Caribbean Tourism Trends

8/6/2019 Caribbean Tourism Trends

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Caribbean tourist hotspots feel the chill

Global financial turbulence is sending a winter chill across Caribbean tourist hotspots and 2009 appears

extremely challenging as hoteliers and governments struggle to ward off a deep slump in the regions

leading industry.

Financial Crisis Headlines.

Norman Chan - BigstockPhoto.com

Adding to the economic downturn that followed the global credit crunch, record high oil prices in 2008

that increased air fares and prompted airlines to cut flights, and low consumer confidence in the main

tourism markets have combined to negatively affect Caribbean tourism. The Caribbean Development

Bank (CDB) has suggested that the current contraction in tourism could be longer and deeper than that

which followed the events of September 11, 2001. Caribbean hoteliers are already reporting drops of 20

per cent and 30 per cent in bookings, triggering lay-offs in the tourism industry in several islands as wellas stalled construction projects and new developments, while hoteliers slash prices and seek creative

ways to keep their properties running.

In December 2008, Sandals Resorts International announced lay-offs of 650 Caribbean hotel workers in

the Bahamas, Jamaica and St. Lucia, representing seven per cent of its workforce. Lay-offs were also

planned for Antigua, and the Jamaica-based resort chain said the cuts would help the company stay

competitive during the global economic crisis. According to Caribbean Tourism Organisation (CTO)

statistics, North America accounts for 50 per cent of the Caribbean tourism market, which attracts 22

million visitors and injects US$21.6bn into the island economies every year. Europe accounts for another

40 per cent of the regions tourists. The move by Sandals has added to economic woes in the Bahamas,

where the world-famous Atlantis resort also retrenched 800 workers, among other cuts by other hotel

operators. Bahamian Prime Minister, Hubert Ingraham, said bookings for 2009 did not look good and

the destination expected to finish 2008 with an eight percent decline in business. Tourism makes up 65

per cent of the Bahamas work force.

Expansion halted

As the economic recession deepens in the United States and Europe, fall-off from both is increasing and

the forecast is for island economies to continue to feel the squeeze with deeper contractions in tourism

and construction. Small tourism destinations in the Eastern Caribbean have been particularly hard hit,

said Wayne Cummings, director of business administration for Sandals Resorts International, which also

operates properties in the Turks and Caicos and St Lucia. Its distressing to see, Cummings said. To

put it bluntly, some hotels are already sucking wind.


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In the Dominican Republic, which along with Cuba has led the way in Caribbean tourism growth over the

past 10 years, the financial crisis has also stalled the major Cap Cana resort, a development which

includes four luxury hotels, three golf courses and a mega-yacht marina. The resort development

released 500 workers in November, media reports said, after Lehman Brothers declared bankruptcy anda US $250M loan fell through. Talks to re-negotiate a US $100M short-term loan also collapsed and

another 1,000 layoffs were also expected. Our project has been affected by the economic tsunami

that has paralysed the global financial markets, said Cap Cana President Ricardo Hazoury.The 50-

square-mile Cap Cana development is located in the eastern section of the Dominican Republic and its

developers include Deutsche Bank, the Trump Organisation and the Ritz Carlton Hotel. Jamaica has also

suspended plans for a multimillion-dollar expansion of a popular tourist port in Kingston. The US $122M

project at the Kingston Wharf has been pushed back to 2011 after several international banks backed

off citing the global financial crisis. The development is to include construction of duty-free shops and a

renovation of the nearby Port Royal town as a cruise ship destination.

In Barbados, the Central Bank has projected a four to five per cent drop in tourist arrivals in 2009

because of the global recession, and a significant fall-off in revenue from the countrys largest foreign

exchange earner with a loss of jobs. In response to the current global crisis, the countrys Prime Minister

David Thompson has rejected a call for belt tightening measures, instead urging more spending and

investment at home to keep the economy going. Thompson outlined some measures designed to

achieve that objective, including accelerating the increase in tax credit and increased pensions. Tourism

Minister, Richard Sealy, is optimistic that Barbados will be able to weather the storm based on the

diversity of its tourism markets and special arrangements with critical partners. Barbados enjoys a high

percentage of high-end repeat business from the United States, Canada and England and responded

quickly to the crisis by stepping up marketing efforts, adding US$5M to its US$50M budget. Others have

also been ramping up their marketing efforts. Puerto Rico began a special emergency campaign,

adding US$12M to the destinations annual marketing budget of about US$20M, while the Jamaican

government is spending US$5M on an additional advertising blitz above its normal US$30M marketing

budget. With CTO backing it is also leading a new regional US$60M campaign seeking to promote the

Caribbean and drive business in major source markets.

