The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must increase its supply of hotel rooms and cruise passenger spending to maintain tourism’s growth pace beyond 2023 with industry earnings now “more than recovered” from COVID’s devastation.

John Rolle, the Central Bank’s governor, in addressing its 2023 second quarter economic briefing, yesterday warned there appeared to be “a bit of a levelling off” in visitor volumes after sea arrivals exceeded pre-pandemic highs by an average of 40 percent during this year’s first six months.

Higher-yielding air arrivals, who typically spend up to 28 times’ more than their cruise passenger equivalents, stabilised at just 2 percent below pre-COVID levels during 2023’s first half, which he attributed at least partially to “increasing limits” on the supply of available hotel rooms especially in New Providence.

The closure of properties such as the British Colonial (291 rooms), the Melia Nassau Beach that is now being torn down (694 rooms), and the Atlantis Beach Towers (400 rooms) for transformation into the ‘Somewhere Else’ concept has removed close to 1,400 rooms from Nassau/Paradise Island’s room inventory and left the destination unable to fully accommodate pent-up demand post-COVID.

Vaughn Roberts, the Paradise Island resort’s senior vice-president of government affairs and special projects, has previously confirmed to Tribune Business that the reduced supply has helped increase average daily room rates (ADRs) and yields across remaining properties to drive significant increases in room revenues.

The Central Bank’s Mr Rolle yesterday added that higher prices paid by tourists as a result of inflation have also helped drive greater resort revenues as he asserted that industry earnings “more than fully recovered” from COVID lows during the 2023 first half.

However, he warned that The Bahamas will need to swiftly increase room capacity to accommodate extra visitor volumes if tourism’s growth momentum is to be maintained beyond the 2023 year-end.

Explaining that the hotel industry’s performance is driven by a combination of “headcount”, visitor spend and their length of stay, Mr Rolle said: “Headcount is just about even with where it was before the pandemic, but spending has gone up because the average pricing in the industry has increased, even over the rough parts of the pandemic.

“When you add the two together, particularly in terms of the cruise segment, we appear to be 40 percent above where we were in 2019 even though it has levelled off. Collectively, those suggest earnings in tourism are more than recovered from pre-pandemic.

“Looking at the volume numbers, what we’re seeing is that volumes seem to have recovered and levelled off in comparison to where they were pre-pandemic. A lot of the growth we are seeing in the numbers January to June compared to last year, it’s still reflecting the fact there was a large deficit that remained in the 2022 numbers,” the Governor continued.

“Now that we’re completely out of the hole numbers wise, you’re absolutely correct in hinting at the accommodations capacity. We need to see now how you can boost returns by growing capacity to accommodate more visitors in the stopover segment.

“And I think in the cruise segment, again, then volumes we are already seeing, there would probably be agreement that you can simultaneously get more out of the industry by finding ways to increase the average spend per visitor.”

The Nassau Cruise Port’s controlling 49 percent shareholder, Global Ports Holding, in bidding to operate Prince George Wharf and oversee its $322.5m transformation, said one of the project’s key ambitions was to near double per capita cruise passenger spend to $150.

The Central Bank yesterday unveiled data showing that cruise passenger volumes had exceeded pre-COVID figures by an average 40 percent since December 2022, although this rate of growth has tapered off since February. Air arrivals, since September 2022, have closely tracked pre-pandemic numbers with Mr Rolle describing them as “almost equivalent” to late 2018 and 2019 performance.

The banking regulator’s report on June’s economic developments revealed that total air arrivals to The Bahamas for the month stood at 99.6 percent of the pre-COVID high achieved during 2019 as the industry closes on full recovery.

“Gains in tourism during the first six months of 2023 were still driven by significant pent-up demand, as travel was no longer constrained by COVID-19 precautions,” Mr Rolle said yesterday. “In addition, the industry benefited from appreciated stopover pricing, both within hotels and vacation rental properties.

“Based on comparisons against the pre-pandemic highs and the best seasonal performance before Hurricane Dorian, sea arrivals, which largely represent cruise visitors, have exceeded the pre- pandemic highs by an average of 40 percent since December 2022. However, the comparative index has not trended further upwards since February 2023.

“In addition, since January, the seasonal recovery in air arrivals stabilised, on average, just 2 percent below the pre-pandemic comparisons, so that is almost equivalent to pre-pandemic levels. Over the first half of 2022, air arrivals were still an average of 25 percent below pre-pandemic volumes, while the sea segment still trailed by 22 percent.

“Some of this levelling-off in volumes may well reflect increasing limits on hotel room inventory, particularly in New Providence,” the Governor continued. “Given appreciated stopover pricing and the magnitude of cruise visitor volume boost, the industry, however, experienced more than fully-recovered earnings in the first half of the year.

“The growth outlook beyond 2023 would, however, be more ameliorated if better pricing was reinforced, among other factors, by capacity-aided visitor volume gains.” Mr Rolle said another avenue through which The Bahamas can capitalise on visitor demand, and fill its room inventory gap, is through the “very vibrant” vacation rental industry.

However, he pointed out that this segment boosts the Bahamian economy in a much different way to the hotel industry and, as such, it was vital to maximise local ownership in vacation rentals to truly fulfill the sector’s potential. “We have t o be mindful that the way in which it beneficially impacts the economy is going to look a little bit different than the hotel sector,” the Governor said.

“There’s less of a labour component in vacation rentals and there’s a greater investment income component, so we want to make sure there’s greater local participation on the earnings being generated by these accommodations because then we’ll see more of it touching down into the economy.

“In addition, to the extent that this is a consumed product, if the Government’s revenue potential is not being realised to the same extent as what is already being consumed, then it also means that the potential performance of the industry that we’re seeing, the indicators, won’t be matched as vigorously when you look at the indicators we should be seeing, whether it’s employment, government revenues or foreign exchange inflows,” Mr Rolle added.

“So some of the emphasis has to be on how we optimise the returns from what is coming in. Clearly there does appear to be a bit of a levelling off now which, in all likelihood, reflects the capacity pull back we’ve had in the hotel sector, which we all know is transient.”