Roko Ki Westin.

Factors responsible for the recent Dominican Republic fever are varied. They range from a series of Dominican baseball stars, a democratic government encouraging foreign dollars, a number of new direct flights from the United States and a lot of recent good press. These reasons coupled with bargain land prices and cheap labor have helped put the Dominican on the map like never before.

“It's just very welcoming, very hospitable and once you've come here you want to come back,” said Tawil Fernandez of the Roko Ki Westin.

Many Americans fall in love with the Dominican while on vacation. A record number of tourists visited this past season after Hurricane Wilma pummeled Cancun, Mexico.

Even Hollywood is taking notice. Recently Brad Pitt was flying about the island looking for his piece of paradise. Fellow actor Vin Diesel is planning on building in Boca Chica and Robert Deniro is also actively looking.

Nestled between Cuba and Puerto Rico on Hispaniola, the Dominican shares this 29,000-square mile island with Haiti.

Poverty remains harsh reality
Islanders like to say Christopher Columbus was the first tourist here. Historians believe Columbus landed on Hispaniola before making it to the new world. Today well-paid tourism-related employees earn between $100 and $140 a month. Nonetheless, the poverty is undeniable — the poorest being an estimated 1 million Haitians who work in sugarcane farms or construction.

Dominican Secretary of Tourism Felix Jimenez recognizes that low wages are part of the draw but also says foreign money is raising the standard of living.

“My country is a poor country, but we are working and investing a lot of money in new roads, electrical supplies, water supply to help build a modern country,” says Jimenez.

That progress is increasingly visible and is encouraging investments from around the world.

Recently a German businessman sank $50 million into a marine adventure park on the north coast, Ocean World, which has been drawing tourists from all over the country.

Wall Street money manager Boykin Curry and a group of investors recently took the plunge on the island's breathtaking north coast and bought up to 2,000 acres to develop in Playa Grande at a bargain $55 million — golf course included.

“He has seen not only the cooperation of the government, but also of key individuals and key development partners in the country that can help us,” said Carl Carlson, CEO of Playa Grande Holdings.

“We have seen a lot of interest from golfers and from people in the industry and everybody is expecting a lot from us,” he added.

Down the road from Playa Grande is picturesque Cabarete beach —a water sports mecca for world-class wind and kite surfers — that has made a splash with Americans.

“Valero is 5 years old, and at the beginning we had a base of international owners, almost 10 percent were American,” said Mario Magnan, general manager of Valero Beach.

“But recently we're seeing a big flux in American owners. Today, Valero Beach is 70 percent American-owned,” he points out.

Retirees drawn to service factor
American retiree Phyllis Berney from Wisconsin discovered the Dominican Republic was a bargain a long time ago, but it's the Dominican people that sold her on staying.

“My mom is going to be 98 in November, and she said, 'Where else could I be that someone could be so kind they actually help me put on my shoes, that I have someone with me all the time?'” said Berney. “'I don't need a walker because when I want to walk someone walks with me.'”

Five years ago Jason and Michelle Matthews from Philadelphia discovered the Dominican Republic while on vacation. They now live part-time on a farm on the north coast. They also own a 15,000 square foot beachfront villa that cost them $2 million dollars and that they rent out to other Americans.

“I think most Americans have discovered what Columbus discovered a long time ago, particularly on the north coast, it's still an unspoiled pristine paradise. It's not over-invested, not over-developed,” said Matthews.

The trick will be keeping it that way.

Las Terrenas in the DR is like heaven

We've just returned from ten days in the Dominican Republic, including four days in beautiful Las Terrenas. Can you image a more heavenly spot? The picture above was taken at a beach club called "Paco Cabana". It's a relatively new restaurant, bar and beach club featuring fabulous French inspired food, a full bar with tropical drinks, and plenty of comfy spots for lounging and sun bathing.

In just five months since our last trip, there are new restaurants, new development projects under construction, and noticeable improvements to the municipal airport, El Portillo. There is almost no beachfront land available for development besides relatively small parcels.

Also worth mentioning, the newly opened El Catey, Samana International Airport is receiving flights from Canada and Europe, and soon there will be flights arriving from the US.

Vacationing in Las Terrenas

Since I've highlighted travel in the Dominican Republic today, I thought I would also provide some resources and information about the Samana Peninsula, the area that I believe holds the most promise for real estate investors. I think from a due diligence standpoint, it's important to be aware of the whole country and what is happening there, which is the reason for posting the previous articles.