Buoyant Cuba

While other islands struggle with cancellations and layoffs, Cubas vacation industry has remained

buoyant and was reported to be gearing up for a strong winter season. Government officials said the

destination was booked solid through December and expected to record 2.34 million visitors in 2008.

Cubas performance has been linked to the fact that the global financial woes have so far been softer on

Canada, its top source of visitors.Some 35 per cent of tourists to Cuba this year were Canadian, with

635,000 visiting up to September, one-fifth more than in the same period last year. Canadas economy


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has not suffered the same losses, now sapping the savings of homeowners in the United States. The

number of Russian tourists to Cuba rose 40 per cent but visitors from Britain, Italy, Spain and Germany,

the top suppliers of tourists after Canada, declined between three and five percent. Going into the high

winter season, his future appears less than rosy for the wider Caribbean: Ive been in the business 38

years. I have seen the impact of the Gulf War. I have seen the recession of the 1980s and the effects of

Sept. 11 2001, said Robert Sands, senior vice president of external affairs at Baha Mar Resorts ltd in the

Bahamas, which owns a number of properties. But nothing has been of a global nature, which makes

the current financial situation were in much more worrisome.

* Barbados-based journalist.


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Caribbean Tourism Investment Fund

In May 2007, Peter J. Odle, President of CHTA, announced the engagement of KPMG and Caribbean Financial

Services Corporation (CFSC) as advisors to a Tourism Investment Fund (the Fund) that CHTA is seeking to

introduce to the market, to help fill a "financing gap" in the regional tourism industry. The financing gap is

primarily defined as being limited access to third-party equity and financing for owner-operators of resortsup to 150 rooms looking to expand, renovate, and/or takeover underperforming assets.

The Fund would support applications evidencing strong management teams with a proven track record and a

robust business plan. The next stage in the development of the Fund were to appoint an investment

advisory board and to agree on a framework for the Fund. Both steps have now been completed.

At a panel discussion during the Caribbean Hotel and Tourism Investment Conference, held in Curaao,

chaired by Peter Odle and featuring Gary Brough, head of KPMG's regional hospitality group, and Milton

Lawrence, Deputy Chairman of CFSC, Odle stressed the importance to the regional hospitality industry of

indigenous entrepreneurs participating in its development.

Stressing that no region in the world is more dependent on tourism than the Caribbean, Brough pointed outthat such dependency is not likely to change at any time in the foreseeable future. "If anything, the region

will become more dependent on tourism as traditional industries, such as sugar and bananas, decline," he

added. Accordingly, Brough suggested that if an opportunity arises to improve the region's tourism industry,

it should be taken.

CHTA has identified one such opportunity with the introduction of the Fund. Brough added that should the

Fund be successful, it would mean more successful indigenous Caribbean entrepreneurs - a very attractive

feature of the engagement for KPMG. However, he warned that a failed fund would benefit no-one and that

its success or failure would be judged in the marketplace as being dependent on whether or not the Fund

achieved commercial rates of return for its investors.

Emphasizing this point, Lawrence made it clear that the Fund would not make decisions based onphilanthropy, but would judge every application on its relative merits and taking an entirely objective,

commercial approach when reviewing applications. However, he pointed out that through its involvement in

the Fund, CFSC will extend to the industry the benefit of its close working relationship with a network of

technical support organizations, which may independently help investees to mitigate some of the existing

challenges in the sector.

Partnership with FirstCaribbean International Bank

With an estimated 1.3 million people working in the tourism

industry in the Caribbean it is expected that an initiative such as this - granting special rates

to hotel workers - should greatly facilitate the progress of the region's people as they access

financing to pursue their dreams and goals.


