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Caribbean Hotel Rivals Beat Bahamas' 5% Revpar Rise

By NEIL HARTNELL Tribune Business Editor THE BAHAMIAN hotel industry's 5 per cent revenue per room (RevPAR) increase for the first nine months in 2011 was overshadowed by greater rises in many Caribbean competitors, as an industry consultant yesterday told the sector: "It's in your hands to aggressively push rates in 2012." Parris Jordan, managing director of HVS Global Hospitality Services' Bahamas office, told Tribune Business he was hoping to see this nation's hotel industry raise average room rates in 2012, given the increasing visitor demand and absence of new room supply. Warning Bahamas-based hotels that they would "leave money on the table" if they failed to exploit the improved climate, especially the rebounding group business, Mr Jordan acknowledged that this nation exceeded the Caribbean average of a year-over-year 2.6 per cent RevPAR increase for the nine months to September 2011. Yet, while the Bahamas' 5 per cent RevPAR improvement was slightly ahead of Jamaica's for the same period, this nation finished well behind regional leader, Curacao, which generated an almost 30 per cent rise in this indicator. According to a presentation given by Mr Jordan to the Bahamas Hotel Association (BHA) last month, St Lucia achieved a 15 per cent RevPAR rise for the nine-month period to September 2011, with Aruba at over 10 per cent, and both the US and Dominican Republic at around an 8 per cent rise. Puerto Rico, too, was slightly ahead of the Bahamas. RevPAR is likely the most important indicator of a hotel's financial performance, since by incorporating both occupancy and room rates into its calculation, it measures yield (how much the property can charge) and how well rooms are being filled. "There's some destinations that have generated higher increases in RevPAR," Mr Jordan acknowledged of the HVS findings. "The Bahamas has, however, outperformed the Caribbean as a whole, though there are other destinations with larger increases. "It's a good thing to do better than the Caribbean average, but the Bahamas needs to do as well as it can, because other islands had higher average rates." While the Bahamas, and Caribbean in general, were seeing "a recovery" in tourist demand from their main source markets, Mr Jordan told Tribune Business this had yet to translate into a increase in hotel room rates. "Demand is back strongly, but rate hasn't increased in tandem with demand," he added. "Group demand is coming back, and as the base builds, it allows hotels to be more aggressive and raise average rates, and that's what I hope to see in the Bahamas this year. If hoteliers don't push rates, they leave money on the table." Mr Jordan said much of the Bahamas' RevPAR growth in the first three quarters of 2011 had come from revenues generated by increased occupancy volumes, "so it's time for the Bahamas to push rates. "Group business has returned, you have that base demand, and are in position to push rates, which will drop to the bottom line. It's in the hoteliers' hands this year to push rates. There is no reason why this year cannot be more successful for hotels. If there's a noticeable improvement in the US economy, 2012 will be a very good year for the Bahamas." The HVS managing director said group/convention business, in particular, gave hotel properties a solid base around which to build other market segments, as it was usually booked far in advance. With its return, Bahamas-based resorts would become more confident "and can push rates for other market segments". Acknowledging that increased global tourism competition and new hotels coming on-line in the Caribbean and elsewhere might limit the ability of Bahamian resorts to raise room rates as much as they might want, Mr Jordan said "everything [else] is in place" to enable them to do so. Room inventory supply in the Bahamian hotel market would not increase appreciably until the $2.6 billion Baha Mar project became fully operational in late 2014, Mr Jordan added. "This gives them the opportunity to push the rate and be aggressive this year and next," he said of other Bahamian resorts. Apart from recovering demand, Mr Jordan added the $409.5 million Lynden Pindling International Airport (LPIA) redevelopment, coupled with string airlift to key source markets and the opening up of Latin America via Copa Airlines, had left the Bahamas well-positioned to benefit from a worldwide economic recovery. Given that 80 per cent, or 1.095 million out of 1.368 million stopover visitors to the Bahamas in 2010 came from the US, Mr Jordan said this nation's continued hotel/tourism industry recovery would continue to depend heavily on the US economy and associated consumer confidence. Only Puerto Rico and the US Virgin Islands, with 90 per cent and 93 per cent of their respective 2010 stopovers coming from the US, were more reliant than the Bahamas on this nation's northern neighbour. A major US rebound could result in a "pop" in travel to the Bahamas, but Mr Jordan cautioned of travellers: "They're back in large numbers, but are looking for deals, looking for value. "The main message is that we're seeing a recovery. The people that are visiting the Caribbean are still looking for bargains, looking to get added value, but demand is back strongly. "You have more people visiting the Caribbean in 2011 than in years prior, and the key thing for hoteliers is to understand they don't need to lower prices and give additional incentives." Competition for the Bahamas, though, was on the rise through Jamaica adding 8,000 new hotel rooms in five years, and Puerto Rico and the Dominican Republic bringing extra resorts on-line. And Mexico's Riviera Maya was providing increasingly stiff rivalry in the destination market. Riviera Maya, Mr Jordan, was offering new and refurbished product, while the Bahamas would not have much new product until Baha Mar came on stream in late 2014. Existing resorts will also benefit, Mr Jordan said, from the fact that banks and other financial institutions are being far more selective when it comes to funding Caribbean resort developments. They are shying away from mixed-use resort projects relying heavily on real estate sales, instead focusing on existing resort expansions. Often, borrowers are being required to put up as much as 40-50 per cent equity, with strong resort branding, location and airlift also essential prerequisites. "They're looking for strong sponsors, people with proven track records who have done that in the past before they decide to lend," Mr Jordan said of lender attitudes. "It allows the existing properties to benefit from the increase in demand, until financing for new properties becomes available."

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