South American demand lifts Caribbean results
17 NOVEMBER 2014 8:26 AM
The emerging South American market’s effect, the role of soft brands and the importance of all-inclusive resorts were among issues addressed during the annual Caribbean Hotel Investment Conference & Operating Summit.
PUNTA CANA, Dominican Republic—The Caribbean hotel industry is beginning to see the burgeoning South American market positively affect its performance metrics, and speakers at last week’s Caribbean Hotel Investment Conference & Operating Summit believe it’s only the beginning.
“South America has increasing importance as a source market,” said Parris Jordan, managing director, Caribbean for HVS, during the opening “Overview of the Caribbean lodging market” session. Jordan added that South American visitation to the Caribbean increased 13% in 2013 from 2012 and has risen 70% since 2000. “The growth is really coming from the South American market,” he said.
Other executives speaking on various general session panels agreed that the Caribbean’s reach is expanding.
“The dynamic is changing; it’s a very good thing,” said Richard Sealy, chairman of the Caribbean Tourism Organization and minister of tourism and international transport for Barbados, on the “Hospitality leaders outlook” panel. “We’re relying on several source markets.”
“We’re seeing the points of origin starting to diversify,” added Paulo Pena, president and managing director, Latin America and the Caribbean for Wyndham Hotel Group.
David Callaghan, VP of resort sales and service for Interval International, said the timeshare company is seeing a significant increase in demand by South Americans in general, but specifically pointed out the emerging habits of Brazilians. For Brazilians, the Caribbean is the market they want to travel to after Orlando, Florida.
There were plenty of other trends identified during the two-day conference held at the all-inclusive Hard Rock Hotel & Casino Punta Cana. The general consensus of the speakers throughout the event was that things are going swimmingly for the region.
“Life is really good if you’re a hotel operator in the Caribbean,” said Carter Wilson, director of STR Analytics, a sister company of Hotel News Now, during the opening session. “There’s 9.6% (revenue-per-available-room) growth, and it’s all about rate right now.
“Lost in the conversation is how strong occupancy is now,” he added, noting that the region’s year-through September occupancy rate was 65.9%.
“Basically, everything is good,” Jordan said. “The market is stronger than it has been in many, many years. … We’re seeing pricing power return to the market.”
Average daily rate for the region is up 7.9% through September, according to STR data. STR is the parent company of Hotel News Now.
In addition, RevPAR is in the midst of a fifth consecutive year of growth: 3.1% in 2010, 10.5% in 2011, 8.1% in 2012, 3.5% in 2013 and 9.6% through September 2014.
Key markets showing impressive RevPAR growth in 2014 include:
- Jamaica, +24.5% to $156;
- Aruba, +14.7% to $181;
- Dominican Republic, +12.7% to $92.
- Bahamas, +11.6% to $181;
- Puerto Rico, +5.7% to $150; and
- Cayman Islands, +4.4% to $250.
“The growth in RevPAR has been driven by average daily rate,” Jordan said. “That drops more to bottom line, which makes operators happy.”
Visitors by the numbers
The increase in performance metrics is in line with other data points presented.
Jordan said more than 25 million visitors made it to the region last year—49% were from the United States, 19% from Europe, 12% from Canada, 6.4% were inter-Caribbean travelers, and 5.8% were from South America. The rest were from other countries or regions.
“U.S. travel to the Caribbean in the second quarter of 2014 grew dramatically,” said George Spence, managing principal, investment banking & capital markets for Leading Property Group. “That accentuates the seasonality for the region.”
Countries with the most visitors in 2013 included the Dominican Republic with 4.7 million, Cuba with 2.9 million, Jamaica with 2 million and Puerto Rico with 1.6 million.
One thing mentioned several times during the conference was the lack of travelers from Asia to the Caribbean.
“Asia is proving to be more of a source for investors (than visitors),” Sealy said. “It would seem only obvious that they to have a lot of citizens that want to travel … the majority of the members of the CTO are actively looking at that market.”
“We’re not seeing Asian arrivals into the Caribbean significantly today,” Pena added.
Soft brands on the way?
However, all of the visitors who are arriving could lead to at least one emerging concept in the hotel industry making its way to the Caribbean region, according to speakers.
Kenny Blatt, principal and COO for CPG (formerly Caribbean Property Group), during the “Outlook” panel wondered what the role of soft brands will be in the Caribbean. The concept is growing in popularity and is being considered for a number of existing properties as well as potential development projects.
Callaghan said he foresees smaller properties with good operators seriously looking at soft branding their properties because they need a deeper distribution platform.
“The consumer, when there is a branding component, they’re prepared to pay a little bit more,” Callaghan said. “A lot of Caribbean operators truly want to maintain their own identity.”
“What the soft brands show is the power of global distribution,” Pena said. “It’s difficult for an independent property to compete with that.”
All-inclusive remains hot topic
The topic of all-inclusive resorts, a staple for the region, also weaved its way throughout the conversations at the conference.
“The elephant in the room in the Caribbean is all-inclusive; it’s driving the growth and will continue to drive the growth,” Blatt said.
Blatt said the growth of the all-inclusive platform is in large part because of the Americanization of the product.
“Marriott (International), Hilton (Worldwide Holdings), Starwood (Hotels & Resorts Worldwide) are on the sidelines dying to get into the business,” Blatt said.
“The all-inclusive concept has received its fair share of criticism in the region, including from me,” Sealy said. “Consumers are demanding it. You can’t knock a concept if this is what consumers want. What is good is that not one size fits all.”
Blatt revealed CPG is looking at a portfolio of all-inclusive properties to acquire. He said there can’t be willy-nilly construction of all-inclusive properties because only certain markets from a labor perspective can support the concept.
Other regions around the world are beginning to realize the attraction of all-inclusive resorts, which means the Caribbean region must be vigilant about the product it offers, according to Jordan.
“All-inclusive hotels are going to get competition from other part of the world,” he said. “We need to find the money to build new projects and refinance existing properties.”