Airlift remains Caribbean’s biggest barrier
21 NOVEMBER 2013 8:33 AM
Increasing the number of flights traveling to and within the Caribbean is a major goal to meet demand from visitors, according to speakers at the HVS CHICOS event.
PUNTA CANA, Dominican Republic—Increasing Caribbean airlift, whether it involves bringing in tourists from around the world or getting residents from one island to another, is vital for the long-term viability of 32 nations comprising the region.
The topic isn’t new, but it never goes out of style in a region that is so dependent on airplanes to deliver tourists and their much-welcomed spending money.
Frank Elias Rainieri, VP of business development and real estate for Grupo Puntacana, put it into perspective during the “Hospitality leaders outlook” general session at the recent HVS Caribbean Hotel Investment Conference & Operations Summit.
“Airlift is basic. The islands that will deliver the most (returns) are the ones that have the most (airlift),” he said.
Rainieri’s company operates a handful of hotels in the Punta Cana region of the Dominican Republic, including Tortuga Bay; The Puntacana Hotel; the Four Points by Sheraton Puntacana Village; and the Westin Puntacana Resort & Club, which is scheduled to open in December.
“We see a bright future because investors are investing in hotels; banks are lending again; and brands are starting to do things they haven’t wanted to do in the past,” said Rainieri, who added that a 13% increase in the number of seats flying into Punta Cana has been a big boost to the hotel sector.
Speakers on the “Up in the air: the question of airlift to the Caribbean” general session panel at the conference echoed Rainieri’s sentiments.
“The two big disclaimers (for the Caribbean) are the two ‘Ls,’ labor and lift,” said moderator Greg Bohan, professor at Florida International University.
Vincent Vanderpool Wallace, principal of Bedford Baker Group and the former minister of the Bahamas Ministry of Tourism, said gaining affordable airfares to the region is paramount.
“We should figure out some ways that the cost of air transportation coming into the region is as low as possible,” Wallace said. “We need ways to fill the rooms we have in the Caribbean that aren’t filled more than we need more rooms.”
More rooms mean more flights needed
Jim Hepple, president and CEO of the Aruba Hotel and Tourism Association, said the 22 November opening of the 320-room Ritz-Carlton Aruba will increase the number of rooms on the island by 5%, which means the country needs more incoming flights.
“The question is always, ‘Will there be enough airlift and will it come from the right markets?’” Hepple said, adding that 60% of the island’s business comes from the United States. “The concern is we want to grow, but the (airline) fleet really isn’t expanding very much.”
Hepple said the Ritz-Carlton’s opening means an additional 30,000 seats are needed annually to fill the need. Because airlines typically shoot for 12 cents per seat mile when flying into the Caribbean, convincing them to add seats is tough.
“You have to show them how they can get 14, 15, 16 cents per seat mile by coming to your destination,” Hepple said.
Josh Powe, manager of route planning for JetBlue, said increasing airlift into a market is determined by a series of things, including the performance, trends and history of the market as well as the existing relationship the airline has with market leaders. JetBlue plans to offer an average of 200 flights per day to, from and within the Caribbean this winter, according to a news release.
Edmundo Gil-Tavarez, VP of Aerolineas MAS, said his airline’s focus is to fly to smaller airports.
“We are looking for airports and countries that can stand up to the cost of the flight,” he said.
Gil-Tavarez said the increasing number of tour operators looking to bring tourists to a business destination is an emerging trend on which airlines can capitalize.
A market within the market
The panelists agreed that increasing options for inter-island travel is essential for the region’s success.
“The biggest single market for the Caribbean is the Caribbean,” Wallace said.
Alberto Smith, director of operations for Punta Cana International Airport, agreed.
“We can’t talk about integration while we keep this barrier between the (island) nations,” he said.
Gil-Tavarez said Aerolineas is working with other airlines to find the best way to move people within the region.
“It has to be in the business plan how you are going to get people there,” he said. “They’re not going to swim.”
Smith said airports in the region, including the one in Punta Cana, are scurrying to add infrastructure to handle the increasing number of wide-body aircraft flying into the region to maximize seat capacity.
“Those are good news for the region,” Smith said.
But what is good for some might not be good for others.
“I think they’re taking the larger planes from me and giving them to you,” Hepple said. “We understand why they are doing it; they’re more profitable.”
Not lost in the conversation was the planned December 2014 opening of the $3.5-billion, 2,900-room Baha Mar resort in the Bahamas. Wallace said an additional 260,000 seats will be needed to satisfy the demand.
“A private-public group is working on it,” Wallace said. “We’re being assured weekly that progress is being made in that direction.”
Powe said JetBlue will have 10 A320 planes flying daily to the Bahamas to help fill the need—and the airline will not cannibalize the rest of its Caribbean fleet to go there.
The panelists agreed that high tax rates on airline tickets is one deterrent for more flights into the region. Wallace said the high taxes levied on airfares are perplexing to most observers.
“I have never figured out why the biggest industry in the region has governments put more and more taxes on the way to get here,” he said.
Wallace said removing taxes on airfares would result in the lost tax revenue being replaced by more tourists spending money in the region.
“If you’re really serious on free trade, get rid of these taxes,” Wallace said.
Hepple said one way to fill the void is for more people to arrive in the Caribbean by water—and that will happen sooner or later.
“The Cubans are just waiting for it to open up,” Hepple said, adding that the availability of ferry service between Havana and major U.S. destinations, such as Tampa and Key West in Florida, is just a matter of time.
Overall, the panel was filled with optimism:
- “Each day that passes people are more conscious of the importance of airlift and the business of the country,” Gil-Tavarez said. “We want to see more flexibility in terms of the political sector about the charges.”
- “Gone are the days when Nassau and Punta Cana are East Coast destinations and Cabo (San Lucas) is the West Coast destination,” Powe said. “We’re very bullish that the infrastructure is taking place.”
- “I’m optimistic, but we have to overcome some issues … political, cultural issues,” Smith said. “Maybe less competition and more collaboration. It’s going to take a while because the government has to understand that. They have to legislate to get the integration together.”
- “I’m optimistic,” Hepple said. “The government is now talking about yield in terms of value and visitors. We’re only going to be successful if we keep talking in those terms.”
At the end of the day, it all comes down to revenue opportunities for the airlines.
Powe said revenue guarantees from a prospective market are an effective way to secure more incoming flights. JetBlue engages in such programs, with its goal to eliminate the program within two years after it is launched.
“We’re fortunate that it’s not a hotel, it’s not stuck. We can take (a plane) and move it,” Powe said.