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Data forecasts highlight Caribbean’s potential
April 26 2012

Panelists at the Caribbean Hotel and Tourism Investment Conference shared data outlining the challenges and opportunities that lay ahead for the Caribbean tourism industry.

Highlights
  • Tourism Economics expects continued tourism growth in the Caribbean within the 3% range over the next few years.
  • During the first quarter of 2012, there were 2,125 hotels in the Caribbean pipeline representing 231,278 rooms, according to STR.
  • Seventy-three percent of lenders said they do not believe leadership in the region is doing enough to make the necessary changes in the tourism industry.

SAN JUAN, Puerto Rico—As a region of economies heavily reliant on tourism, the Caribbean has been hit particularly hard by the downturn. And although challenges still lay ahead, data presented by panelists at the Caribbean Hotel and Tourism Investment Conference indicates the industry has the potential to bounce back.

The Caribbean saw two successive years of record highs in 2010 and 2011 in terms of tourism growth, said Adam Sacks, president of Tourism Economics. “We expect continued growth in the range of 3% over the next few years,” he said. The historical average is 3.7% per annum.

Sacks emphasized the importance of analyzing historical patterns to predict growth in the Caribbean. From 2000 to 2010, the world faced a financial crisis, record highs in oil prices, a recession and 9/11—yet the region still saw 2.5% growth on average. Although possible, it is unlikely the industry will face those issues within the next three years, boosting the likelihood of increased tourism growth.

The World Tourism Organization is projecting more modest growth for the region. According to the WTO, the Caribbean tourism industry is expected to grow 2% in 2012, below the 3% to 4% average growth it projected for the globe.

International tourism arrivals around the world are expected to hit the 1 billion mark in 2012, said Carlos Vogeler, regional director for the Americas for the World Tourism Organization.

And while the Caribbean represents approximately 2% of the world’s tourism wealth, only seven destinations in the Caribbean account for 74.7% of those arrivals. These numbers signify there is much room for improvement in the region, Vogeler said.

Although much of the world is putting emphasis on attracting travelers from the emerging Asian markets, such as China and India, Sacks advised hoteliers those aren’t the travelers that will be filling their rooms in the coming years.

“Focus on the U.S. and Latin America markets,” he said.

Supply and demand
During the first quarter of 2012, there were 2,125 hotels in the Caribbean pipeline representing 231,278 rooms, according to data presented by Amanda Hite, president of
STR, parent company of HotelNewsNow.com.

“We’re at a point now where we have much higher demand growth, very low supply growth, which we think puts hotels at a great position to drive revenue,” Hite said.

However, there is a possibility low supply growth could present itself as a challenge to some hoteliers, Hite said.

There were 8,401 rooms in the active pipeline as of March, which would make up 3.4% of the supply if all open, Hite said.

Much of that new supply falls into the upper-end market segments, she said. Meanwhile, most of the demand in the Caribbean is for the lower-end market segments. “It’s going to be tough for some of those upper-end hotels to really drive rate and demand growth when there’s that much supply coming into the market,” she said.

The Caribbean reported 77.4% occupancy in March, up 2.2% year-over-year; an average-daily-rate increase of 6.1% to $209.72; and revenue per available room of $162.28, an increase of 8.5% year-over-year.

Looking ahead in the lending sector
Presenting results from KPMG’s 2012 Caribbean Region Financing Survey, Charlene Lewis-Small, associate director of KPMG in the Bahamas, said lenders are reporting mixed feelings in terms of interest in lending in the market.

The results of the survey ranged from those willing and interested to lend to new projects and those who are holding back.

Respondents were asked to gauge how bullish they felt about the market’s recovery during the next 12 months, with an answer of 1 being bearish and an answer of 10 being bullish. The 5.18 average reported in March 2012 dropped a few points from the 5.63 average in May 2008.

Many said they don’t expect to see growth until 2014, Lewis-Small said.

In addition, 73% of lenders said they do not believe leadership in the region is doing enough to make the necessary changes in the tourism industry. The lenders believe more needs to be done from a regional level, she said.

While things are moving slowly now in terms of lending, “The good news is we still have lenders out there who are looking for good projects,” Lewis-Small said. “The keyword is going to have to be ‘patience.’”

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