Posted 8/22/2012 - 7:25:01 AM
ATLANTA—A recently released study from PKF Hospitality Research, LLC, shows the average Caribbean hotel that participated in the survey experienced a 10% increase in net operating income in 2011, the greatest annual increase in profits since 2008
Last year "was the first year since the recession where the Caribbean’s hotel industry posted positive growth in all three major top-line performance indicators,” said Scott Smith, SVP of PKFC. In the report, PKF-HR noted a 1% increase in occupancy and a 5.6% increase in ADR. This lead to a 6.7% increase in RevPAR for the hotels in the survey sample.
“The Caribbean’s economy relies heavily on their hotel industry. In 2008 when the global recession struck, the Caribbean, like many other regions, saw a large decline in tourist visitations. This forced hotel owners and operators to make necessary cuts in employment and services offered,” Smith said in a statement. “The lack of employment opportunities for the locals had a large negative impact on their overall economy. Three years later, hotel occupancy is on the rise. This, in turn, has caused employment to begin to increase in the region.”
According to PKF-HR, the Caribbean’s hotel industry has a unique operating environment in that it consists of mostly resort properties, with a high percentage of revenue coming from sources such as golf, spas and casinos.
Higher operating costs also set the Caribbean apart. For example, food and beverage department expenses average 85.2% of revenue at Caribbean resorts, but only average 70.9% at comparable U.S. resorts. The high costs can be attributed to the need to ship in much of the food, beverages, equipment and supplies from countries such as the United States.
The cost of utilities also runs high in the Caribbean and is rising sharply, according to the report. In 2011, the surveyed properties saw an increase of 12.7% in utility expenses from 2010. This is largely due to many countries in the Caribbean region lacking the infrastructure to produce energy at a low cost. When compared to comparable U.S. properties, utility expenses in the Caribbean are 126% higher, according to PKF-HR.
In contrast, property taxes are low in the Caribbean, due mainly to government subsidies.
The report indicates the region is in need of more airlines providing routes to the islands. “The success of upcoming resorts, as well as the ones already in existence, relies on the expansion of the airlines. With more tourists visiting the region, the Caribbean needs viable transportation for its guests,” Smith said.
"Over the past three years, the Caribbean has seen several hotel development projects halted due to insufficient funding,” Smith noted. By the end of 2011, potential development activity began to pick up.
According to Smith Travel Research, as of June 2012, there are 135 hotels currently in the Caribbean/Mexican hotel development pipeline.