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Global financial turbulence is sending a winter chill across Caribbean tourist hotspots and 2009 appears
extremely challenging as hoteliers and governments struggle to ward off a deep slump in the region͛s
leading industry.

Financial Crisis Headlines.

© Norman Chan - BigstockPhoto.com

Adding to the economic downturn that followed the global credit crunch, record high oil prices in 2008
that increased air fares and prompted airlines to cut flights, and low consumer confidence in the main
tourism markets have combined to negatively affect Caribbean tourism. The Caribbean Development
Bank (CDB) has suggested that the current contraction in tourism could be longer and deeper than that
which followed the events of September 11, 2001. Caribbean hoteliers are already reporting drops of 20
per cent and 30 per cent in bookings, triggering lay-offs in the tourism industry in several islands as well
as stalled construction projects and new developments, while hoteliers slash prices and seek creative
ways to keep their properties running.

In December 2008, Sandals Resorts International announced lay-offs of 650 Caribbean hotel workers in
the Bahamas, Jamaica and St. Lucia, representing seven per cent of its workforce. Lay-offs were also
planned for Antigua, and the Jamaica-based resort chain said the cuts would help the company stay
competitive during the global economic crisis. According to Caribbean Tourism Organisation (CTO)
statistics, North America accounts for 50 per cent of the Caribbean tourism market, which attracts 22
million visitors and injects US$21.6bn into the island economies every year. Europe accounts for another
40 per cent of the region͛s tourists. The move by Sandals has added to economic woes in the Bahamas,
where the world-famous Atlantis resort also retrenched 800 workers, among other cuts by other hotel
operators. Bahamian Prime Minister, Hubert Ingraham, said bookings for 2009 did not look good and
the destination expected to finish 2008 with an eight percent decline in business. Tourism makes up 65
per cent of the Bahamas͛ work force.

Expansion halted

As the economic recession deepens in the United States and Europe, fall-off from both is increasing and
the forecast is for island economies to continue to feel the squeeze with deeper contractions in tourism
and construction. Small tourism destinations in the Eastern Caribbean have been particularly hard hit,
said Wayne Cummings, director of business administration for Sandals Resorts International, which also
operates properties in the Turks and Caicos and St Lucia. ͞It͛s distressing to see͟, Cummings said. ͞To
put it bluntly, some hotels are already sucking wind͟.
In the Dominican Republic, which along with Cuba has led the way in Caribbean tourism growth over the
past 10 years, the financial crisis has also stalled the major Cap Cana resort, a development which
includes four luxury hotels, three golf courses and a mega-yacht marina. The resort development
released 500 workers in November, media reports said, after Lehman Brothers declared bankruptcy and
a US $250M loan fell through. Talks to re-negotiate a US $100M short-term loan also collapsed and
another 1,000 layoffs were also expected.͟ ͞Our project has been affected by the economic tsunami
that has paralysed the global financial markets͟, said Cap Cana President Ricardo Hazoury.The 50-
square-mile Cap Cana development is located in the eastern section of the Dominican Republic and its
developers include Deutsche Bank, the Trump Organisation and the Ritz Carlton Hotel. Jamaica has also
suspended plans for a multimillion-dollar expansion of a popular tourist port in Kingston. The US $122M
project at the Kingston Wharf has been pushed back to 2011 after several international banks backed
off citing the global financial crisis. The development is to include construction of duty-free shops and a
renovation of the nearby Port Royal town as a cruise ship destination.

In Barbados, the Central Bank has projected a four to five per cent drop in tourist arrivals in 2009
because of the global recession, and a significant fall-off in revenue from the country͛s largest foreign
exchange earner with a loss of jobs. In response to the current global crisis, the country͛s Prime Minister
David Thompson has rejected a call for belt tightening measures, instead urging more spending and
investment at home to keep the economy going. Thompson outlined some measures designed to
achieve that objective, including accelerating the increase in tax credit and increased pensions. Tourism
Minister, Richard Sealy, is optimistic that Barbados will be able to weather the storm based on the
diversity of its tourism markets and special arrangements with critical partners. Barbados enjoys a high
percentage of high-end repeat business from the United States, Canada and England and responded
quickly to the crisis by stepping up marketing efforts, adding US$5M to its US$50M budget. Others have
also been ramping up their marketing efforts. Puerto Rico began a special ͞emergency͟ campaign,
adding US$12M to the destination͛s annual marketing budget of about US$20M, while the Jamaican
government is spending US$5M on an additional advertising blitz above its normal US$30M marketing
budget. With CTO backing it is also leading a new regional US$60M campaign seeking to promote the
Caribbean and drive business in major source markets.