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In January 2005, FirstCaribbean International Bank and CHTA signed a strategic partnership agreement to

work together that, among other things, provides hotel workers across the region with special concessions

on loans and mortgages.

Furthermore, FirstCaribbean has also agreed to fund research done by CHTA. As a financial institution, the

Bank values timely and accurate information both for an understanding of present realities, as well as to

forecast future trends. The findings of any research undertaken by CHTA should not only help that

organization in its planning but provide the Bank with information on an industry that is the main economic

plank in most of the territories in which it operates.

Under the agreement, which, in part, should facilitate the development of

programs to benefit CHTA member hotels, the association will also make FirstCaribbean International Bank

its official bank.

FirstCaribbean is a result of the combination of two complementary and leading financial services businesses

in the Caribbean - CIBC West Indies Holdings Limited and Barclays Bank PLC - with the aim of offering itscustomers enhanced products and improved and extended access to banking services. FirstCaribbean

focuses on the needs of the businesses and people of the Caribbean while delivering the global reach of its

founding institutions. FirstCaribbean is the largest locally listed bank in the Caribbean based on market

capitalization, with some US $9 billion in assets, 3,300 staff and over 700,000 accounts. More information

about FirstCaribbean can be found at: www.firstcaribbeanbank.com


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Key strengths Proximity to the U.S. Reliable and affordable airlift Demographics of U.S. tourists Weak local currencies, especially versus the Euro Natural beauty and weather Unique tourist product

Key threats U.S. housing market softening Hurricanes/terrorism Labor shortages Increased preference for cruises Opening of the Cuban market toU.S. nationals Reemergence of Mexico in thetourism market Increase in the cost of debt


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Overview of Tourism

Barbados is truly a unique tropical tourism destination. A 166 square mile gem of white sand beaches, a complex mix of high

class accommodation, made up of intimate guest-houses, small, medium and large hotels, luxury apartments, villas, and

condominiums. An array of quality restaurants providing a culinary experience that is not easily found in anywhere and the

picture of the ideal tourist island begins to take shape. Place these obvious tourism attributes along side an activities

calendar that is second to none and what tourism planners on this most easterly of the chain of Caribbean islands may just

have created, is the most complete tourism and hospitality oriented destination in the region.

However, Barbados' brand of hospitality goes way beyond the traditional tourism and hospitality mix for which this tropical

region has become renowned. Barbados is a country that boasts infrastructural development attributes that places the island

way ahead of its neighbours. An expansive road networkof major highways and well paved minor roads that uniquely link

every area of the island, modern accessible buildings, a telecommunications network that is as effective and reliable as any in

any developed country and an educated populace that supplies to the industry a set of the most competently trained

hospitality personnel in the industry, makes for the ideal tropical island tourism and hospitality experience.

Additionally, Barbados' tourism reputation is further strengthened by the fact that transportation to the island is available

from the North America and Continental Europe. Approximately 75% of the island's long stay visitors come from Great

Britain, the USA and Canada, whilst the Caribbean itself and the rest of wider Europe mostly account for the other 25%.

The cruise industryalso supplies another approximately half of a million visitors per year, most of whom sail out of the USA

and are in the most part US citizens, whilst a vibrant "home porting" programme that sees British ships utilizing the island

as their home base during the traditional winter months, November to March and sailing the Caribbean from Barbados,

produces a European Cruise passenger that adds to the number of visitors that share in this unique island hospitality

experience.

Attractions that range from a visit to an underground cave, to inland safaris over rough terrain not readily expected on such

a relatively flat island, to aerial treks across huge gullies of lush vegetation and visits to local heritage sites and more modern

cultural displays, offers a world of tourism and hospitality experiences. So uniquely composed, that they make Barbados a

must visit and a destination that has a worldwide brand appeal.

Barbados as a major international business destination also is accustomed to providing accommodation and related services

to many visitors who are here to conduct international business, in such industries as financial services, marketing,intellectual property development, health and wellness, sports and education, call centres, ICT etc.

