The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian hotel industry believes it will approach its pre-recession “banner years” in 2014 and “surpass” them next year, its president said yesterday, with the sector’s confidence levels reaching 97 per cent.

Although coming off a mixed 2013, more than 70 per cent of the 31 hotels surveyed last month by the Bahamas Hotel and Tourism Association (BHTA) expect revenues and occupancy to increase year-over-year in 2014.

But, while industry confidence is at its “highest level” since the pre-recession 2007 peak, Stuart Bowe, the BHTA’s president, yesterday told Tribune Business that hotel profitability remained “of great concern”.

The BHTA survey found that 47 per cent of survey respondents, meaning around 14-15 hotels, reported a net loss in 2013 - an increase from the 33 per cent who ended up in the red ink in 2012.

This, the BHTA, said “reverses a four-year profitability improvement trend”, as the number of Bahamian hotels reporting a net loss had dropped from 51 per cent in 2010 and 41 per cent in 2011.

For 2013, some 47 per cent of hotels reported a profit, with the remaining 6 per cent reaching ‘break even’.

“The profitability of our industry is of great concern,” Mr Bowe told Tribune Business. “We know that our small hotels and Family Island hotels are particularly vulnerable, and that is why we have advocated for special consideration for them on matters related to Hotels Encouragement Act incentives, taxation policies and small business development support.

“The larger issues which affect all businesses - airlift, energy costs, high operating costs - are matters which we are constantly working on as an Association.

“The increased number of hotels reflecting losses correlate to the factors previously described. The increasing number of members reporting net losses is concerning,” Mr Bowe added.

“It should be noted that a number of hotels invested in capital improvements which they had put off for several years because of their financial difficulties.

“These investments cut into their bottom line with the view that they will pay off as we showcase a better product.”

The BHTA survey revealed that another factor inhibiting the sector’s 2013 profitability was “competitive constraints” that prevented them from raising room rates.

Only 41 per cent increased their prices and room rates in 2013, with the remaining 59 per cent keeping them flat or lower.

Yet even on this indicator there is room for optimism, and signs the industry is regaining its pricing power, as 59 per cent of hotels surveyed expect to increase their prices this year.

Some 97 per cent of Bahamian hotels have a ‘fair to extremely positive’ outlook for 2014, with the majority - some 65 per cent - falling into the former category.

Another 29 per cent are ‘positive’, and the remaining 3 per cent ‘extremely positive’. This, the survey showed, was a major turnaround from the 74 per cent of hotels who held a ‘negative’ outlook in 2010.

“We are optimistic that the industry will approach the banner years this year, and surpass them in 2015,” Mr Bowe told Tribune Business, when asked how close the hotel industry was to matching its peak 2007-2008 performance.

“Despite the challenges..... there are many positive indicators which underscore the increased optimism,” he added.

“Many existing hotels have invested in upgraded properties, and more properties are coming on line. Investments in airports and infrastructure; stronger group bookings and major events, particularly around sports tourism; and the steady improvement in the world economy are all contributing to a higher level of confidence in 2014.”

While Mr Bowe said the late 2014 opening of the $2.6 billion Baha Mar project was also boosting confidence, the impending implementation of Value-Added Tax (VAT) on July 1 remains a potential setback to this momentum.

“Our industry is very aware of the potential impact of VAT,” Mr Bowe told Tribune Business. “VAT as proposed will affect the tourist consumer value proposition and our price competitiveness.

“Our industry continues to explore other methods of tax collection, inclusive of revised VAT.”

Elsewhere, the BHTA survey found that 71 per cent of hotels are predicting occupancy increases in 2014, with 16 per cent anticipating a “significant” rise.

Around 26 per cent of hotels expect occupancies to be flat in 2014, with only 3 per cent forecasting a decline. The BHTA survey also found that 26 per cent of resorts suffered an occupancy decline in 2013, with 35 per cent seeing an increase - a major turnaround from the 85 per cent occupancy drop in 2009.

As for revenues, the BHTA survey said 75 per cent of hotels are projecting an increase for 2014, with 19 per cent anticipating it will remain flat. Just 6 per cent are projecting a decrease.

This represents a major swing from 2013, when 40 per cent of hotels reported a revenue decrease and 51 per cent saw a rise.

With the hotel industry still the Bahamas’ largest private sector employer, any increase in employment represents a major economic boost.

For 2014, 34 per cent of hotels expect to increase staffing levels, with only 19 projecting a decline - indicating the sector will see a net job increase.

This represents a slight gain in 2013, when 28 per cent of resorts increased staffing; 59 per cent kept their workforce the same; and 13 per cent suffered a decline.

Assessing the survey results, the BHTA said the mixed answers showed the divide in the sector, with Family Island and Grand Bahama hotels generally reporting marginal revenue and occupancy improvements, while Nassau-Paradise Island hotels saw small declines in performance.

Initial results for the industry as a whole showed that, Bahamas-wide,there was a year-over-year decline Bahamas-wide of 3.5 per cent in room occupancy and a 4.7 per cent increase in the average room rate.

Mr Bowe said: “The results mirror the industry’s hotel performance and overall visitor arrivals data for 2013.

“This tells us that more needs to be done to increase visitor stopover numbers. Stopover visitor expenditure is valued at 20 times more than the cruise guest. The multiplier effect of stopover visitor expenditure is crucial to all stakeholders in our economy.”

Calling for the visitor experience to be improved, Mr Bowe added: “The measurement starts from booking a vacation and every encounter in between until check-out. ‘Service excellence’ can be the only goal in this global tourism economy full of competitive sun, sand, and sea product offerings.

“As a high cost destination, creating value through people interactions is our competitive advantage, and our business goals should reflect this focus. Nothing drives business like word of mouth marketing and, more recently, social media referrals.”