Parris Jordan of HVS Global Hospitality Services said demand is back in the Caribbean, but hoteliers are not pushing rate.
NASSAU, Bahamas—Speakers at last week’s Caribbean Hotel Investment Conference & Operations Summit at The Atlantis Resort said there are reasons for some optimism in the region’s hotel community even as challenges continue to be prevalent.
While referring to data from STR, the parent company of HotelNewsNow.com, Parris Jordan, managing director Caribbean for HVS Global Hospitality Services, said year-to-date numbers show a push. Occupancy is slowly increasing, and after starting the year in negative territory, average daily rates are now up a little less than 1%.
“Demand is back; the challenge in the region is we’re not net yielding as well as we should,” he said. “We’re not pushing rate.”
As an overview, Jordan provided some things hoteliers should know about the region, including:
• There are 7,000 islands comprising 32 nations in the Caribbean.
• The hospitality industry is responsible for one of every six jobs in the region.
• Room expenses tend to be lower in the Caribbean than in the United States, while real-estate taxes tend to be lower or nonexistent.
• Insurance costs tend to be higher in the Caribbean than in the U.S.
• Utility costs tend to be higher in the Caribbean than in the U.S.—the cost on some islands is three times higher. He said utility costs on Trinidad & Tobago are the exception at about half U.S. utility costs.
“We get squeezed as the hotel operator,” said Ken Blatt, principal and COO of the hospitality division with Caribbean Property Group, which owns 10 hotels in the Caribbean region. “Utility costs are going through the roof. Still, we’re very optimistic on the macro level long term.”
|Ken Blatt of Caribbean Property Group said governments should consider providing financing options for hoteliers.
Specifically, he projected revenue-per-available-room growth of between 5% and 8% for Aruba and San Juan, Puerto Rico.
Blatt was not the only speaker who was optimistic about future performance numbers.
Vincent Vanderpool-Wallace, minister of tourism and aviation for the government of the Bahamas, said the forecast is much stronger than it was last year at the same time and group business is coming back.
Paul Burke, COO of Kerzner International Bahamas Limited, echoed the thoughts about group business. He said group business during the fourth quarter of 2011 at the Atlantis, which Kerzner owns and operates, is the best since 2007.
“2012 will be the third straight year-over-year increase,” he said. “Leisure travel is much more short term. We’re very optimistic about the fourth quarter (of 2011) and 2012.”
Beyond the unpredictability of airlift, the region faces other challenges, including excessive wear-and-tear caused by the elements, a change in the mix of visitors panelists said was a result of the influx of more all-inclusive resorts into the Caribbean, and competition from a potential Miami mega-resort that is being discussed.
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Wear and tear
The affect of salt on hotels can’t be underestimated. It was mentioned several times during panel discussions as a big concern for hoteliers.
“The greatest asset in the Caribbean is the environment, and it creates a lot of wear and tear,” said Adam Cohen, managing director & COO of Brilla Group, a real-estate private-equity firm focused on acquiring luxury beachfront hotel and resort assets in South Florida, the Caribbean, Mexico, Central America and Colombia. “Now is the time to revolutionize the properties.”
He said smaller operators—specifically the mom-and-pop hotel owners—need financing options to get properties renovated so they can take advantage of the upcoming increased traffic as the recession eases.
Scott Woroch, executive VP of worldwide development for Four Seasons Hotels & Resorts, said renovation and general property upkeep is an important factor for the long-term viability of a hotel.
“Wear and tear is a critical concern,” he said. “Ultimately, you’re depending on the ongoing success of a property to get owners to reinvest in the properties.”
Blatt said governments should consider providing financing options for hoteliers looking for money to renovate their properties.
The call to raise rates while so many properties need renovating is a concern for Aly-khan Merali?, executive VP of acquisitions and strategic development for Gencom Group.
“There are assets that have not been renovated and you raise rates … what worries me is in a few months pictures (of hotels that don’t meet guests’ expectations based on rates) will be on TripAdvisor,” he said.
An exercise in branding
One way the Caribbean could create momentum for hoteliers is to adopt an across-the-board branding program in which all of the island nations participate, panelists said.
“The Caribbean is the best well-known, unowned brand,” Vanderpool-Wallace said. “The image of the Caribbean transcends any individual country that is in it.”
“There’s a real opportunity for the region as a whole to rebrand itself,” Brilla Group’s Cohen said. “The first thought from someone in the Northeast (U.S.) in the winter should be the Caribbean.”
Four Season’s Woroch said attracting long-haul visitors who might visit three or four different nations while on one trip could be a beneficial by-product of a cohesive branding campaign for the region. He pointed to the Maldives in the Indian Ocean as an island nation with numerous islands that promotes island-hopping adventures.