The Tribune

By NEIL HARTNELL

Tribune Business Editor

THE 14-property Nassau/Paradise Island hotel industry's 71.2 per cent average occupancy rate for the 2012 first quarter beat projections by "just over 1 per cent", the Bahamas Hotel Association's (BHA) president said yesterday, with occupancies lagging just below - and possibly set to "this year surpass" pre-recession levels.

Stuart Bowe, in response to e-mailed questions from Tribune Business, said the New Providence-based hotel sector's performance for the three months to end-March 2012 matched industry projections very closely.

However, competitive pressures and other constraints were holding Bahamian hotels back when it came to increasing room rates, and while room revenues were "slowly" mounting a comeback, this was being countered by rising marketing and utility costs.

"Hotel performance was very close to what was forecasted," Mr Bowe said of the 2012 first quarter. "Room occupancy for the first quarter beat forecast by just over 1 per cent. We remain constrained from increasing room rates, but saw minimal improvements versus projections.

"Our room occupancies are just below pre-recession levels and may surpass 2008 this year, but revenue will likely lag behind due to room rates, which will take longer to increase due to market forces."

These forces include both rival Caribbean destinations and the likes of Orlando and Las Vegas, which had either dropped hotel room rates more sharply when the recession hit, or enjoyed lower operating costs through larger room inventory and infrastructure cost spreads.

"Most of our competitors dropped their rates much lower than we did during the recession, and while they are now increasing their rates, many are still below our average rates," Mr Bowe told Tribune Business.

"This will be a challenge for some time, particularly with destinations like the Dominican Republic, Jamaica, Cuba and Cancun, where the cost of labour and utilities is lower.

"In the US, destinations like Orlando and Las Vegas have a much larger base of hotel rooms and lower operating costs, and therefore are able to offer lower rates. We expect this to be an ongoing challenge, hence, the need to continue value-oriented marketing packages, better airfare offerings and improving customer serve experiences from arrival to check-out."

It "remains to be seen", Mr Bowe added, how quickly the Nassau/Paradise Island hotel industry was able to increase room revenues. He added: "We continue to slowly see revenues increase but they remain below pre-recession levels. At the same time, the marketing, promotion, and utility costs are rising."

Acknowledging that much of the improvement had come from the hotel industry/government promotions, discounting and marketing, Mr Bowe said: "A large part of the turnaround trendline we are experiencing is tied to our value-oriented promotions.

"The partnership between our Promotion Boards and the Ministry of Tourism and Aviation, added to our ability to secure additional airlift, has played a key role in attracting business. We note the focus by all properties on creating exceptional Bahamian customer experiences. Word of mouth is very effective marketing."

Meanwhile, a BHA/Ministry of Tourism survey released earlier this week showed the key indicator of hotel performance, revenue per available room (RevPAR), stood at $238.97 for March 2012, up from $220.31 last year. RevPAR was also up for the first two months of 2012 compared to the same periods in 2011, and for the 2012 first quarter stood at $181.46, compared to $168.23 last year.

Mr Bowe agreed that RevPAR improvements had enabled some hotels to enjoy "a stronger first quarter", which was particularly important given that "the first quarter is critical to sustaining the balance of the year, when rates are lower".

And, noting that the short-term outlook for the Bahamian hotel industry was still uncertain, the BHA president added: "Most hoteliers remain cautiously optimistic.

"Our forecast, at least through the summer, is flat, although we wish that room rates were stronger. Beyond summer, the uncertainties of airfares, energy costs and the outcome of the US election ensures that we restrain our optimism."

The 14 New Providence properties saw average occupancies rise from 80.1 per cent in 2011 to 84.3 per cent in March 2012, with ADRs for the month up year-over-year by $8.44 to $283.35. Room nights sold were ahead 4.8 per cent.

Nine of the 14 hotels experienced revenue increases in March 2012, with four of them showing double digit increases compared to last year. Four properties achieved increased revenues through increases in ADR and room nights sold, three through increases in ADR only, and two other properties through increases in room nights sold.

The 2012 first quarter ended with a 71.2 per cent occupancy rate compared to 66.6 per cent last year. The ADR was $254.77 compared to $252.71, with room nights sold and room revenue up by 8.2 per cent and 9.1 per cent, respectively.

The Ministry of Tourism/BHA sad the 2012 first quarter performance finished with all but two of Nassau/Paradise Island's 14 properties registering increased revenues. Of the 12 properties with increased revenues, seven saw these revenue surpluses generated primarily through double digit increases in room nights sold.