No Silver Bullet For Hotel Sector Recovery

Stuart Bowe also confirmed that the 2011 first quarter was not working out as expected for the major Nassau and Paradise Island resorts, with February and March “trending behind what was forecast”, but hoteliers were holding out hope that the remainder of the year would hold true to predictions.

Mr Bowe was speaking after the BHA and Ministry of Tourism yesterday released their joint survey of the 2010 and fourth quarter performance generated by 14 Nassau and Paradise Island resorts, the findings showing that the industry’s recovery slowed during the final three months of the year.

While the 14 resorts surveyed saw average occupancies for the full year increase to 62.9 per cent, compared to 60.9 per cent in 2009, with the ADR rising by $4.33 or 1.9 per cent to $231.96, compared to $227.63 in 2009, the fourth quarter improvement was more marginal.

The room revenue increase for the three months to December 31, 2010, was 1.2 per cent, compared to the 6.7 per cent, 5.2 per cent and 11.8 per cent increases enjoyed during the previous three quarters respectively.

And the 2010 fourth quarter was the only period in 2010 when ADR declined, dropping by 1.2 per cent compared to the 2.2 per cent, 1.9 per cent and 4.9 per cent increases in the first, second and third quarters.

The December ADR also fell below 2009 levels, dropping to $267.10 compared to $269.20 the year before. Average occupancies, though, rose to 55 per cent for the month compared to 54 per cent the year before, while room nights sold and room revenue grew by 2 per cent and 1.2 per cent.

The 2010 room nights sold and room revenue were 7.2 per cent and 21 per cent above December 2008 levels, which reflected the immediate aftermath of the Lehman Brothers crash, as occupancy rates for that month slumped to 50.4 per cent with a $236.55 ADR.

“We’re creeping slowly back, marginally back towards occupancy,” Mr Bowe said of the 2010 performance compared to pre-recession and early 2008 numbers.

“Where the issue is, is the average rate, which is moving at all. It’s down $15, $16 from where it was pre-recession. While occupancy is moving up marginally, it’s difficult to get the rate back because of the competition. People are looking for the packages, looking for the deals, and there’s more competition as people bring new inventory on to the market across the world.

Challenged

“We’re still challenged with the average rate because of the competition and the value deals. We are some time away from getting back the average rate, because even in the leisure business people are looking for deals. There’s no silver bullet.”

Weakness in ADR, the BHA president said, impacted both revenues and profits. He described the industry’s improvement as “slim”, rather than using the term “progress”.

Given the general lack of pricing power enjoyed by Bahamian resorts, Mr Bowe said the private sector was working with the Ministry of Tourism on various initiatives, and developing sales and marketing strategies of its own.

“All the hotels have value driven deals out there to achieve marginal occupancy rate improvements, but the value deals are affecting the rates,” he added. “It’s not possible to stay in one place.”

Acknowledging that the 2011 first quarter to date had “not turned out quite the way we thought it would be”, Mr Bowe told Tribune Business: “We’re in the first quarter of 2011, with January the first month, and February and March are trending behind what was forecast. Coming out of last year, we thought the first quarter would be stronger, but have not seen that yet. The hope is that the whole year will be as we expect.”

The BHA president said that what was especially concerning about the 2011 first quarter was that the three months to end-March, together with the second quarter, are traditionally the strongest periods for Bahamian hotels.

A better comparative for the Nassau/PI hotels’ 2010 performance is 2008. While occupancy inched closer to the 63.4 per cent average for that year, current ADR’s were $15 below the $246.70 achieved for that year. Room nights sold and room revenue were 6 per cent and 11.7 per cent, respectively, behind the levels achieved in 2008.

“We’ve still got a distance to go,” Frank Comito, the BHA’s executive vice-president said, in terms of the industry getting back to 2008 numbers. “We’ve been inching closer. We’re not there yet. We’ve got some work to do, and hopefully we’ll get closer to that this year.”

The BHA/Ministry of Tourism release pointed out that the 2010 fourth quarter performance was impacted by the September-late November hiatus in the Companion Fly Free programme, plus weather-related cancellations around the Christmas holidays. The sector was also up against tougher year-over-year comparisons.

Mr Bowe told Tribune Business that resorts “started to see a pick-up immediately” once the Companion Fly Free was reinstated, adding that the Christmas-New Year period was “the highest average rated period for the year”.

Nimble

“It is incumbent on all individual properties to remain nimble. When things happen, weather-related or otherwise, they have to adjust to the competition, and again, value is the word,” Mr Bowe said.

The BHA/Ministry of Tourism survey said: “Nine properties ended 2010 with room revenues above 2009. Of those, seven saw their improved revenue picture generated from similar or higher ADRs and boosts in room nights sold.

“Three properties tried to generate higher revenue levels through increased ADRs, but only saw their room nights sold fall along with their room revenue. The remaining three properties experienced declining room revenues in 2010, driven by lower ADRs and room nights sold.”

“While marginal increases were realised for the year, the pace of improvement slowed in the final quarter, underscoring the importance of continued caution, aggressive marketing and providing exceptional value for what we offer in an extremely competitive global tourism marketplace.

“The industry and the Ministry of Tourism are cognisant of this and continue to collaborate on initiatives aimed at moving the needle in the right direction,” Mr Bowe said.

The Tribune