Key Contacts for Tourism Industry

y Wayne Capaldi, President of Barbados Hotel & Tourism Association:[email protected]

y Sue Springer, Executive Vice-president of Barbados Hotel & Tourism Association: [email protected]

y Andrew Cox, Permanent Secretary Ministry of Tourism: [email protected]

y David M Rice, President and CEO of Barbados Tourism Authority: [email protected]

y Alec Sanguinetti, Director General & CEO Caribbean Hotel & Tourism Association:

[email protected]

y Hugh Riley, Secretary General of Caribbean Tourism Organization: [email protected]

y Loreto Duffy-Mayers, Vice Chairman of Caribbean Association for Sustainable Tourism: [email protected]

y Martin Ince, Foster &Ince Cruise World: [email protected]

y Ralph White, Island Safari (Barbados) Ltd.: [email protected]

y Roseanne Myers, General Manager Atlantis Submarines (Barbados) Inc.: [email protected]


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Web & Other Resources

Resource Description

The Hon. Richard Sealy - Minister of Tourism:

http://www.gisbarbados.gov.bb

A link to the biography of The Hon. Richard Sealy (Minister of

Tourism)

Barbados Hotel and Tourism Association:

http://www.bhta.org

This website offers information about the association and

provides access to the Visitors Guide.

Barbados Tourism Authority: http://barbados.org/

http://visitbarbados.orgHoliday and business travel information.

Ministry of Tourism: http://www.barmot.gov.bb *This website is under construction

Barbados Tourism Investment

Inc.: http://barbadostourisminvestment.com

This website provides information for those considering

investment in the tourism and hospitality industry. The BTI

assists by identifying investment opportunities, identifying

service providers, liaising with government department and so

on.

The Green Tourism Business

Scheme: http://www.green-business.co.uk A resource that provides information about sustainable tourism.

The Barbados Private Sector Trade Team

(PSTT): http://www.tradeteam.bb

The PSTT provides professional contributions to

Barbados and regional trade negotiations on behalf of

the Barbados private sector. This PSTT website has current

information on the latest developments in the various sectors.

World Tourism Organization: http://www.unwto.org

The World Tourism Organization (UNWTO/OMT) is a

specialized agency of the United Nations and the leading

international organization in the field of tourism. It serves as a

global forum for tourism policy issues and a practical source of

tourism know-how.

World Travel & Tourism Council: http://www.wttc.org The World Travel & Tourism Council (WTTC) is the forum for

business leaders in the Travel & Tourism industry. This website


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provides tourism news, the latest tourism initiatives as well as

research information.

Caribbean Tourism Organization:

http://www.onecaribbean.org/

The Caribbean Tourism Organization's exists to increase

significantly the inclusion of the Caribbean region in the set of

destinations being considered by travellers. Their website is a

great resource for tourism statistics and market research

information.

Caribbean Hotel and Tourism Organization:

http://www.caribbeanhotelassociation.com

The CHTA website has a wealth of information about theCaribbean's hospitality industry as well as a Data Centre.

Caribbean Alliance for Sustainable Tourism:

http://www.cha-cast.com

CAST's mission is to enhance the practices of the region's hotel

and tourism operators by providing high quality education and

training related to sustainable tourism. Their website provides

information on what they do including the training courses and

workshops that the organization hosts.

Forum for the Future:

http://www.forumforthefuture.org

Forum for the Futures role is to help organisations find their way

to a sustainable and successful future.

http://www.bhahotels.com/tourism-statistics


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Trends and Stats

PKF: Downturn severely affected Caribbean hotelindustrySeptember 13, 2010 Hotel and Motel Management

Atlanta The Caribbean lodging industry felt the full negative impact of the recent global recession in 2009, but to a lesser

degree than the U.S. hotel industry. During the year, Caribbean hotel revenues and profits experienced double-digit

declines. While the results may be disappointing for Caribbean hotel owners and operators, the fall off in net operating

income was much less severe than what was experienced by U.S. properties. These findings are reported by Colliers PKF

Consulting USA (PKFC) in the recently released 2010 edition ofCaribbean Trends in the Hotel Industry, the only published

research available that focuses exclusively on Caribbean hotel profits, revenues, and expenses.

