News for the Hospitality Executive
ATLANTA, Ga., August 21, 2008 – PKF Hospitality Research (PKF-HR), an affiliate of PKF Consulting, today announced that it has released its 2008 edition of Caribbean Trends in the Hotel Industry. The report finds that the Caribbean hotel industry faces some strong challenges going forward. After a soft 2006, most Caribbean destinations saw their visitation rates grow in 2007. In 2008, however, the combination of a slow U.S. economy, increased competition, rising energy costs, and threats of reduced air service could result in lower levels of occupancy and profits for the region’s hotel owners and operators.
“Given the region’s dependence on airlift, the most daunting issues facing the Caribbean hotel industry are the rising cost of airfares and the announced cutbacks in air service,“ said Scott Smith, MAI, senior vice president in the Atlanta office of PKF Consulting. “Due mostly to the rising cost of fuel, four of the five leading air carriers to the Caribbean have announced cutbacks in service. Puerto Rico and the Dominican Republic could see as many as 26 percent fewer flights in December of 2008 compared to December 2007.” In an effort to maintain air service, the Puerto Rico Port Authority is offering to reduce airport fees by 45 percent.
Not only is the reduced air capacity a concern, but so are rising airfares. “The Caribbean has always been attractive to price-sensitive travelers. If airfares continue to rise, hotels may have to reduce their room rates in an effort to maintain the Caribbean’s position as an affordable destination,” Smith said.
Airlines are not the only mode of transportation impacted by the rise in energy costs. The relatively low cost of Caribbean cruises has made the region the number one cruise market in the world. “Despite the strength of the market, we have seen shifts in the cruise industry that have been influenced by the rising cost of fuel. Cruises to more remote ports in the southern Caribbean, such as Aruba, are being cut from itineraries due to the length of the trip and fuel required to get there,” Smith noted.
The rising cost of energy is not only impacting transportation, it has perpetuated the high cost Caribbean hotels have to pay for utilities, as well. Utility costs for the average property in the Caribbean Trends sample were 7.3 percent of total revenue, or $8,341 per available room in 2007. This compares to just 3.6 percent, or $3,868 per available room, for comparable U.S. resorts.
In an effort to offset the rising cost of energy, some Caribbean hotels have instituted energy surcharges. Most people believe this is not a permanent solution. The buzz word in the region is to “go green.”
“To preserve the natural beauty of the region, Caribbean resorts have had a long history of being environmentally friendly,” Smith commented. “Hotel operators are now parlaying this experience into energy conservation. In addition to installing cost-cutting equipment, such as efficient light bulbs, showers, toilets, sinks, and air conditioning, Caribbean hoteliers are working with their local energy providers to develop new sustainable technologies. This will not only reduce the cost of operations, but improve the overall economy of the island on which they operate.”
PKF Hospitality Research (PKF-HR), headquartered in Atlanta, is the research affiliate of PKF Consulting, a consulting and real estate firm specializing in the hospitality industry. PKF Consulting has offices in Boston, New York, Philadelphia, Washington DC, Atlanta, Indianapolis, Houston, Dallas, Bozeman, Sacramento, Seattle, Los Angeles, and San Francisco.
Scott Smith, MAI
|Also See:||Caribbean Hotels Match U.S. Profitability; Unique Operating Environment Reduces Some Costs / November 2007|
|Spurred by a Strong U.S. Economy, Caribbean Hotels Profitable In 2005; PKF Hospitality Research Frst-ever Report on the Caribbean Hotel Industry / July 2006|