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Sunny Days Ahead For Caribbean Tourism

The U.S. isn’t the only market breaking records. The Caribbean is seeing record arrivals, strong demand and strengthening rates. Here’s what’s happening.

Thursday, November 08, 2012
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It may be hard to believe but the Caribbean hotel market is quickly turning into a global bright spot. A confluence of strong market demand, higher property valuations and a limited new supply is creating a triple play of opportunity for owners and investors.

Of course financing is still lagging for major new construction projects – with the notable exception of the $3 billion Baha Mar project in Nassau, The Bahamas-- which is helping operators keep existing hotels flush with guests who are willing to spend.

That’s the overall feeling here at the second annual HVS Caribbean Hotels Investment and Operations Summit being held this week on Paradise Island. And we can see why here at Hotel Interactive®. Here at Atlantis, the conference host hotel, business is seemingly booming with vacationers filling rooms, eating in pricy food outlets like Nobu and gathering at casino gaming tables.

In fact, according to Parris Jordan, Managing Director, Caribbean - HVS Global Hospitality Services, the 32 nations of the Caribbean saw 16 million visitors last year and that number is climbing. It’s expected to top 17 million in 2012. “More people traveled to the Caribbean in 2011 than any time previously. This year the region is up another 5.5 percent,” said Jordan. “People constantly travel to Caribbean, even in the downturn.”

That’s why The Bahamas green lit a major $400 million airport expansion that broke ground in 2009. By the time it is complete next year the island will double its capacity allowing for new entrants like Jet Blue to expand service even further.

Through September 2012 overall Caribbean occupancy is 67.9 percent, according to Carter Wilson, Director - STR Analytics. He also said ADR is at $176 in September with RevPAR at $119.50. Rates are just a few percentage points off peak and he expects to see peak numbers sometime in 2013.

In the region, ADR grew 3 percent in 2010, 2.7 percent in 2011 and so far through September 2012 is up an additional 4.2 percent. Jordan expects that number to rise above 5 percent for the year.

“Visitor arrivals continue to climb and demand has come back strongly during the last year and a half,” Jordan said. “There has never been a demand issue and with group demand slowly coming back it is giving hoteliers the confidence they need to start raising rates.”

Michael Shindler, Executive Vice President of Hotels & Casinos – Hard Rock Hotels & Casinos operates a property in the Dominican Republic and he says its performing stronger every day. “We are seeing the same stats as the region. There are enormous increases in occupancy and rates.”

Shindler attributes a good amount of the jump to the branding of an existing hotel with what he calls a Hard Rock overlay. They are seeing the same phenomenon in other locations as the company plans to expand into additional markets.

“Our brand overlay in Cancun has always been successful, occupancy never got below 84 - 85 percent during the downturn,” said Shindler, who said the Caribbean has a bevy of opportunity for hotels sized between of 250 and 1,500 rooms depending on the specific location and country.

Meanwhile, Jordan noted that Caribbean hotels reinvesting in properties and not deferring maintenance are the ones making the most rate gains.

The Islands are seeing people visit in record numbers too. Jordan said hospitality and tourism is a more than a $420 billion per year business and is responsible for one of every six jobs. For some island nations tourism accounts for 50 percent of GDP while some countries tourism represents as much as 75 percent GDP.

The United States continues to be a major source market bringing in 44 percent of all visitors while Europe the next region is bringing less than half those arrivals with 21 percent of all Caribbean arrivals.

The Dominican Republic gets the most visitors with 4.3 million arrivals followed by Cuba with 2.7 million arrivals and Jamaica with just under 2 million arrivals. Puerto Rico drew 1.45 million while The Bahamas drew 1.3 million.

Finally, though the Caribbean is well known for its all-inclusive hotels, but that formula may not be right for many existing hotels, said Rich Cortese, SVP Operations and Development with Aimbridge Hospitality.

“They don’t work everyplace because the cost to operate can be high if you don’t have inexpensive labor. Plus you have to meet with the customer wants. They want teppan-yaki, Italian, continental and food all day and pizza at midnight. If you don’t have five restaurants as all inclusive it won’t work. When you give away free F&B it costs money and [all inclusive] is not a marriage made in heaven.”
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