The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Despite the Nassau/Paradise Island resort industry beating June occupancy forecasts by 1.5 per cent, the Bahamas Hotel Association’s (BHA) president last night said the sector remained concerned about anything that could “tamper with an already thin bottom line”, bookings having “slowed considerably” for the upcoming weaker months.

Responding to Tribune Business’s questions, Stuart Bowe said marketing and promotional packages continued to “drive a good deal of business to the Bahamas”, with rates - and yields - constrained by competitors and overall market conditions.

Noting that the temporary end to air fare credits last month resulted in a “definite” decline in booking activity, Mr Bowe said that while June’s occupancy average occupancy rate had exceeded its 2008 comparative by almost six percentage points, average daily room rates (ADR) were more than $7 below pre-recession levels.

“June performance was slightly above forecast for room occupancy rates by 1.5 per cent but below forecast for Average Daily Rates by $5,” Mr Bowe told Tribune Business.

“Following the pattern which we’ve seen this year, the average daily rate in June 2008 was $235.77 versus this June at $228.04. Our room occupancy rates have exceeded June 2008, jumping from 71.9 per cent to 77.7 per cent.”

The 14-strong Nassau/Paradise Island hotel industry is still having to attract stopover visitors through discounts, promotions and marketing activity. This effectively means the Bahamas is still having to ‘buy’ a significant amount of its business, pushing down yields and returns.

“The air credit and value packages are driving a good deal of the business,” Mr Bowe confirmed.

“When we had a brief lull last month in air credit offerings, we saw a definite decline in bookings and website activity.

“While the booking pace for the next several months has slowed considerably, primarily due to seasonal changes, we expect to remain on pace with last year or slightly above pace.

“September, October, and early November are lower occupancy months, but we hope to achieve projections by bolstered marketing efforts by the Ministry of Tourism and Promotion Boards, groups, and seasonal special events.”

Market conditions post the worst of the recession (to date), combined with increased competition from rival destinations, have constrained the Bahamian hotel industry’s ability to raise its room rates.

Mr Bowe told Tribune Business: “The industry is closely monitoring the rate activity of competitors. Supply and demand really dictates what we can do with rates.

“Most hotels have instituted strong measures to contain operating costs, but we remain concerned, particularly with anything which can tamper with an already thin bottom line. Our economic performance survey earlier this year revealed that 41 percent of the nation’s hotels experienced a net loss in 2011. When one looks at small hotels, particularly in the Family Islands, those who operated in the red last year are much higher.

“It remains a delicate balancing act between offering a rate which will attract business while covering one’s basic operating costs. One of the key elements in raising the room rates is our ability to deliver world class service. Previous research has shown that consumers will pay more if ‘service value’ expectations are exceeded. On a property level, guest service issues are constantly being addressed, but we must continue to address service delivery on a national level to fill the gaps in the tourist experience.”

Data released by the BHA and Ministry of Tourism showed that the average 77.7 per cent June occupancy rate achieved by the 14 Nassau/Paradise Island hotels comfortably beat last year’s 68.7 per cent.

Room revenue for June 2012 was also up 8.3 per cent, driven by a 12.6 per cent increase in room nights sold. Yet this year’s $228.04 ADR was below the $237.05 achieved in June 2011.

The BHA and Ministry of Tourism said results varied by property, with five properties seeing an average 9.4 per cent decline in room revenue, driven by a 1.8 per cent decrease in room nights sold and a $14.04 decrease in ADR.

Another five New Providence properties added to room revenue by 19.7 per cent, based on a 17.7 per cent increase in room nights sold with a virtual $3.50 increase in ADR. The remaining four hotels included in the BHA/Ministry of Tourism sample increased room revenue 6 per cent, with this coming from a 13.4 per cent increase in room nights sold and a $15.89 decrease in ADR.

The 2012 second quarter produced a 75.4 per cent occupancy rate compared to 67.9 per cent last year.

The 14 Nassau/Paradise Island hotels’ average ADR was $237.23 compared to $251.62 in 2011. Room nights sold were up 11.1 per cent, while ADR decreased by $14.39.

Year-to-date to the end of June 2012 showed a 73.3 per cent occupancy rate compared to 67.2 per cent last year. The ADR was $246.96 compared to $252.16, with the room nights sold up 9.6 per cent and room revenue up 7 per cent.

The BHA and Ministry of Tourism added: “The June and year-to-date results also show a similar pattern to pre-recession performance, with the major hotels beating 2008 occupancy results but lagging behind in average daily room rates.

“Comparative figures for June 2008 showed a 71.9 per cent occupancy and a $235.77 ADR. Comparative figures for the second quarter 2008 showed a 71.1 per cent occupancy and a $253.66 ADR. Comparative figures to the end of June 2008 showed a 72.4 per cent occupancy and a $268.02 ADR.

“Preliminary air arrivals to Nassau to the end of May were up 11 per cent.”

Mr Bowe, in further comments, said: “Our marketing efforts are paying off. These results, while generally encouraging, continue to point to challenges our industry faces.

“While we have seen occupancy rates increase in each of the past 10 months, our ADR has also declined in seven out of the past 10 months.

“To remain competitive we are offering lower rates and investing heavily in marketing and value-added packages. The increased room night volume factor is under pressure from reduced average rates, increasing operating costs and slowdown in group business. We remain cautious.”

And he added: “The next four months could be very challenging for the industry. The traditional lull in activity during the soft months could deepen as we see growing uncertainty about the global economy and consumers in our major market, the United States, become preoccupied with the upcoming US election, when historically they travel less.

“We are focusing on marketing efforts and supporting events to inject business during the period”.