The market we are focusing on, Las Terrenas, is currently quite different from what is described in the New York Times articles. There are some all inclusive resorts in Las Terrenas; however, none yet that approach the price points you would find in Punta Cana. Instead, Las Terrenas has a good supply of smaller hotels and resorts that are mostly comprised of apartments (condos owned mostly by investors) as well as villas and bungalows that sleep as many as eight to ten people. Because Las Terrenas is not only a vacation destination–it is home to over 4,000 Europeans who have taken residency in the Dominican Republic–there are markets, shops, bakeries, and other resources that preclude the need for all inclusive resorts as the only option.

One of the best resources for information about Las Terrenas and the Samana Peninsula is Samana.Net. This site lists many of the accommodations available in Las Terrenas, Las Galeras, and Samana, the three major towns on the Samana Peninsula as well as a lot of other useful information.

dr1.com is about news and travel in the Dominican Republic. This site has a wealth of information and is worth exploring. There are several blogs associated with dr1.com, including the Green Team, a blog focused on sustainable tourism and preserving the environment.

The Dominican Republic Offers a New Place in the Sun

Here's another article about travel and vacationing in the DR published by the New York Times and reprinted in local papers. Again, the article focuses on the highest-end destinations. As the article indicates, there are in fact still bargains in the DR. The author mentions the improved access to the Samana Peninsula (see bold below). Vacation rental rates in the town of Las Terrenas, just 30 minutes from the newly opened El Catey International Airport, range from about $60 for a one-bedroom apartment, in an older, but still very pleasant resort, to $400 or so nightly for a 4-bedroom villa directly on the beach.

October 29, 2006
The Dominican Republic Offers a New Place in the Sun
By SETH KUGEL

Correction Appended

I WAKE up in my golden-yellow Oscar de la Renta-decorated, $650-a-night villa, throw off the 350-thread-count sheets, and pad over to open the balcony doors. In floods the Caribbean sunlight, nothing but a long-fronded palm and a patch of manicured grass between me and the sugary sand beach, which gives way to water a shade of aquamarine that I thought had existed only in Crayola boxes. It’s as if I had woken up in a travel brochure ... or a Corona commercial. But really, it’s just morning in Tortuga Bay, the new luxury resort on the eastern tip of the Dominican Republic.

My old friend Jon is also up, already fantasizing about his golf game on the P. B. Dye-designed oceanfront course (and, yes, there’s the seventh hole, jutting out into the sea just to my left). It’s a significant change from his dusty jaunts through the public courses of eastern Massachusetts.

Meanwhile, I am preparing myself for the salt-scrubbing, Oriental-massaging experience of a $247 Energizing Day Package at the Six Senses Spa, the high-end Asian chain previously only available at destinations like Phuket and the Maldives, where it takes a $247 massage just to recover from your 20-plus hour flight. (Tortuga Bay is just a three-and-a-half-hour flight from John F. Kennedy Airport in New York).

But first, breakfast. Sure, just pressing “2” on our direct-to-butler cell phone would summon a feast to the aforementioned balcony, but we’re guys who prefer the high-end gluttony of the breakfast buffet combined with made-to-order omelets and pancakes at the poolside Bamboo Restaurant. It’s just a two-minute walk away. (Still, we take our golf cart.)

Just another day in paradise.

But great as Tortuga Bay might sound (and some service glitches over the course of our stay made me question just how great it was), this resort, with 50 suites in 15 villas, is just one of a number of high-end getaways that are beginning to call the Dominican Republic home. The Sanctuary Cap Cana, a boutique hotel with eight restaurants within a larger $500 million development, has a low-key opening scheduled for Feb. 1; before then, Jack Nicklaus will be flying in to open one of his Signature golf courses, with nine of the holes on the water. Farther up the east coast, through picturesque hills and small towns, the Sivory resort, with its 55 terra-cotta-colored suites built into jungle-worthy vegetation (lushness reduced near the suites to avoid bugs) — some right on the beach with their own private plunge pools — is gearing up for its first full winter season.