It is evident that Caribbean hotels and resorts suffered one of the worst declines in profitability during 2009, said Scott

Smith, MAI, senior vice president in the Atlanta office of Colliers PKF Consulting USA. Being a global destination for leisure

and incentive group travelers, as well as intra-regional commercial demand, the worldwide recession resulted in significant

declines in hotel performance. It may still be hurricane season in the Caribbean, but fortunately we are starting to see the

stormy economic seas begin to calm in 2010.

Fewer Guests, Less Revenue

In aggregate, the hotels in the Caribbean Trends survey sample reported an 11.9 percent decline in total revenue from

2008 to 2009. Leading the dollar decline in revenue was the 13.6 percent fall off in rooms revenue, the result of a 3.7

percent drop in occupancy and a 10.1 percent decline in ADR.

With fewer guests staying at the Caribbean properties, all other sources of revenue posted declines as well, Smith noted.

Food and beverage revenue fell 13.7 percent from 2008 to 2009, while the revenue from other operated departments (golf,

spa, retail, casinos) declined a relatively modest 5.3 percent.

Costs Controlled

Facing declines in revenue, Caribbean hotel managers responded by cutting costs an impressive 10.5 percent.

Unfortunately, this was not enough to overcome the 11.9 percent fall off in revenues.

Due to climate, population, natural resources, and government involvement, Caribbean hotel managers have some unique

operational advantages, and disadvantages, compared to their U.S. counterparts, Smith said. In general, labor costs and

property taxes tend to be less in the Caribbean. However, the cost of supplies, insurance, and utilities are frequently higher

than in the U.S.

Despite relatively low wage rates, labor costs are the single biggest item of Caribbean hotels expenses. Therefore,

operators had to implement staffing cuts and salary/wage reductions in order to keep departmental expense ratios in line. Intotal, labor related expenditures were reduced by approximately 11.0 percent from 2008 to 2009.

The largest expense reduction was achieved in the utility department. In past issues of Trends we reported that many

hotels in the Caribbean were implementing green sustainable energy practices in an effort to control utility costs. By using

energy-efficient light bulbs, toilets, sinks, and showers, Caribbean hotel managers were able to cut their utility costs by 21.2

percent in 2009, Smith observed.


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The only expense item to rise in 2009 was insurance costs. During the year, insurance premium payments increased 5.3

percent. Despite a relatively calm hurricane season in 2009, insurers still fear the threat of hurricanes, he added.

Future Profits

With Caribbean hotel revenues declining at a greater pace

than expense cuts, net operating income in the Trends sample declined 18.2 percent in 2009. While this is a significant

decline, it is considerably less than the 35.4 percent drop in profitability reported in the 2010 edition of U.S. Trends in the

Hotel Industry.

Fortunately, things are beginning to pick up in 2010. The peak season results as reported by Smith Travel Research

indicated a comeback in the demand for lodging accommodations in the region. As with the United States, we are clearly in

the beginning stage of what should be a period of improving operating performance for the Caribbean lodging industry. Our

estimates of demand and ADR growth are strong through 2013. However, one cannot ignore the depth of the 2009

recession and what was occurring in the real estate and financial markets. This is going to be a protracted revival for hotel

operators and an even longer recovery for property owners, Smith concluded.


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Airlift, cooperation crucial to Caribbean's futureMay 6, 2010 By: Paul J. Heney Hotel and Motel Management

SAN JUAN, PUERTO RICOHaving the

airline industry in a protracted slump is bad

news for many hoteliers. But here in the

Caribbean, where airlift is so critical and

directly tied to occupancy, hoteliers live and

die by the fortunes of airlines. Throw in the

fact that some island nations here have as

much as 75 percent of their jobs related to

tourism, and its clear why so much of this

weeks discussion at the Caribbean Hotel &

Tourism Investment Conference has centered

around both international and regional air

networks.

Opening keynote speaker Robert Crandall,

former chairman/CEO of AMR Corp., the

parent company for American Airlines, told

attendees that hard times were still ahead for

the region, and their best hope was to band together.

