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Caribbean hotel profits hit hard by economic recession

Posted by CaribShout on August 13, 2009 at 8:23pm

GEORGIA, United States, August 13, 2009 - A report by a Georgia-based research firm has shown that the average Caribbean hotel saw bottom-line profits decline by 16 per cent last year. PKF Hospitality Research, in its newly released 2009 edition of 'Caribbean Trends in the Hotel Industry' said the global economic recession was the primary driver of the double-digit profit decline. And it said that given the poor market conditions observed this year, further profit deterioration is expected this year. Visits to the Caribbean decreased by four per cent in 2008, translating into a 4.5 per cent drop in hotel revenues. "Even though Caribbean hotel managers were able to cut expenses by 1.1 per cent in 2008, it was still not enough to offset the 4.5 percent decrease in total revenue," said Scott Smith, senior vice president of PKF Consulting. "The net result was an average 16 per cent decline in unit-level profits for the typical Caribbean hotel in 2008." Utilities and insurance costs remain a major concern for Caribbean hoteliers. In 2008, utilities and insurance expenses increased by 9.1 per cent and 6.3 per cent, respectively. The PKF study also found that not only has the economic recession impacted the operations of existing hotels, but it also has forced planned hotels to either delay or stop construction. Several proposed Caribbean hotels have not been able to obtain the financing they need in order to proceed with construction. "Deposits from residential buyers are no longer sufficient enough to cover the financing of hotels. This business model is no longer viable," Smith explained. In addition to proposed projects, the solvency of existing hotels also has been impacted. Of the 105 projects under development, only 54 are actually under construction, with the remaining delayed until the economic situation improves.

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