Time was the Dominican Republic was famous for its bargain getaways: $1,000 for a flight-included, all-inclusive resort where the food was passable, the drinks strong and the merengue music festive. (Actually, that time was only a year or two ago, and the bargains are still there.) But the country is increasingly becoming the five-star playground of the Caribbean, pulling in tourists that might otherwise have gone to Jamaica, Puerto Rico or St. Thomas and gearing up to give the glamour spots of Anguilla, St. Bart’s and Turks and Caicos a run for their money.

As the winter season approaches, the Dominican Republic has all but been anointed with “it-destination” status by celebrities, travel magazines and tour operators. It’s estimated that four million people will visit the country this year. That’s more than double the 1.9 million that came in 1996. And though Canadians and Europeans were the traditional visitors, Americans are fast taking over.

With thousands of pricey hotel rooms and luxury second homes planned for the next decade, and paparazzi-drawing celebrities like the Clintons, Mikhail Baryshnikov, Julio Iglesias, Vin Diesel and Brad Pitt popping in for work or play or both, this is only the beginning. The Roco Ki real estate venture will open the Westin Roco Ki Beach and Golf Resort in Punta Cana in winter 2007, and is planning at least seven high-end hotels, in a resort that gives a nod to the Taíno Indians who lived on the island before Columbus arrived. (It financed an archaeological dig on its land before beginning construction and is considering opening a museum nearby with the findings.) It is also a residential community: there was $100 million in sales the day those homes went on the market in April 2005, according to Nick Tawil Fernandez, the chief executive officer.

Cap Cana has about 30,000 acres south of Tortuga Bay, and villas are on sale from $750,000; in addition to the Sanctuary Cap Cana, its marina, whose debut is this December, will eventually have 1,000 slips. And it’s not just on the east coast that all this action is taking place: in Samaná, the paradisiacal peninsula on the north coast visited by humpback whales, the Gran Bahía Príncipe chain is opening no less than four five-star hotels for the winter season.

And there is much near-virgin beach still being scoured: Fernando Rainieri, a former tourism secretary and the brother of the Punta Cana pioneer Frank Rainieri, is part of a group of Dominican investors that includes the wealthy Najri family, that bought some beachfront land in 1997 in Miches, the largely undeveloped area between the resorts of Samaná and Punta Cana. They’ve recently been negotiating with a group of American and Canadian investors. (Howard Kerzner, whose company owns the Atlantis resort in the Bahamas and many others, recently died in a helicopter crash on his way to scout out land in the north.)

How did a country that three decades ago few people considered a beach destination become such an A-list destination?

BEACHES The hundreds of miles of sandy shore, much of it seemingly typecast for the role of Paradise, beats every other Caribbean nation but Cuba for length; especially on the east end, the fine white sand and turquoise waters match up for quality as well.

GOLF Fazio, Nicklaus, Dye, they’ve all been there, designed that. (There are more than 20 designer golf courses in use or planned.)

FLIGHTS With five international airports taking in more than a dozen daily nonstop flights from New York City and direct service being offered from an ever-increasing number of other American cities, it’s easy to get there. A contributing factor: New York’s enormous Dominican immigrant community flies back and forth regularly, creating year-round demand and thus increasing options.

THE COCOON EFFECT Tourism in the Dominican Republic has long been all-inclusive. And although many of the new high-end resorts are not, they do provide the same kind of get-away-from-it-all experience travelers in escape mode are often looking for.

POOR INFRASTRUCTURE The Dominican Republic’s notoriously bad (and badly marked) roads, dysfunctional power grid and dubious water system had a hand in driving the all-inclusive culture by making it necessary for resort owners to provide a self-sustaining community and thus a huge disincentive to explore the otherwise culturally rich island, home to everything from merengue to Christopher Columbus’s first settlement in the New World.

BASEBALL As Dominican baseball superstars like Pedro Martínez, Sammy Sosa, Manny Ramírez and Albert Pujols became household names in the United States over the last decade, their country of origin did too.

CELEBRITIES It’s hard to imagine anyone who has brought more boldface names to the Dominican Republic than the designer Oscar de la Renta. To cite one prominent example, he got Hillary Clinton to visit Punta Cana in 1998, and she and Bill have been going back every since. Producing a Miss Universe, Amelia Vega, in 2003, didn’t hurt either.

GOVERNMENT EFFORTS The government played a key role in providing tax breaks and other support for the first round of all-inclusive resorts that sprouted in the 1980’s. These days, the secretary of tourism, Félix Jiménez, has a $30 million promotional budget, and through the public relations firm BVK has been blitzing New York and other cities with its Republic of Colors campaign.

