Expert Opinion

An Interview with Carlos Hernandez

Carlos Hernandez is a seasoned Chief Executive Officer and international real estate professional, and the creator of some of the most unique and awarded concepts in luxury hotels, golf courses, resorts, and master-planned communities in Latin America including the Santa Maria Golf & Country Club, a 1,000 acre mixed used neighborhood in Panama, Guacalito de la Isla, a 1,900 acre resort in Nicaragua and its celebrated Mukul Hotel, An Auberge Resort and the 3,000 acres Costa Elena master-planned community in Costa Rica.

He is a creative thinker and an expert in leading complex projects and teams in multiple countries and jurisdictions, on a mission to transform remote and offen marginalised communities into thriving sustainable tourism destinations. Mr. Hernandez graduated with a Bachelor’s degree in Civil Engineering from the Universidad Iberoamericana in Mexico City, and he earned a Master of Science in Finance at Florida International University in 2003 and completed the Advanced Management Program AMP at Kellogg School of Management at Northwestern University. He is an active member of the Recreational Council of the Urban Land Institute.

How would you describe what you do?

“I’m a place-maker who specialises in locations that are off the beaten path.”

How did you get started in this career?

“By accident, like almost everyone who gets started in their career. I have always been curious about a lot of things; I like architecture, I like history, I like politics but I studied civil engineering. And very early in my career as a Construction Manager I realised that that was not completely fulfilling as I wanted to be the developer and creator of concepts rather than just its builder.”

At what point did you make the jump into development?

“I was given the opportunity in Miami by a group of Mexican Investors to join their team in the development of a couple of limited service hotels, and shortly thereafter I joined Fairmont Hotels & Resorts as their Director of Design & Construction but it was not until I was offered a position in Panama by the Pellas Development Group that I had my first break in leading from conception to executing the development of a large mixed-used resort lifestyle community.  I had participated in various golf course renovations and hotel renovations but was never given one single large mixed-use, master-planned, a large community where everything comes into play, until then.”

What is it about the Central America region that has played a role in influencing what you have done?

“The region is so close to two of the largest leisure markets in the world – the US and Canada. This region is just naturally positioned to be a preferred tropical playground where there are so many new jewels and destinations to be discovered. This is where tourism and hotel development intersects with this passionate concept of discovering new places. I like to be the first one on the ground – it feels almost like being an explorer and creator.”

Can you give us a snapshot of the work you do with Pellas Development Group?

“I’m the CEO of Pellas Development Group, an investment, development, and operating company specialized in developing some of the most ambitious, sustainable, and socially integrated master-planned, mixed-use communities in Central America. I lead and coordinate the efforts of a large team of talented and multicultural people, from designers and artists, engineers and architects, hoteliers and financial experts, to even experts in biology, sustainability, sociology, and archaeology. I spend a lot of time with stakeholders, from billionaires putting money into these extremely capital-intensive resorts to local fishermen having an open townhouse. To be a developer means you can comfortably manage this wide range of audiences and paradoxes, and it’s also part of what makes this job so exhilarating.”

Is there one particular project you’d like to highlight that you are proud of?

“I was invited by Don Carlos Pellas to collaborate with him on the creation and development of Mukul in Nicaragua, one of the most exclusive and amazing resorts in Central America. Mukul was developed as Don Carlos’s legacy and a testament to his love for his country and his desire to elevate the well-being of his fellow Nicaraguans and bring development and tourism to this beautiful but unknown corner of the world. It was a blank canvas and finding the right narrative to put this country on the map was an incredible challenge for me. It took a decade of my life, but we built it and it was an incredible success. We wanted to entice sophisticated travelers to come to this place, discover it and celebrate it and then take positions as ambassadors of the country so to speak. And it worked! It was a chance to put Nicaragua on the news for the first time for the right reasons, for the beauty of the country, the warmth of its people, and the richness of their culture. I quickly learned that through the right development and tourism project we can impact positively an entire community, that was very fulfilling.”

Is there something in the DNA of the Pellas Group that you leave behind in the legacy of every project?              

“We are very particular in how we approach projects and the care we take in design. We don’t rush design, which is hard because we’re also in a capital intensive, financially driven industry where things are run by IRR. I’m a strong believer that good design matters not only for beauty but for lasting quality. What we do as resort developers has tremendous implications, so we have an obligation to be responsible stewards of the land and its use so that the beauty, value, and biodiversity of the places where we work remain and increases over time.”

Can you give us a snapshot of where you think the hospitality sector is right now?

“Compared to other real estate sectors it has always been perceived as a more complicated asset to own; not so many institutional players or money will look at these assets as attractive as say office or industrial because hospitality by nature is operationally intensive and complex to own and to run and maintain. But I think what has been happening lately and especially after COVID is that the hospitality sector proved its resilience. In as much as hospitality is complex in its operation, it is also the most human touch sector of real estate and we have learned from COVID that we yearn for human touch and human interaction and that is hospitality.”