Youve got to do more. Package and brand and advertise the Caribbean, he said.

Jean Claude Baumgarten, president of the World Travel & Tourism Council, agreed that the Caribbean cannot continue to

function as dozens of self-serving tourism entities.

You have to have a common goal, a common aim, he said.

One panelist even suggestedperhaps only half jokingthat on islands where a couple might spend, on average, $8,000

per week, perhaps the travelers should be refunded their airfare before they leave.

Luis A. Fortuo, governor of Puerto Rico, explained that his commonwealth holds close to 30 percent of the total inbound

seat capacity of the region and boasts nearly three times the seats from the U.S. mainland as the next largest Caribbean

market. However, tourism represents a mere 7 percent of Puerto Ricos GDP, compared to more than 20 percent among

other islands.

It imparts us with a sense of duty to do better in fostering our own tourism industry not only for our economic

development, but for that of the whole Caribbean region, he said.

Fortuo pointed out that the pipeline here is strong. He said the Sheraton Puerto Rico Hotel & Casino across from the

convention center is the first hotel on the island with more than 500 rooms to be constructed in 10 years. Additionally, the

recently opened W Retreat & Spa on the island of Vieques is Puerto Ricos first five-star property. In 2010, more than 600

new rooms will debut on the island, he said.

Outlook

Speakers were mixed on the economic outlook for the region. Baumgarten said he sees a very muted recovery for the

Luis A. Fortuo, governor of Puerto Rico


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Caribbean in 2010, while Carlos Vogeler, regional representative for the World Tourism Organization, said the recovery has

already begun. Crandall gave more of a dour picture, warning hoteliers about the negative effects that higher taxes and

interest ratesboth across the region and in the mainland U.S.would have on their businesses.

Mark Lomanno, president of Smith Travel Research, gave a mostly positive presentation, noting that the recovery was

taking root across the islands.

Were going to be back in growth [mode] in 2010, he said.

Lomanno said the percentage change in occupancy for the Caribbean was -4.7 percent in 2008, -4.1 percent in 2009 and up

3.1 percent in Q1 of 2010. Following a similar trend, the percentage change in ADR for the Caribbean was -10.2 percent in

2008, -13.5 percent in 2009 and up 4.3 percent in Q1 of 2010.

Much of Lomannos quiet optimism for hoteliers here stemmed from the way he sees the recovery shaking out.

We think that from a lodging industry perspective, it will be a top-down recovery. The higher-end properties will do better

very quickly, starting at the high end, he said.

For a region with a large percentage of upscale and luxury properties that caters to affluent U.S. travelers, that may have

been the best news Caribbean hoteliers heard all week.


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Developments, luxury segment is focus in CaribbeansectorMarch 3, 2010 By: Paul J. Heney Hotel and Motel Management

MiamiThere was plenty of dire economic news to focus on at the inaugural Caribbean Hotel & Resort Investment Summit,

held at the InterContinental Miami in February.

Mark V. Lomanno, president, STR, laid it on the line for attendees.

"The markets that seemed to be the most affected in 2009 were the ones that relied on group business, which really fell off,

no matter where you were," he said. "The U.S. markets group business was off almost 30 percent.

Lomanno also explained that while there should be significant recovery in 2010at least compared to what it was in 2009

that doesn't mean we'll quickly be back to the room rates of the past peak.

"It is going to take years for most of these areas to get back to the levels of performance from a RevPAR standpoint or ADR

standpoint that existed in 2007. In the U.S., Europe and the Caribbean, its going to take some time, he said.

The other issue for the Caribbean is that there are multiple places for travelers, especially in the coveted luxury segment, to

spend their money. More choices abound, including condos, second homes and even cruise ships. This has pushed

demand lower in the region.

If you look at lodging demand from about mid-2006 on, its been trending down, which is not at all like the resort markets in

the U.S. and other places around the world," said Lomanno. "There has been a little more of a challenge [in the Caribbean]

from that resort demand perspective. The good news is that its less negative in the past couple of months.

And Lomanno again stressed that it will be a long road back.