TERRORISM AND ANTI-AMERICANISM The Dominican Republic doesn’t have them — or tsunamis — making it an attractive substitute for those fearful of seeking luxury in Thailand, Indonesia, Egypt and the like. “Dominicans are not anti-anything,” said Ellis Pérez, a vice president of Cap Cana and a former secretary of tourism. “We are an open, simple people.”

According to Mr. Jiménez, tourists spent $14 millon in the country in 1974; in 2005 his government placed the figure at $3.5 billion. In 1986 just over half a million people visited the country. In 1996, it was over 1.5 million. And beyond the four million expected this year, the secretary nonchalantly predicts five million for 2007.

The Dominican Republic already takes in more tourism dollars than any other country in Latin America except Mexico and Brazil, according to World Tourism Organization statistics. In the meantime, the importance of sugar, coffee, cocoa and tobacco to the economy has declined. “Tourism has been the motor of the Dominican economy for the last 20 years,” said Fernando Rainieri, the former tourism secretary and current investor in Miches. “In 1980, nobody believed in it and no one wanted to invest in it.”

The tourism industry in the Dominican Republic is focused these days on Punta Cana, which many have compared to Cancún. For better or for worse, the comparison makes sense: like Cancún, in the 1960’s Punta Cana was not on the map. Then, in 1969, a young Frank Rainieri flew with a group of American investors over the isolated, lightly inhabited east coast of the country; by the early 70’s the land was theirs. A 1972 law made investing in tourism a nearly tax-free endeavor, and the government backed the first beach resort, Playa Dorada, which opened on the north coast simultaneously with the Puerto Plata airport in 1980.

The next year Club Med opened in Punta Cana, followed closely by the Spanish hotel company Barceló. The Punta Cana Airport, privately owned and operated by Mr. Rainieri and the Punta Cana Group, opened in 1985 and in 1988 the Puntacana Resort & Club opened. More followed, and through August of this year, according to official Central Bank statistics, 1.26 million foreigners not of Dominican origin (presumably tourists) entered the country through Punta Cana. That is nearly three times as many as flew into Santo Domingo, the capital and by far the country’s biggest city.

The country has also been investing in infrastructure. There is the Tourist Boulevard between Punta Cana and Uvero Alto. Late last month, the Dominican president, Leonel Fernández, was in Punta Cana to meet with hotel owners, and Frank Rainieri suggested they begin thinking about stretching the highway beyond Uvero Alto to Miches. (Which, coincidentally or not, is where his brother Fernando owns land). A highway from Santo Domingo to the beautiful Samaná peninsula is supposed to be completed in 2008, and the airport at Samaná, El Catey International Airport, is to open next month. Not coincidentally, the Gran Bahía Principe resort chain will open about a thousand luxury hotel rooms in the next two months, in four different complexes.

With the high-end hordes bearing down upon them, though, hotel operators face a problem: quality of service. Tourism officials and hotel executives all seem to read from the same talking points: the Dominican people are the country’s biggest asset, what with their warm hearts, friendly faces and big smiles. But hand-clapping, merengue-dancing Club Med smiles are one thing; boutique hotel “Let me explain our pillow menu to you” smiles quite another.

The flaws during my two days in Tortuga Bay made that all too clear.

Sometimes, they were funny: a welcome letter left for Jon and me in our bedroom (with two separate beds, I hasten to point out), read, “Mr. Kugel, thank you again for choosing us for your honeymoon vacation.” But more often they were annoying. Repeated dial-2 calls to our butler to help us reduce the air-conditioning level from Arctic freeze to Caribbean cooldown produced fruitless advice; we would have shivered through two nights if the comforters Oscar de la Renta chose for us weren’t so cozy. Jon got charged the outside guest rate for a round of golf ($50 extra) even though our butler had made the tee time and it had been confirmed with a letter from management. (And some things even the best of service couldn’t have helped. That pristine view from our balcony covered up a secret: just beyond the shoreline, the precious sand gave way to a bottom so rocky and slippery as to make taking a dip genuinely unpleasant.)

Haydée Palmieri, the vice president of hospitality and human resources at Punta Cana (and Frank Rainieri’s wife), acknowledged the flaws in service, though she did point out that Leading Hotels of the World had approved their application in September, making them the second member from the Dominican Republic (along with the Paradisus Palma Real).