In the work you do, it seems that the stakeholder environment is also very complex

“It has always been complex because development and construction is complicated by its very nature – you’re altering the physical world, traffic patterns, creating noise. You have to deal with government regulations, permits for construction, etc. so development has always had that element that makes it really difficult. But these types of projects are even more complex because they are impacting the physical space of a number of players. You’ve got politicians who want you to invest in the region and other politicians who don’t want private investment, so things become really complex.  I think in today’s world the most complex part of the stakeholder eco-system is the neighbours.  The people in the community. People have become empowered and projects like ours have to gain a social licence to move forward.”

You are in an interesting position because you often take a position on the board of the company running the development when it is finished – how unusual is this?

“Yes, that’s unusual. Typically, you see the development industry completely separated from the asset management and the operations. I do this because of the scale and complexity of the projects we are doing. If the projects were smaller in scale and were more about developing a hotel rather than a destination then you could probably frame the project in a timeframe that is more manageable, the problem with these types of projects we’ve been doing in Central America, which are game-changers, is that we do land development that builds a destination. We create a market, we are market makers. And you realise that whatever you do you have a stewardship obligation to the land and to the place.”

What are the key trends that are impacting hospitality?

“There’s a definite trend towards luxury and value. We’re seeing that in other sectors as well, this is no exception. Luxury in the sense that we are going away from the mass market delivery of hotel solutions. The middle of the market is suffering incredibly all around the world. So, there’s the rise of value with quality. The other trend that is affecting everyone is sustainability. I don’t believe in sustainability if we are thinking only about green. I think sustainability is becoming very complex as it has to do with local producers, displacement of neighbourhoods, use of water and soils, and resilience and climate change. We all have to ask ourselves, if we open this amazing project on a quiet, pristine beach or island, are we going to impact the way people live here in a positive way? Are we going to successfully attract others to the point where it’s not sustainable anymore? How do we approach this paradox of decline by success? How do we make it sustainable over time?”

How important are sustainability concerns from investors, developers, and end-users?

“It’s becoming more important, but I don’t think it’s completely there yet in terms of being a deal breaker for an investor to put resources in a project or an end user visiting a place. There are other drivers that are still dominating – capital returns, price, air connectivity, etc. The drivers of value that were always important continue to be important.  But sustainability and the environment are becoming more important and critical, and because of that I have no doubt than in the next decade it will become the most important driver of capital allocation and consumers decisions.”

And what about COVID, how has that affected hospitality?

“We have just experienced a 10-year acceleration in the adoption of technology. Also, our ability to travel and work from anywhere. I think this is the end of what we thought of as the normal Monday to Friday, high season, low season. I think that we’re seeing a tremendous dislocation of the idea that I have to be where my job is, and that is completely disrupting how you use a hotel, what you look for in a resort and it’s a tremendous opportunity.”

What are the key ingredients that are driving experience-making in resorts now?

“Food! There is a culinary culture emerging all over the world. Through food we connect to local communities – it’s the ultimate authentic experience. The other thing that is driving experience is the warm delivery of hospitality by the local community. The interaction with locals that is becoming very important. In the past, hoteliers did a great job at providing people with the safety and assurance that they were going to find familiar standards and services wherever they are – the triumph of standardization. Today we are in a whole new world, where travellers want precisely the opposite of standard, and where we want to celebrate the place and its surroundings.”

It must be a prime motivator for you to know that you are positively impacting lives and countries.

“That has been the part that makes me feel that I have been incredibly lucky and incredibly blessed. I don’t have a job; I have a mission. I have a reason for being here. And I like to tell my kids it lets me sleep well and wake up energised.”

But there is a flip side and I have to ask you – does it ever bother you that you are creating these luxurious resorts in a region still marked by significant inequality?

“Although I appreciate the paradox of the death of a destination by its success, I believe that true luxury resorts are the ultimate tool for economic development and true conservation in remote communities. Carefully curated and master planned concepts, not mass market and volume driven developments, are the best tool we currently have to introduce high paying guests in limited numbers to remote, marginalized communities and thus do an effective and sustainable transfer of wealth by way of services and goods that only those communities can deliver. They create jobs for some of the most pristine but underdeveloped and marginalized regions of the world. I think that we need to change the narrative and accept that it’s ok that it’s not affordable to go to remote locations and communities en masse. It is a privilege, and should be treated and priced as one so as to preserve them for us and future generations.”

What’s next for you?

“I am currently working full time on developing our new project, Costa Elena, a new luxury frontier in Costa Rica, where we are creating the most amazing, sustainable next-generation master planned community, energized by authentic experiences, inclusivity, luxury lifestyle and multi-generational amenities. It is going to be anchored in a conservation-based community built within one of the last untouched and most intense biodiverse regions of the world and a UNESCO heritage site in the gulf of Santa Elena. It fills me with great sense of purpose to think about the possibilities that this new place making and development philosophy could bring to other emerging locations, where it can transform the well-being of their inhabitants and foster the protection and conservation of their environments, biodiversity, cultural heritage, and way of life.”