Puerto Rico Hotels See Growth as Luxury Supply Expands and ‘Bad Bunny Effect’ Boosts Demand

Puerto Rico’s hotel sector is experiencing rising demand, fueled by luxury hotel expansion and international attention from artist Bad Bunny, resulting in a shifting visitor profile and new opportunities for hoteliers.

Hotel Industry Expansion and Changing Visitor Demographics

Puerto Rico has seen a notable transformation in its hospitality sector, marked by a surge in luxury hotel openings and renovations. According to CoStar data, the island now has 175 hotels with a total of 16,239 rooms, including 16 luxury hotels with 2,119 rooms. Since the start of 2024, luxury hotel room supply has increased by 25%. Two additional luxury hotels are in development, although most new projects are expected to fall within the upper midscale to upper upscale categories.

Existing hotels are investing in upgrades to appeal to modern travelers. For example, Driftwood Capital, which acquired and renovated the former Sheraton Old San Juan into the 245-room Hotel Rumbao, is set to open a new 10,500-square-foot casino on the property. Driftwood’s leadership has indicated ongoing interest in expanding its presence in Puerto Rico, not only through hotel acquisitions and developments but also via lending and management services.

Tax incentives play a significant role in attracting investment. Hotel owners who renovate properties can receive tax credits based on their capital expenditures, with larger renovation projects yielding higher returns. This has encouraged many owners to upgrade or expand their properties, further increasing the island’s luxury offerings.

The visitor profile is also evolving. Industry leaders note a rise in “discerning travelers” willing to spend more on premium experiences. This shift reflects Puerto Rico’s growing reputation as a destination that appeals to a broader and more affluent audience.

The ‘Bad Bunny Effect’ and Its Impact

A major factor in Puerto Rico’s tourism growth is the international attention generated by Puerto Rican artist Bad Bunny. His 31-show residency at the José Miguel Agrelot Coliseum in San Juan during the summer of 2025 drew visitors from around the world, boosting hotel occupancy during what is typically the island’s low season. According to STR data, hotel revenue per available room (RevPAR) increased by 74.7% year-over-year on the final night of the residency.

The residency was intentionally scheduled during the slowest months for tourism, helping to address seasonal dips in demand. Hotels such as Hotel Rumbao reported a 20-25% increase in demand during the residency period, with peak occupancy on concert dates. The Caribe Hilton organized special events for guests and concertgoers, further capitalizing on the influx of visitors.

The impact extended beyond the residency. Following Bad Bunny’s performance at Super Bowl LX, flight searches from Europe to Puerto Rico reportedly increased by 255%. International arrivals during the residency period rose by 18% compared to the previous year, indicating a broader reach for Puerto Rico’s tourism industry.

Industry professionals acknowledge that while the full extent of the “Bad Bunny effect” may be difficult to quantify, the exposure has contributed to a heightened global profile for Puerto Rico and increased interest from new markets.

Resilience and Infrastructure Challenges

Despite the positive trends, Puerto Rico faces ongoing challenges with its infrastructure, particularly its power grid and its vulnerability to hurricanes. The island has made progress in improving resilience since the devastation caused by Hurricanes Irma and Maria in 2017. Recovery times for power outages have improved significantly, with the average restoration time now measured in days rather than months.

Industry leaders emphasize the importance of continued investment in infrastructure, including airports and the electrical grid, to maintain Puerto Rico’s competitive advantage as a tourist destination. The island is currently undergoing a $425 million redevelopment of two cruise port areas, and the main airport is adding more flights to accommodate growing demand.

Short-Term Rentals and Market Competition

The rise of short-term rentals presents additional competition for traditional hotels. According to AirDNA, rental listings in Puerto Rico have more than doubled since 2019, with 3.8 million short-term rental nights in 2025—a 171% increase from 2019. While supply growth outpaced demand between 2022 and 2024, occupancy rates stabilized in 2025, reaching an annual average of 56%, up 5% from 2019.

Hoteliers remain optimistic about the future, citing Puerto Rico’s unique cultural offerings and growing international recognition as factors that will continue to attract visitors. They also highlight the importance of government support and effective use of tax incentives to sustain growth.

Outlook for Puerto Rico’s Tourism Sector

Puerto Rico’s tourism industry is benefiting from a combination of increased investment in luxury accommodations, effective marketing, and high-profile cultural events. The “Bad Bunny effect” has played a significant role in raising the island’s profile and attracting new visitors, particularly from international markets.

Continued improvements in infrastructure and resilience, alongside strategic use of tax incentives, are expected to support further growth in the hotel sector. However, competition from short-term rentals and the need for ongoing government support remain important considerations for the industry’s future.

Overall, Puerto Rico is positioned to continue its trajectory as a destination of choice for both domestic and international travelers, with a hospitality sector adapting to changing demands and new opportunities.

Discover more at CoStar.