André Gerondeau, executive vice president for Sol Meliá, which owns the Paradisus, acknowledges that raising the level of service will take time. “Anywhere in the world,” he said, “especially in Latin America, there is a huge gap between people that have resources and those who don’t,” which makes high-end service a problem. The Dominican Republic is quickly catching up, he said. But still, “if someone has been to Bali, Seychelles, St. Bart’s and then comes to the D.R.,” he said, “they will certainly see a difference. You need to connect with your team members. The overall perception of us versus them is a killer.”

Will the Dominican Republic dominate the Caribbean for years to come? Puerto Rico is feeling the heat, having fallen behind it in tourism receipts, if not absolute numbers, in 2004, and is fighting back with a new Tourism and Transportation Strategic Plan. And the stress on beaches, golf, beaches and golf — the themes that dominate the Web site, godominicanrepublic.com and its Republic of Colors campaign, may leave the country open to competition with places like Jamaica, whose advertising and Web site (visitjamaica.com) also stresses people, culture, art, music, food and ecotourism.

This much is safe to say: The secretary of tourism’s prediction of five million visitors in 2007 will very likely come true. Or there will be a lot of really expensive hotel rooms, villas and bungalows lying empty.

VISITOR INFORMATION

The rates are for double occupancy in mid-January, including a 16 percent tax and 10 percent service charge. All in the Punta Cana area unless otherwise noted.

Tortuga Bay, (888) 442-2262; puntacana.com. From $773 per night.

Sivory Punta Cana, (809) 552-0500; sivorypuntacana.com. From $617 per night or $995 per night all-inclusive.

Sanctuary Cap Cana, (809) 562-7555; capcana.com. Opening Feb. 1.; rooms from $347.

Paradisus Palma Real, (866) 436-3542; paradisuspalmareal.com. From $471 per night, all inclusive.

Gran Bahía Príncipe Cayo Levantado (in Samaná), (866) 282-2442; bahia-principe.com. From $672 per night, all inclusive.

SETH KUGEL is a frequent contributor to the Travel section.

Correction: Nov. 12, 2006

An article on Oct. 29 about new resorts in the Dominican Republic misstated the designer of the golf course at Tortuga Bay, a new resort there. It was designed by P. B. Dye — not by his father, the golfer and course designer Pete Dye.

Family Destination of the Year: Dominican Republic

This article about vacationing in the Dominican Republic was printed in the New York Times a year ago. The places mentioned are still the most developed tourist destinations on the island. The Dominican government is putting $5 billion into tourism development between now and 2008. Media coverage in the US, Canada and Europe is also adding to the increased interest in the DR as a vacation destination.

January 22, 2006
Family Destination of the Year: Dominican Republic
By CAREN OSTEN GERSZBERG

THE variables involved in planning a Caribbean family vacation can be daunting enough to send the weak scurrying back to a condo in Sarasota. Ideal for honeymooners or stressed-out grown-ups, many Caribbean resorts are designed for those who need to get away from it all. Yet children seem to need something to do other than lounging on sunny beaches. Picky teenage travelers need something to do other than sneaking into casinos. (At least, their parents think so.) And the deal-breaker is that many remote Caribbean destinations require changing planes.

The Dominican Republic, known as the D.R., is gaining traction as a family destination. One reason is a growing number of family-centered resorts with activities ranging from windsurfing to world-class golf to snorkeling to teenage-only lounges. Another lure is that there are now numerous nonstop flights from the New York area.

Emily Greenberg, a mother of three and a nursery school teacher from Mamaroneck, N.Y., just spent her fifth consecutive winter holiday in the Dominican Republic and finds it the ideal place for a yearly family reunion. "Our extended family includes 16 children, ranging in age from 7 to 25, and we've found that the Dominican Republic has something for everyone. The younger kids enjoy a busy day of sports and beach activities and for the older kids, the night life of nearby casinos and discos is most important," Ms. Greenberg said.

At 19,000 square miles, the Dominican Republic is not a pipsqueak island with one airport, so picking the right spot takes some thought. Most of the Dominican Republic's resorts and white sandy beaches lie along the southern coast to the east of the capital, Santo Domingo, and stretch to the country's eastern tip at Punta Cana.

