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Caribbean Hotels Trending Upward

Tuesday August 20th, 2013 - 9:16AM

ATLANTA—PKF Consulting USA, LLC announced that the average Caribbean hotel that participated in the survey reported a 10.9% increase in net operating income (NOI) in 2012, according to its newly released 2013 edition of Caribbean Trends in the Hotel Industry.

This is the second year in a row that Caribbean hotels have experienced a double-digit increase in NOI and the highest annual growth in profits that Caribbean hotels have seen since 2008.

“While this continued profit growth is encouraging, the Caribbean lodging market still is not back to its pre-recession levels. Recovery in the Caribbean is occurring, but lagging behind the rate experienced in the U.S.,” stated Scott Smith, SVP at PKFC. “This is a mixed-message for a region whose economy depends primarily on the tourism industry.”  

The Caribbean hotel industry is made up of a large number of resort properties, which creates the opportunity to earn profits from a variety of services and amenities. Properties in the Caribbean Trends sample reported the highest level of revenue growth (+6.4%) in other operated departments, meaning that visitors to the Caribbean are spending more money on extra amenities, such as golf courses, casinos and spas. “This is in contrast to U.S. resorts, where operators struggled to generate revenue beyond the rental of guestrooms,” said Smith.

Compared to U.S. properties, Caribbean hotels have higher operating costs. For example, in 2012, the average Caribbean hotel incurred 20.1% greater food and beverage expenses than the average U.S. hotel since importing the necessary food, equipment and supplies to the region is very costly. Utilities continue to be a large expense in the Caribbean, as well. Many Caribbean nations lack the infrastructure to produce cost-efficient energy, and this is clearly reflected in the report.     

The growth in profits is attracting developers. Accordingly, there has been much development activity in the Caribbean. As reported in Smith Travel Research’s June 2013 Construction Pipeline Report, there are 17,932 rooms either under construction or planned for development in the region. In addition, several hotels are undergoing major renovations and improvements.