Buoyant Cuba

While other islands struggle with cancellations and layoffs, Cuba͛s vacation industry has remained
buoyant and was reported to be gearing up for a strong winter season. Government officials said the
destination was booked solid through December and expected to record 2.34 million visitors in 2008.
Cuba͛s performance has been linked to the fact that the global financial woes have so far been softer on
Canada, its top source of visitors.Some 35 per cent of tourists to Cuba this year were Canadian, with
635,000 visiting up to September, one-fifth more than in the same period last year. Canada͛s economy
has not suffered the same losses, now sapping the savings of homeowners in the United States. The
number of Russian tourists to Cuba rose 40 per cent but visitors from Britain, Italy, Spain and Germany,
the top suppliers of tourists after Canada, declined between three and five percent. Going into the high
winter season, his future appears less than rosy for the wider Caribbean: ͞I͛ve been in the business 38
years. I have seen the impact of the Gulf War. I have seen the recession of the 1980s and the effects of
Sept. 11 2001,͟ said Robert Sands, senior vice president of external affairs at Baha Mar Resorts ltd in the
Bahamas, which owns a number of properties. ͞But nothing has been of a global nature, which makes
the current financial situation we͛re in much more worrisome.͟

* Barbados-based journalist.
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Key strengths
‡ Proximity to the U.S.
‡ Reliable and affordable airlift
‡ Demographics of U.S. tourists
‡ Weak local currencies, especially versus the Euro
‡ Natural beauty and weather
‡ Unique tourist product

Key threats
‡ U.S. housing market softening
‡ Hurricanes/terrorism
‡ Labor shortages
‡ Increased preference for cruises
‡ Opening of the Cuban market to
U.S. nationals
‡ Reemergence of Mexico in the
tourism market
‡ Increase in the cost of debt
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http://www.bhahotels.com/tourism-statistics
¢

PKF: Downturn severely affected Caribbean hotel
industry
September 13, 2010 Hotel and Motel Management

Atlanta ± The Caribbean lodging industry felt the full negative impact of the recent global recession in 2009, but to a lesser
degree than the U.S. hotel industry. During the year, Caribbean hotel revenues and profits experienced double-digit
declines. While the results may be disappointing for Caribbean hotel owners and operators, the fall off in net operating
income was much less severe than what was experienced by U.S. properties. These findings are reported by Colliers PKF
Consulting USA (PKFC) in the recently released 2010 edition of Caribbean Trends in the Hotel Industry, the only published
research available that focuses exclusively on Caribbean hotel profits, revenues, and expenses.

³It is evident that Caribbean hotels and resorts suffered one of the worst declines in profitability during 2009,´ said Scott
Smith, MAI, senior vice president in the Atlanta office of Colliers PKF Consulting USA. ³Being a global destination for leisure
and incentive group travelers, as well as intra-regional commercial demand, the worldwide recession resulted in significant
declines in hotel performance. It may still be hurricane season in the Caribbean, but fortunately we are starting to see the
stormy economic seas begin to calm in 2010.´


 




In aggregate, the hotels in the Caribbean Trends® survey sample reported an 11.9 percent decline in total revenue from
2008 to 2009. Leading the dollar decline in revenue was the 13.6 percent fall off in rooms revenue, the result of a 3.7
percent drop in occupancy and a 10.1 percent decline in ADR.