For families who like to stay put, there is an array of all-inclusive resorts to choose from. Largest among them, the 7,000-acre Casa de Campo resort in La Romana, www.casadecampo.com.do, 809-523-3333, is the site of the famous Teeth of the Dog golf course and two additional courses. An elaborate equestrian center, 13 tennis courts (with lights for night play), skeet shooting, water sports, children's programs for all ages and a marina with shops and restaurants are among the amenities here. Double rooms start at $353 a night in the winter season (packages including meals and activities are additional). Two-bedroom villas start at $840 a night; three-and four-bedroom villas come with breakfast and maid and butler service and start at $1,057 and $1,253, respectively.

Teenagers are catered to at the recently renovated Club Med Punta Cana, 809-686-5500, www.clubmed.com. There are programs for children aged 2 to 13, to be sure, but only guests between the ages of 14 and 17 are allowed entry into the Ramp, a new two-story open-air lounge (to make sure, each is given a special red bracelet upon check-in). The Ramp has an area for inline skating, skateboarding and playing foosball, telescopes for star gazing and plenty of places to just hang out. Seven-night all-inclusive rates start at $840 an adult, $385 a child ages 4 to 15, and $231 a child ages 2 to 3.

There is plenty of space to wander at the brand-new Paradisus Palma Real in Playa de Bavaro, Punta Cana, 809-686-7499, www.solmelia.com, a 554-room all-suite, all-inclusive resort that opened last month and provides a family concierge to coordinate activities, a children's camp for ages 5 to 12, six restaurants, and three swimming pools. All-inclusive rates for two start at $1,100 and at $337 for children ages 4 to 12 in the winter high season. And for the child who dreams of becoming the next Sammy Sosa, an action park with batting cages, archery and a climbing wall awaits at the nearby sister resort, Paradisus Punta Cana, Playa de Bavaro, Higüey, 809-687-9923, www.solmelia.com. All-inclusive rates for two start at $750; $187 for children ages 4 to 12.

Plans are under way for the new 315-room Westin Roco Ki Beach and Golf Resort, Punta Macao, 305-792-1500, on the Web at www.westin.com/rocoki , set to open in 2007. Aside from its 18-hole championship golf course, two-mile beach and Westin Kids Club, the draw here is likely to be the 20 Jungle Luxe Bungalows, which will look as if they are floating over man-made lakes and will have panoramic views of the ocean.

Families seeking smaller hotels and closer access to adventure may prefer the northern coast near Puerto Plata. Also known as the Amber Coast because of its large amber deposits, the north attracts avid mountain bikers and is one of the world's top windsurfing destinations. Set at the base of a mountain range on a private beach, Casa Colonial Beach and Spa, Playa Dorada, Puerto Plata; 809-320-3232; www.slh.com, is an all-suite hotel with Spanish colonial architecture. Hotel guests have access to the Playa Dorada Golf Course, ranked in 2005 by Golf Digest as one of the best 100 courses outside the United States. Although there are no organized programs, children are welcome. Doubles from $350.

Perched on a cliff above Sosua Bay and recently renovated, the 190-room, all-inclusive Victoria Resort Golf and Beach Resort, also on Playa Dorada, Puerto Plata, 809-320-1200, www.vhhr.com, looks like a Victorian gingerbread house. Mountain biking, kayaking, snorkeling, windsurfing and fishing are just some of the activities offered, and there is a children's program for ages 4 to 12. All-inclusive winter rates start at $110 an adult and $55 a child from age 2 to 12.

If the desire to touch, pet and feed a shark strikes, take the family to Ocean World, Cofresi, 809-291-1000; www.oceanworld.net. Just minutes from Puerto Plata, this park has interactive dolphin programs, sea lions, snorkel reef tours, and swimming tigers. Call ahead to reserve for various activities.

There are five airports in the Dominican Republic, four of which can be reached by nonstop flights from the New York area. If you are traveling to the eastern tip, fly nonstop into the Punta Cana International Airport on American or Continental; rates start at $148. To get to the north, Puerto Plata International is a 15-minute drive from the Playa Dorada resorts and has nonstop flights on American and Continental starting at $208. Travelers going to the south coast can fly into Santo Domingo, served by American, Continental and Delta; high season rates start at $174. La Romana has its own airport on Casa de Campo's property, and American Airlines flies there with a change of planes in Miami or San Juan; rates start at $308. Jet Blue, American, Delta and Continental fly nonstop into Santiago, a 90-minute drive to Puerto Plata; rates start at $158. Fares do not include taxes and fees, which come to about $100 more.

