Caribbean hotels show profit growth

By Admin Thursday August 30 2012 in Caribbean
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BRIDGETOWN: 2011 was the first year since the global economic recession began that the Caribbean’s hotel industry posted positive growth in all three of the sector’s performance indicators.


The announcement was made by Scott Smith, Senior Vice President of PKF Consulting USA, LLC (PKFC) as he commented on the recently released 2012 edition of “Caribbean Trends in the Hotel Industry,” a study by PKFC’s research affiliate PKF Hospitality Research, LLC (PKF-HR).


According to the report, the average Caribbean hotel that participated in the survey experienced a 10 per cent increase in Net Operating Income in 2011. This is the greatest annual increase in profits since 2008, when the global economic recession began.


In the report, PKF-HR noted a 1.0 per cent increase in occupancy and a 5.6 per cent increase in Average Daily Rate. This led to a 6.7 per cent increase in Revenue per Available Room for the hotels in the survey sample.


“The Caribbean’s economy relies heavily on their hotel industry. In 2008, when the global recession struck, the Caribbean, like many other regions, saw a large decline in tourist visitations. This forced hotel owners and operators to make necessary cuts in employment and services offered.


“The lack of employment opportunities for the locals had a large negative impact on their overall economy. Three years later, hotel occupancy is on the rise. This, in turn, has caused employment to begin to increase in the region,” said Smith.


The PFK-KR analysts noted that the Caribbean’s hotel industry has a unique operating environment due to the fact that it consists of mostly resort properties.


Resorts are different from other types of hotel properties because a high percentage of their revenue comes from sources such as golf, spas and casinos.


Higher operating costs also set the Caribbean apart, the analysts noted. For example, food and beverage department expenses average 85.2 per cent of revenue at Caribbean resorts, but only average 70.9 per cent at comparable U.S. resorts. The high costs can be attributed to the need to ship in food, beverages, equipment and supplies from countries such as the U.S.


Utilities were highlighted as other expenditures that run high in the Caribbean and are rising sharply. In 2011, the surveyed properties saw an increase of 12.7 per cent in utility expenses from 2010. This is due to the fact that many countries in the region lack the infrastructure to produce energy at a low cost. When compared to comparable U.S. properties, utility expenses in the Caribbean are 126 per cent higher.


The report also stated that the region is in need of more airlines providing routes to its islands.


“The success of upcoming resorts, as well as the ones already in existence, relies on the expansion of the airlines,” said Smith. “With more tourists visiting the region, the Caribbean needs viable transportation for its guests.”


The analysts predicted that investor confidence was set for healthy growth in the industry.


“As the economy becomes increasingly more stable, more investors are entering into the Caribbean market,” said Smith. “Over the past three years, the Caribbean has seen several hotel development projects halted due to insufficient funding.”


By the end of 2011, potential development activity began to increase. According to Smith Travel Research, as of June 2012, there are 135 hotels currently in the Caribbean/Mexican hotel development pipeline. These new properties are expected to attract more visitors to the Caribbean, which will have a positive effect on the region’s overall economy.

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