The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Two-thirds of regional hotels responding to KPMG’s 2013 Caribbean benchmarking survey aim to initiate expansions within the next 18 months, although Value-Added Tax (VAT) reforms and access to financing remain key concerns.

The accounting firm’s survey indicated that Bahamian hotels are extremely concerned over the Government’s planned VAT, with 62 per cent expressing concerns that it will not be implemented successfully and could deter foreign direct investment (FDI). The majority of that percentage are likely to be based in the Bahamas, as this is the only nation implementing VAT this coming year.

“A number of jurisdictions have introduced, or are contemplating introducing, VAT for example,” the KPMG survey said.

“They are, however, keen to ensure that this does not have a negative impact on tourism. A majority of reporting hotels do not believe that new revenue streams such as VAT will be implemented successfully in the region. The overwhelming opinion is that such measures may ultimately act as a deterrent to inward investment.”

Charlene Lewis-Small, a director of KPMG (Bahamas), and Gary Brough, its Turks & Caicos managing director, said of the findings: “While still challenging, the operating landscape for regional hotels appears to have improved since we released our last survey in 2011.

“For example, the number of visitors to several Caribbean destinations has stabilised and even grown in some cases, and hotels surveyed are experiencing improvements in certain key performance indicators such as ADR and RevPAR.

“Although overall occupancy fell slightly for survey respondents, the aforementioned improved rates, coupled with successful implementation of cost containment measures, resulted in 2012 profitability indicators showing signs of improvement when compared to 2011,” the KPMG duo added.

“Bolstered by the general expectation that meaningful market growth will arrive by 2015, more than two-thirds of survey respondents have expansion plans for the next 18 months. Our survey results indicate airlift, the impact of new taxes such as VAT and the ability to secure financing are currently issues of critical interest to hoteliers.”

Total Caribbean stopover visitors grew by 3.55 per cent in 2012, and KPMG said trends in the region, and Bahamas’, core US market represented cause for optimism.

“The number of affluent households in the US is expected to grow from 10.5 million in 2011 to 20.5 million by 2020, and their total wealth is expected to grow from $39 trillion to $87 trillion,” the KPMG survey said.

“Luxury hotels and resorts dominate the preferences of affluent Americans when it comes to vacation accommodation. Furthermore, it is estimated that in 2013 affluent travellers will increase their spending on vacations by 10 per cent.”

All of which bodes well for the Bahamas and its high-end tourism product. And there are also indications that the proposed casino gaming reforms, and Baha Mar’s $2.6 billion investment - with its casino-centric model - are well-timed.

“During 2010-15, the global casino industry is expected to achieve a compound annual growth rate (CAGR) of 9.2 per cent, growing to a market size of $182.8 billion in 2015,” KPMG said.

“The gaming industry (measured in terms of ‘wins’) grew at a CAGR of 3.9 per cent in the US for the period 2010-2012. Nearly one-third of the US adult population gambled in casinos during 2012, with total consumer spending at commercial casinos increasing by 4.8 per cent in 2012, reaching a total of $37.3 billion.”

And the KPMG survey added: “Business travel spending is expected to experience strong growth in the next 10 years with a CAGR of 5.5 per cent in the US and 6.9 per cent in the Caribbean.

“In 2012, US businesses spent $34 billion on international travel and $225 billion on domestic travel, supporting 3.7 million jobs and generating $35 billion in taxes.”

KPMG said 64 per cent of hotel respondents reported that 2012 performance met or exceeded budget. While average occupancies fell from 62.9 per cent in 2011 to 61.7 per cent last year, average daily room rate (ADR) increased from $376 to $395.

And revenue per available room (RevPAR) rose from $229 to $233. “This is an encouraging sign as it suggests that resorts no longer need to ‘buy’ occupancy, and that healthy room rates may be returning,” KPMG added.