During the last downturn, it took six years for the lodging industry to recover the rates they had in 2000," he said. "Were

thinking that in terms of inflation-adjusted dollars, its probably going to take 8-10 years for the rates to come back.

Following are photos and selected thoughts from other panelists at CHRIS 2010.


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Profit Decline for Caribbean Hotels in 2009

2010-09-13

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Cost Controls Mitigate Decline Relative To U.S. Properties

The Caribbean lodging industry felt the full negative impact of the recent global recession in 2009, but to a

lesser degree than the U.S. hotel industry. During the year, Caribbean hotel revenues and profits

experienced double-digit declines. While the results may be disappointing for Caribbean hotel owners and

operators, the fall off in net operating income was much less severe than what was experienced by U.S.

properties. These findings are reported by Colliers PKF Consulting USA (PKFC) in the recently released 2010

edition ofCaribbean Trends in the Hotel Industry, the only published research available that focuses

exclusively on Caribbean hotel profits, revenues, and expenses.

It is evident that Caribbean hotels and resorts suffered one of the worst declines in profitability during

2009, said Scott Smith, MAI, senior vice president in the Atlanta office of Colliers PKF Consulting

USA. Being a global destination for leisure and incentive group travelers, as well as intra-regionalcommercial demand, the worldwide recession resulted in significant declines in hotel performance. It may

still be hurricane season in the Caribbean, but fortunately we are starting to see the stormy economic seas

begin to calm in 2010.

Advertisement

Fewer Guests, Less Revenue

In aggregate, the hotels in the Caribbean Trends survey sample reported an 11.9 percent decline in total

revenue from 2008 to 2009. Leading the dollar decline in revenue was the 13.6 percent fall off in rooms

revenue, the result of a 3.7 percent drop in occupancy and a 10.1 percent decline in ADR.

With fewer guests staying at the Caribbean properties, all other sources of revenue posted declines as

well, Smith noted. Food and beverage revenue fell 13.7 percent from 2008 to 2009, while the revenue

from other operated departments (golf, spa, retail, casinos) declined a relatively modest 5.3 percent.


16/18

Costs Controlled

Facing declines in revenue, Caribbean hotel managers responded by cutting costs an impressive 10.5

percent. Unfortunately, this was not enough to overcome the 11.9 percent fall off in revenues.

Due to climate, population, natural resources, and government involvement, Caribbean hotel managers

have some unique operational advantages, and disadvantages, compared to their U.S. counterparts, Smith

said. In general, labor costs and property taxes tend to be less in the Caribbean. However, the cost of

supplies, insurance, and utilities are frequently higher than in the U.S.

Despite relatively low wage rates, labor costs are the single biggest item of Caribbean hotels

expenses. Therefore, operators had to implement staffing cuts and salary/wage reductions in order to keep

departmental expense ratios in line. In total, labor related expenditures were reduced by approximately

11.0 percent from 2008 to 2009.

The largest expense reduction was achieved in the utility department. In past issues ofTrends we

reported that many hotels in the Caribbean were implementing green sustainable energy practices in an

effort to control utility costs. By using energy-efficient light bulbs, toilets, sinks, and showers, Caribbean

hotel managers were able to cut their utility costs by 21.2 percent in 2009, Smith observed.

The only expense item to rise in 2009 was insurance costs. During the year, insurance premium payments

increased 5.3 percent. Despite a relatively calm hurricane season in 2009, insurers still fear the threat of

hurricanes, he added.

Future Profits

With Caribbean hotel revenues declining at a greater pace than expense cuts, net operating income in

the Trends sample declined 18.2 percent in 2009. While this is a significant decline, it is considerably less

than the 35.4 percent drop in profitability reported in the 2010 edition of U.S. Trends in the Hotel

Industry.

Fortunately, things are beginning to pick up in 2010. The peak season results as reported by Smith Travel

Research indicated a comeback in the demand for lodging accommodations in the region. As with the

United States, we are clearly in the beginning stage of what should be a period of improving operating

performance for the Caribbean lodging industry. Our estimates of demand and ADR growth are strong

through 2013. However, one cannot ignore the depth of the 2009 recession and what was occurring in the

real estate and financial markets. This is going to be a protracted revival for hotel operators and an even

longer recovery for property owners, Smith concluded.

