ATLANTA (CMC):
The Caribbean hotel industry felt the full negative impact of the recent global recession in 2009, registering double digit declines in revenues and profits, according to the latest edition of the Caribbean Trends in the Hotel Industry released here on Monday.
The study, undertaken by the Atlanta-based Colliers PKF Consulting USA (PKFC) that specialises in the hospitality industry, noted that 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 United States (US) properties.
"It is evident that Caribbean hotels and resorts suffered one of the worst declines in profitability during 2009," said Scott Smith, senior vice president of Colliers PKF Consulting USA.
"Being a global destination for leisure and incentive group travellers, as well as intra-regional commercial demand, the world-wide 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," he added.
According to the study, the hotels in the survey sample reported an 11.9 per cent decline in total revenue from 2008 to 2009. It noted that leading the dollar decline in revenue was the 13.6 per cent fall off in rooms' revenue, the result of a number of factors including a 3.7 per cent drop in occupancy.
"With fewer guests staying at the Caribbean properties, all other sources of revenue posted declines as well. Food and beverage revenue fell 13.7 per cent from 2008 to 2009, while the revenue from other operated departments, golf, spa, retail, casinos, declined a relatively modest 5.3 per cent," Smith added.
Cost-cutting
The study noted that faced with declines in revenue, Caribbean hotel managers responded by cutting costs an impressive 10.5 per cent. Unfortunately, this was not enough to overcome the 11.9 per cent 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 US counterparts," Smith said. "In general, labour 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 US," the study found.
It noted also that despite relatively low wage rates, labour costs were 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, labour-related expenditures were reduced by approximately 11 per cent from 2008 to 2009.
"The largest expense reduction was achieved in the utility department."
The only expense item to rise in 2009 was insurance costs. During the year, insurance premium payments increased 5.3 per cent and Smith said "despite a relatively calm hurricane season in 2009, insurers still fear the threat of hurricanes."
Regarding future profits for the industry, the study warns that with Caribbean hotel revenues declining at a greater pace than expense cuts, net operating costs declined 18.2 per cent in 2009.
But it said that fortunately, things are beginning to pick up in 2010.
"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 added.
http://jamaica-gleaner.com/gleaner/20100915/business/business8.html
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