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Caribbean Hotels Steadily Improving, According to PKFC

ATLANTA—PKF Consulting USA (PKFC) revealed that the average Caribbean hotel enjoyed an 18.6% increase in net operating income (NOI) during 2013, according to the advisory firm’s newly released 2014 edition of Caribbean Trends in the Hotel Industry. 

This is the third year in a row that Caribbean hotels have experienced a double-digit increase in NOI and the highest annual growth in profits achieved since 2008, according to PKFC.

“Caribbean hotels have unique operating challenges that result in relatively higher expenses,” said Scott Smith MAI, VP in the Atlanta office of PKF Consulting, USA.  “Fortunately, recent increases in visitation to the region have resulted in top-line revenue growth that has overcome the high costs and resulted in strong growth in bottom-line profits.”

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. Rooms revenue (56.8%) remains the largest source of revenue for the properties in the Caribbean Trends sample, but significant contributions come from food and beverage sales (28.8%), as well retail and recreation outlets (12.7%).

“From 2012 to 2013, we observed healthy increases in both rooms and food and beverage revenue. On the other hand, we noticed a slight decline in other operated department revenues. Visitors to the Caribbean are not spending as much money on extra amenities, such as golf courses, casinos and spas, as they used to,” Smith said. In aggregate, total revenues for the survey sample increased by 4.4% in 2013.

With revenues growing greater than expenses, Caribbean hotel profits were able to increase by 18.6 percent in 2013.  However, a comparison to comparable properties in the United States finds that the higher costs of goods, services and utilities in the Caribbean does result in relatively lower profit margins.  In 2013, Caribbean resorts achieved a 16.3 percent profit margin compared to a 21.4 percent margin for comparable U.S. resorts.

With profits growing, the Caribbean region is attracting the attention of developers from all around the world.  As reported in STR, Inc.’s June 2014 Construction Pipeline Report, there are 27,690 rooms either under construction or planned for development in the region. In addition, several hotels are undergoing major renovations and improvements.

The biggest new development to enter the Caribbean region in 2014 will be the 2,900-room, mega-resort, Baha Mar, in Nassau, Bahamas.  Other new developments coming on line from 2014 through 2017 include the Westin Cozumel, RIU Palace Antillas (Aruba), Real InterContinental (Santa Domingo), Park Hyatt (St. Kitts/Nevis), Kimpton (Grand Cayman), Belle Mont Farm (St. Kitts/Nevis), and Third Turtle Resort and Marina (Turks and Caicos).  “In addition to these new hotels, I know of several previously abandoned projects that are starting to see the light of day that could enter the market in the next few years,” said Smith.

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