To purchase a copy of the 2010 Caribbean Trends in the Hotel Industry report in PDF format, please visit

the firms online store at www.pkfc.com/store, or call (866) 842-8754. The report contains several data

tables that allow Caribbean hotel owners and operators to benchmark the financial performance of their

property based on room count and ADR groupings


17/18

STR Reports Caribbean and Mexico Pipeline for January 20102010-02-18

/Mexico hotel development pipeline includes 130 hotels comprising 18,088 rooms, according to the January

2010 STR/TWR/Dodge Construction Pipeline Report released this week.

Among the countries in the region, Mexico ended the month with 10,204 rooms in the total active pipeline,which accounts for more than half of the regions total active pipeline. With 4,305 rooms, Mexico also

reported the most number of rooms in the In Construction phase of the pipeline.

Among the Chain Scale segments, the Upper Upscale segment made up the largest percentage of rooms in

the In Construction phase with 39.2 percent and 3,372 rooms. The Luxury segment followed with 17.7

percent of the rooms in the In Construction phase and 1,525 rooms, followed by the Upscale segment,

which accounted for 14.3 percent of rooms in the In Construction phase and 1,227 rooms.

Caribbean/Mexico pipeline by Chain Scale segment for January 2010 (number of rooms)

* Includes those projects in the In Construction, Final Planning and Planning phases


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Hotel Price Index shows Caribbean and Latin Americarates hold steadyOctober 8, 2010 Hotel and Motel Management

DALLAS, TX Caribbean and Latin American hotel rates have remained

steady for the first half of 2010 according to Hotels.com who released their

biannual Hotel Price Index unveiling a global 2% increase in average hotel

room rates for the first time since the end of 2007.

Despite this worldwide increase, hotel room rates in the Caribbean and

Latin America rose less than 1% versus the previous HPI report while

Cancun experienced one of the greatest average hotel price reductions in

2010, dropping to an average rate of $171 per night a -6% change from

its $182 average nightly room rate six months prior. Cancun proved to be

among the declining minority, as prices in such popular Latin American and

Caribbean destinations as Rio de Janiero (+12%), Nassau (+14%), Sao

Paulo (+7%) and Buenos Aires (+5%) all posted an increase in respective

hotel rates over the same six-month period.

"Hotel rates in Latin America and the Caribbean remain steady and strong,"

said Miguel Oliveira, director of Global Merchandising Strategy for Hotels.com. "Since the U.S. traveler spends on average

$161 per room when staying abroad, the Caribbean and Latin America markets continue to offer phenomenal savings.

There are amazing deals to be had for hotel rooms in such places as Monterrey, Mexico; Buenos Aires, Argentina and

Negril, Jamaica."

Top Caribbean and Latin America Destinations The Caribbean continues to be a top destination for U.S. travelers due to its

close proximity to the U.S., as well as offering sweeping oceanside vistas and diverse, vibrant cultures. Latin America alsocontinues to be a popular destination among U.S. travelers due to the fact that the U.S. dollar can last a lot longer in most of

Latin America's 20 countries.

Since 2009 there has been an increase in the number of Caribbean and Latin American properties, which has greatly

impacted rates and increased room availability, making it easier and more affordable than ever for travelers to visit. New

Yorkers booked the most rooms in the Caribbean and Latin America, while hotel guests originating in Los Angeles, San

Francisco, Chicago and Houston rounded out the top five respectively.

The HPI revealed that the most expensive destinations across the region included locations in Bermuda, the Bahamas,

Saint Lucia and the U.S. Virgin Islands because these areas all contain higher-end hotels and resorts, attracting luxury

travelers, willing to pay for more lavish vacation experiences. Additionally, average prices for hotels in resort markets in

Mexico and Costa Rica are skewed by the growing prevalence of all-inclusive properties with rates includingaccommodation, meals, gratuities and taxes.

The HPI reveals the current economic climateof the hospitality industry

Caribbean Tourism Trends

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