HENDERSONVILLE, Tennessee—The Caribbean is a renowned leisure destination, known for great beaches, warm breezes and inviting hotels. The Smith Travel Research database includes more than 2,250 hotels with some 238,000 rooms in the Caribbean region. Let’s take a look at how the region is performing in the midst of a challenging global operating environment.
Not surprisingly, 2009 Caribbean hotel performance has suffered significantly. Based on October 2009 year-to-date data, occupancy declined 5.1 percent and average daily rate slid 15.6 percent, pushing revenue per available room down nearly 20 percent. Supply growth has basically been flat in 2009, meaning that falling occupancy has been driven totally by decreased demand (roomnights sold). The long term annual supply growth rate in the Caribbean is just under 1 percent.
The Caribbean Tourism Organization cites the United States, Europe and Canada as primary feeder markets for Caribbean tourism. Peak occupancy months are February—April, as holidaymakers seek relief from winter.
The region’s long-term demand trend has moved in relative sync with its biggest feeder markets—the U.S. and Europe. Based on the 12-month moving average in October, Caribbean demand began to show signs of improvement. In fact, demand for the month of September actually increased 5.7 percent from September 2008, and October monthly demand gained 1 percent. These were the first monthly demand increases since April 2008.
RevPAR also improved in September (up 0.5 percent) and October (up 6.8 percent), the first monthly RevPAR increases since January 2008. Similar to the U.S., Caribbean comparables will be very easy in the last quarter, which could mean that the worst of the performance declines the region has experienced in the current cycle may be over.
Although 2009 Caribbean performance is down in basically all areas, the degree of decline has varied across countries. Aruba, Bahamas and Puerto Rico performance was analyzed due to the relatively strong STR sample in those countries. October 2009 year-to-date RevPAR declined the most in the Bahamas (-17.7 percent), followed closely by Puerto Rico (-17.1 percent) while Aruba was down “only” 13 percent. The Bahamas experienced the biggest occupancy decline (-11.2 percent) while ADR slid the most in Puerto Rico (-14.1 percent). In absolute performance terms, Bahamas experienced the lowest absolute occupancy at 52.7 percent and also had the highest ADR at US$255.61.
Moving forward, the region should continue to see improvements in the final quarter of 2009 and into 2010 as the European, Canadian and U.S. economies gain momentum. Economic strength in these key regions should translate into stronger occupancies and room rate growth for Caribbean hotel operators. Longer term, continued airlift capacity and a stable governmental and political environment are critical for successful hotel operations and growth.