The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Nassau/Paradise Island hotel industry “contracted” against both prior year performance and expectations during the 2016 first half, with total room revenues down 5 per cent.

Data obtained by Tribune Business for the six months to end-June shows that the sector is suffering from pricing softness compared to 2015, with average daily room rates (ADRs) for the period down 6.1 per cent.

And revenue per available room (RevPAR) was also off by almost 6 per cent for the same six months, standing at $190.70 compared to $202.55.

RevPar, which is calculated by multiplying a resort’s ADR by its occupancy rate, is seen as one of the best indicators of hotel performance, given that it is a broad and accurate measurement.

With key indicators moving in the wrong direction, Stuart Bowe, the Bahamas Hotel and Tourism Association’s (BHTA) president, acknowledged that the industry had “contracted” against both its 2015 comparatives and the ‘budget’ expectations of individual hotels.

“The tourism industry in the Bahamas has contracted when compared to the 2015 business performance,” Mr Bowe said, writing in the BHTA’s July 2015 newsletter.

“Overall 2016 average rates and occupancies are down to budget and 2015 for the first quarter.”

While not detailing the factors driving the decline, Mr Bowe pointed to the increased competition facing the Bahamian hotel industry as a result of Cuba’s opening to more US visitors and the growth of ‘vacation home rentals’.

“Cuba will likely draw from the same source markets that currently feed the Caribbean,” the BHTA president added.

“The ‘opening up of Cuba’ has prompted the Bahamas Hotel and Tourism Association and the Caribbean Hotel and Tourism Association to commence plans to respond to the potential impact of Cuba.”

Mr Bowe continued: “Another phenomenon which influences the Bahamian tourism industry is the rising popularity of the ‘vacation home rental’ market.

“This relatively new sector of the tourism product deserves attention, as companies such as AirBnB, VRBO, Home Away and Flip Key continue to grow globally. The cost of doing business remains a challenge, especially the costs of utilities and labour. Despite these challenges, hoteliers must continue to focus on service delivery.”

The significance of the 2016 first half data, though, is that the Bahamas’ largest private sector employer - the hotel industry - continues to struggle for growth and market share in an environment where competition is ever-increasing.

For the Nassau/Paradise Island hotel industry, room revenues were down year-over-year by as much as 12 per cent in the key months of January and April 2016, although the latter was likely influenced by Easter falling in late March.

May was the only month when the industry’s room revenues were up over 2015, and that was by just 1 per cent. As for room rates (ADR), March was the only month when they exceeded prior year comparatives.

The same was true for RevPAR, which only managed to beat 2015 in May, and that was by less than $3.

First-half occupancies were relatively flat, standing at an average 74.9 per cent compared to 74.7 per cent in 2015. Following a slow start to 2016, the Nassau/Paradise Island hotel industry shrugged off a first quarter in which occupancies were consistently down on 2015, turning the corner in April to beat the prior year in both May and June.

Air arrivals to the destination were also up by 4 per cent for the 2016 first half, with room nights sold also ahead by 1 per cent. This indicates that while visitor volumes are up, pricing power has declined.

There was better news for the Nassau/Paradise Island industry on airlift trends, where capacity for the 2016 first half was “up slightly”, and the destination headed back towards a “four-year peak”.

Nassau, according to a presentation by the Nassau Paradise Island Promotion Board, has seen a 1.7 per cent year-over-year increase in daily flights from non-Caribbean destinations, which now stand at 39.

Nassau is also receiving some 4,600 seats per day into the destination, up 1.1 per cent, with airlines enjoying an average load factor of 75 per cent in the 12 months to end-June 2016.

“Year-to-date, over 5,000 seats have been added by American Airlines from Miami, Delta from Atlanta and United Airlines from Newark,” the presentation added.

Grand Bahama’s hotel industry also suffered a 2016 first half decline, although this was likely driven by the Canadian dollar’s decline in value against the US dollar (and, by extension, the Bahamian dollar).

Canada is the biggest source market for the Memories resort, and with a Bahamas vacation suddenly becoming more expensive for visitors from that nation, the island’s tourism product suffered accordingly.

Data obtained by Tribune Business reveals that hotel room revenue on Grand Bahama was off by 19.2 per cent or $3.124 million for the 2016 first half, falling from $16.269 million last year to $13.145 million.

While available rooms had increased by 14,151 or 4.43 per cent for the period, rising from 319,191 to 333,342, all other indicators were down in a decline similar to that on Nassau/Paradise Island.

Room nights sold on Grand Bahama were down by 36,823 or 15.92 per cent, standing at 194,419 as opposed to 231,242 in 2015. Occupancy rates fell by an average 14.3 percentage points as a result, declining to 58.32 per cent as compared to 72.45 per cent in 2015.

Pricing, though, as indicated by average daily rates, remained relatively stable, falling by just $2.74 or 3.9 per cent to $67.61.