Soon we'll be back in Las Terrenas

In two weeks we will be on our way back to the Dominican Republic. We'll spend a few days in Santo Domingo, the capital city and the remaining time in Las Terrenas. Most of our days in Las Terrenas will be spent looking at sites for future development projects and accessing what's already there.

I'll be writing about our adventures in Las Terrenas once we get there, but I thought I'd give some background first.

Las Terrenas is located on the Samana Peninsula in the northeast of the Dominican Republic. Far away from the centers of mass tourism, the Samana Peninsula is one of the most beautiful parts of the country. Long, white sand beaches are lined by a thick belt of palm trees, a ridge of hills inland is covered with luxuriant tropical vegetation, and there are several quaint villages and towns in the area. Las Terrenas, Las Galeras and Samaná are the tourist and economic centers of the peninsula, where there are businesses, cafés and restaurants, bakeries, car and motorbike rental companies and diving schools.

In the 19th century, Samaná was still an island, separated from the mainland by a narrow waterway. The result is a diversity of very distinctive flora and fauna that are found nowhere else in the country. Clear water and fabulous coral reefs make Samaná a paradise for divers and snorkelers. The Samana bay is a prime whale watching area.

The peninsula is currently 4-5 hours drive by car or bus from Santo Domingo by country road. A motorway is under construction that will cut the driving time to 1 1/2 hours. There is also a regular ferry connection and a small airport in Las Terrenas, approached by air from Puerto Plata and Santo Domingo. El Catey International Airport, only a 30-minute drive from Las Terrenas, just opened in November 2006. Once the road from the airport to Las Terrenas is improved, the commute will be less than 15 minutes. The improvement in access to the area is one of the reasons we are so excited about the investment potential in this market.

Las Terrenas is a very lively town with a great deal of charm. Small shops, boutiques, restaurants and cafés are setting up in town. The once sleepy fishing village is a good example of "sustainable tourism"–there are no large hotel developments, and Dominicans and tourists are respectful in their dealings with each other. There is a three-story maximum height imposed on all buildings, which will preserve the charming character of the area. Tourism is just taking its first steps forward and thus offers a wealth of opportunities for positive development.

The town is situated on a wonderful section of the coast with 18 miles of sandy beaches, some of the finest in the Caribbean. Several diving schools have set up in Las Terrenas, and cars, motorbikes and bicycles can be rented. There are a number of very good restaurants that have been opened by European immigrants, and in the evenings the sounds of Bachata and Merengue drift out of the Dominican bars.

On our last trip, we stayed at the Hotel Playa Colibri, a very pleasant small resort of apartments owned primarily by US and European investors. There's a great casual dining restaurant affiliated with the Colibri, where we enjoyed freshly caught langoustine almost every day.

This time we will stay at a newly opened hotel called the Alisei. The Alisei was under construction last August, but when we learned it was developed by the same folks who run the Colibri, we thought we'd give this one a try.

I'll write all about our trip once we get there, but in the next two weeks I'll continue to give an overview of the DR, investing in the DR, and the opportunities in Las Terrenas.

Adventures in the DR

Just six short months ago my husband and I learned about the exciting real estate investment opportunities in the Dominican Republic. After spending the last several years primarily focused on investment options in the US, I was thrilled to find that significant cash flow and appreciation is easily obtainable in the Dominican Republic (DR). I'm sure there are great opportunities all over the DR, but the place we are really excited about is the Samana Peninsula, and specifically in and around the town of Las Terrenas.

Las Terrenas, a charming beach town with a cosmopolitan flair, is an established tourist destination with dozens of hotels, apartments, restaurants and shops. There are 18 miles of beautiful white sand beaches studded with coconut trees. Access to the area is now greatly improved with the recent opening of El Catey International Airport. New highways and roads are under construction, and a golf course, marina, and country club are in development. Las Terrenas, with its exceptional natural beauty, is perfectly poised to become the prime destination in the Caribbean.

Though I am also invested in US markets, I'll be writing mostly about the Dominican Republic. I look forward to sharing my adventures, insights, and experiences with you. I hope my posts will be interesting and informative.