Recently published statistics suggest that despite the Caribbean continuing to experience buoyant visitor arrivals numbers, the region may not experience a commensurate overall rise in earnings from tourism in 2019.
According to the industry analysts STR (formerly known as Smith Travel Research) as this year has gone on there has been a decline in revenue per available room (RevPAR), a key industry measure of profitability, and a fall in occupancy rates, possibly signalling longer-term economic problem.
According STR’s data, hotel occupancies across the Caribbean began falling in April and continued to steadily decline throughout the summer relative to comparable figures for 2018. The US based company reported that Caribbean hotel occupancy declined 5.6% between April and August 2019, falling from a high of 75.2% in March to 61.1% in June compared with the same period in last year. It also reported that occupancy fell by 5.6% year on year to 62.5% because of falling demand and a rise in inventory as Caribbean room supply continued to grow by around 3% per annum.
STR said that while hoteliers continued to increase the average daily rate (ADR) charged, this was not enough to drive RevPAR and thus profitability upwards. Instead RevPAR moved downwards from April on when it stood on average at US$164.82 eventually falling in August this year to US$112.54 or down by 5.3% on the same period last year.
Despite this general weakness across the summer months, STR forecast that 2019 will end with a 1.1% increase in ADR and a 0.3% rise in RevPAR over 2018 but a slight decrease in hotel occupancy of -0.8%.
What STR’s figures suggest, as well as other figures regularly provided by regionally based industry analysts and individual destinations, is wide variation between destinations, with some of the region’s principal tourism markets suffering disproportionately this year as a result of unique local circumstances.
Speaking recently to the travel trade press about this and the fall off in tourism profitability, the Caribbean Hotels and Tourism Association’s (CHTA) CEO, Frank Comito noted that out of the 16 Caribbean destinations reporting for August, nine were up on occupancy, and seven were down. “Assuming we don’t see an acceleration of any kind of global economic downturn, growth in demand has kept up with supply, and we’re hopeful that will continue”, he said.
Hardest hit countries
Among the Caribbean destinations hardest hit this year have been the Dominican Republic, Cuba, The Bahamas and Puerto Rico.
In the case of the Dominican Republic, a spate of negative publicity surrounding a number of unrelated tourist deaths resulted in significant reputational damage in the US and a consequent fall-off in bookings. This, STR reported, resulted in hotel occupancies there falling to 66.6% mid-year and RevPAR reaching a low of US$69.82 in August, figures confirmed by local analysts.
Cuba also saw its summer arrivals fall but as a result of the US Administration’s restrictions on US travel which all but killed off its rapidly growing cruise arrivals. According to STR in August its occupancy fell to 50%, and RevPAR to US$31.77.
Puerto Rico also suffered a downturn as it continued to suffer visitor misperception that its tourism infrastructure remained damaged following hurricanes Irma and Maria in 2017. In its case, STR reported that occupancy was down by 68.1% this August, and RevPAR to US$123.12.
A similar situation is expected in The Bahamas where hurricane damage this August was limited to Grand Bahama and Abaco, but consumer perception was that the whole island chain was hit by Hurricane Dorian.
In contrast STR said that Barbados experienced the highest rise in July occupancy at plus 12.4%, while Dominica recorded the largest jump in ADR at plus 36.5%, and RevPAR at plus 25.3%.
More generally however, the industry’s fortunes have not been helped by the collapse of the UK based tour operator Thomas Cook which accounted for 62% of all Caribbean flights from Germany and roughly 10% of all Caribbean flights from the UK.
According to CHTA its bankruptcy is likely to particularly affect Barbados, St Lucia, Jamaica, Cancun and the Dominican Republic until alternative ways can be found to meet European demand. The region private sector tourism organisation said that Thomas Cook had been expected to bring up to 0.4m visitors during to the region over the autumn and winter season but to date only 60% of its business was guaranteed as a result of the German government’s decision to rescue Condor, Thomas Cook’s German tour operator and airline.
On the development side of the industry STR said it did not expect to see a slowing in the pace of supply of new hotel rooms noting that there are currently 57 hotels accounting for 14,085 rooms under construction in the Caribbean.
CTO to restructure
All of which comes against the background of a decision by the Caribbean Tourism Organisation (CTO) to restructure its operations in the face of rising costs and what its Chairman, the Minister of Tourism of St Lucia, Dominic Fedee, described as the need to elevate tourism development in the region.
Fedee announced on 15 October that CTO would be closing its London and New York offices by the end of January 2020, would undertake a comprehensive audit of the role of its head office in Barbados. He also indicated that this would involve redundancies. In an emailed statement he said that, in future, the public sector body which groups Caribbean tourism ministers and some corporate interests, would have to reinvent and reposition itself “as a pillar upon which tourism advancement can rest”. This, he suggested, would require it to refocus on marketing the Caribbean as a single brand, more in-depth research, a more uniform approach to policy formulation and product development and enhancing tourism’s role as a tool for sustainable development across member states.
Fedee added that the restructuring is expected to significantly reduce operational expenditure giving it more capacity to undertake the functions identified.
This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication. Please follow the links on the right-hand side of this page to subscribe, or access a free trial.