Golden Horizons: Why Now is the Perfect Time to Develop Hotels in the U.S. Virgin Islands

By Steven Boughner

The U.S. Virgin Islands—comprising St. Thomas, St. John, and St. Croix—has long been a coveted destination for travelers seeking pristine beaches, crystal-clear waters, and a relaxed island atmosphere. For generations, the islands have drawn visitors from the U.S. mainland, attracted by the ease of travel to an American territory, where no passport is required, and the natural beauty that rivals any tropical paradise in the world. Yet today, the USVI offers more than just an alluring vacation experience. For hotel developers and investors, the territory represents one of the most compelling hospitality investment opportunities in the Caribbean.

A convergence of economic, demographic, and policy trends has created a window of opportunity that is unique in its scope and potential. From a booming post-pandemic travel rebound to ambitious government incentives, the conditions for profitable, sustainable, and culturally attuned hotel development have never been better in the USVI. This moment is particularly appealing for developers who understand that the islands are no longer just seasonal retreats, but destinations capable of supporting year-round hospitality ventures across multiple segments—from luxury resorts and boutique properties to eco-conscious accommodations.

One of the key factors driving this development opportunity is the robust recovery and expansion of the USVI’s tourism sector. As the global travel industry recovers from the disruptions caused by COVID-19, the USVI has emerged as one of the Caribbean’s most resilient markets. According to data from the USVI Department of Tourism, air and cruise arrivals in 2023 surpassed pre-pandemic levels, fueled by demand from U.S. travelers who increasingly seek tropical destinations that are close to home and easy to navigate. The USVI’s status as a U.S. territory eliminated many of the pandemic-related barriers that slowed travel to other Caribbean nations, giving the islands a competitive advantage that persists today.

Hotel performance metrics reflect this strong demand. According to STR, the USVI’s average hotel occupancy rate in 2023 hovered around 68%, with upscale and luxury properties achieving even higher figures during peak travel months. The length of stays also increased, with more travelers opting for extended vacations, blending work and leisure in flexible remote work arrangements. The islands’ natural beauty, combined with reliable infrastructure and U.S.-standard healthcare and safety regulations, has made the USVI a particularly attractive option for this new wave of long-stay visitors.

Yet, as demand has surged, supply has struggled to keep pace. Much of the existing hotel inventory in the USVI dates back to the 1960s and 70s, with only piecemeal renovations over the decades. While these properties maintain nostalgic appeal, many fall short of contemporary traveler expectations. Guests increasingly seek sustainability-focused hotels, immersive cultural programming, and modern amenities—areas where much of the USVI’s existing hotel stock lags. This supply-demand imbalance creates fertile ground for new development, especially for developers who can deliver innovative properties tailored to evolving traveler preferences.

The USVI government has embraced this opportunity, positioning hospitality investment as a central pillar of its long-term economic development strategy. The Hotel Development Act (HDA) is a cornerstone of this effort, offering qualifying projects the ability to capture a portion of the hotel occupancy taxes they generate and reinvest those funds directly into their development. In essence, the HDA allows new hotels to help finance their own construction or renovation using the tax revenue they generate, significantly improving the economics of new projects in a high-cost island environment. This is similar to Tax Increment Financing (TIF) structures uses the hotel occupancy tax to repay the debt instead of property taxes – which is highly accretive to projected cashflows.

The USVI’s Economic Development Commission (EDC) complements the HDA by offering extensive tax incentives to qualifying businesses, including hotel developers and operators. These incentives can include reductions in corporate income tax, property tax, and excise taxes on imported materials—critical savings in a market where nearly every construction input must be shipped in from off-island. Together, the HDA and EDC create one of the Caribbean’s most attractive incentive environments for hospitality development, effectively lowering the barriers to entry for experienced developers willing to navigate the complexities of island development.

This supportive policy environment has already borne fruit. On St. Thomas, the long-awaited redevelopment of Frenchman’s Reef has redefined the island’s luxury hospitality landscape. Reopened under the Westin and Autograph Collection flags, the project represents a bold bet on St. Thomas’ ability to support high-end, dual-branded properties that cater to both traditional resort guests and experience-seeking travelers. The successful reopening of Frenchman’s Reef not only underscores investor confidence in the market, but also demonstrates the type of innovative, experience-driven development that today’s travelers demand.

Critical to the success of hotel development across the islands is the ongoing modernization of the USVI’s airports. St. Thomas’ Cyril E. King Airport, the busiest airport in the territory, is undergoing a comprehensive expansion and renovation program designed to enhance both capacity and visitor experience. The project, which includes expanded terminal facilities, upgraded baggage handling systems, and new retail and dining options, will improve passenger flow and create a modern gateway befitting the island’s luxury positioning. Just as importantly, the expansion will allow the airport to accommodate larger aircraft and additional direct flights from key U.S. markets, improving airlift and opening new opportunities for hotels to attract a broader visitor base.

On St. Croix, a similarly ambitious effort is underway at Henry E. Rohlsen Airport, where a planned terminal expansion will significantly enhance passenger capacity and streamline customs processing. Historically underserved by direct airlift compared to St. Thomas, St. Croix stands to benefit immensely from these improvements, which will make the island more accessible to both leisure travelers and group business. Improved air access is a critical enabler for hotel development, ensuring that new properties can tap into strong and diverse demand channels.

Nowhere is the case for hotel development stronger than on St. Croix, the largest and most historically underdeveloped of the three islands. For much of the 20th century, St. Croix’s economy was anchored not by tourism, but by heavy industry. The island was home to the massive Hovensa oil refinery, one of the largest in the world, as well as rum distilleries and light manufacturing facilities. This industrial focus left little room for large-scale tourism development, even as St. Thomas and St. John built reputations as luxury destinations.

That began to change after the closure of Hovensa in 2012, which left St. Croix with both economic challenges and newfound opportunities. Large tracts of land once dedicated to industrial use became available for redevelopment, and attention gradually shifted to the island’s remarkable natural beauty and rich cultural heritage. At 84 square miles, St. Croix is not only the largest island in the territory, but also the most geographically diverse. Its rainforest-covered hills, fertile plains, and pristine beaches offer diverse settings for hotel development, from beachfront resorts to wellness retreats tucked into the hills.

Unlike St. Thomas, where steep terrain and dense development limit new opportunities, St. Croix offers developers flexibility and creative freedom. It also offers something increasingly rare in the Caribbean: an authentic, under-the-radar destination rich with historical character, local culture, and unspoiled landscapes. From the historic streets of Christiansted to the vibrant cultural traditions rooted in the island’s Afro-Caribbean heritage, St. Croix offers developers an unparalleled opportunity to create properties that tell a story and deliver experiences travelers can’t find anywhere else.

As airlift expands and the government continues to prioritize tourism investment, St. Croix is poised to become the USVI’s next great hospitality frontier. For developers who embrace the island’s character, respect its environment, and invest in its people, the rewards will extend beyond financial returns. They will play a role in shaping the future identity of the USVI, transforming St. Croix from a well-kept secret into a flagship destination for modern travelers.

The opportunity is here, and the time is now. Those who act today will lead the next chapter of Caribbean hospitality in one of its most beautiful, authentic, and welcoming destinations.

Steven Boughner
Founder & President
Global Strategies Group

Global Strategies Group is a commercial real estate developer currently developing a $400M+ pipeline of hospitality projects in the Caribbean.