³With fewer guests staying at the Caribbean properties, all other sources of revenue posted declines as well,´ Smith noted.
³Food and beverage revenue fell 13.7 percent from 2008 to 2009, while the revenue from other operated departments (golf,
spa, retail, casinos) declined a relatively modest 5.3 percent.´
 

Facing declines in revenue, Caribbean hotel managers responded by cutting costs an impressive 10.5 percent.
Unfortunately, this was not enough to overcome the 11.9 percent fall off in revenues.

³Due to climate, population, natural resources, and government involvement, Caribbean hotel managers have some unique
operational advantages, and disadvantages, compared to their U.S. counterparts,´ Smith said. ³In general, labor costs and
property taxes tend to be less in the Caribbean. However, the cost of supplies, insurance, and utilities are frequently higher
than in the U.S.´

Despite relatively low wage rates, labor costs are the single biggest item of Caribbean hotels¶ expenses. Therefore,
operators had to implement staffing cuts and salary/wage reductions in order to keep departmental expense ratios in line. In
total, labor related expenditures were reduced by approximately 11.0 percent from 2008 to 2009.

The largest expense reduction was achieved in the utility department. ³In past issues of Trends® we reported that many
hotels in the Caribbean were implementing µgreen¶ sustainable energy practices in an effort to control utility costs. By using
energy-efficient light bulbs, toilets, sinks, and showers, Caribbean hotel managers were able to cut their utility costs by 21.2
percent in 2009,´ Smith observed.
The only expense item to rise in 2009 was insurance costs. During the year, insurance premium payments increased 5.3
percent. ³Despite a relatively calm hurricane season in 2009, insurers still fear the threat of hurricanes,´ he added.


 
With Caribbean hotel revenues <http://www.pkfc.com/store/Product.aspx?ProductID=3024> declining at a greater pace
than expense cuts, net operating income in the Trends® sample declined 18.2 percent in 2009. While this is a significant
decline, it is considerably less than the 35.4 percent drop in profitability reported in the 2010 edition of U.S. Trends® in the
Hotel Industry.

Fortunately, things are beginning to pick up in 2010. The peak season results as reported by Smith Travel Research
indicated a comeback in the demand for lodging accommodations in the region. ³As with the United States, we are clearly in
the beginning stage of what should be a period of improving operating performance for the Caribbean lodging industry. Our
estimates of demand and ADR growth are strong through 2013. However, one cannot ignore the depth of the 2009
recession and what was occurring in the real estate and financial markets. This is going to be a protracted revival for hotel
operators and an even longer recovery for property owners,´ Smith concluded.
Airlift, cooperation crucial to Caribbean's future
May 6, 2010 By: Paul J. Heney Hotel and Motel Management

SAN JUAN, PUERTO RICO²Having the

airline industry in a protracted slump is bad
news for many hoteliers. But here in the
Caribbean, where airlift is so critical and
directly tied to occupancy, hoteliers live and
die by the fortunes of airlines. Throw in the
fact that some island nations here have as
much as 75 percent of their jobs related to
tourism, and it¶s clear why so much of this
week¶s discussion at the Caribbean Hotel &
Tourism Investment Conference has centered
around both international and regional air
networks.

Opening keynote speaker Robert Crandall,

former chairman/CEO of AMR Corp., the
parent company for American Airlines, told
Luis A. Fortuño, governor of Puerto Rico
attendees that hard times were still ahead for
the region, and their best hope was to band together.

³You¶ve got to do more. Package and brand and advertise the Caribbean,´ he said.

Jean Claude Baumgarten, president of the World Travel & Tourism Council, agreed that the Caribbean cannot continue to
function as dozens of self-serving tourism entities.

³You have to have a common goal, a common aim,´ he said.

One panelist even suggested²perhaps only half joking²that on islands where a couple might spend, on average, $8,000
per week, perhaps the travelers should be refunded their airfare before they leave.

Luis A. Fortuño, governor of Puerto Rico, explained that his commonwealth holds close to 30 percent of the total inbound
seat capacity of the region and boasts nearly three times the seats from the U.S. mainland as the next largest Caribbean
market. However, tourism represents a mere 7 percent of Puerto Rico¶s GDP, compared to more than 20 percent among
other islands.

³It imparts us with a sense of duty to do better in fostering our own tourism industry « not only for our economic
development, but for that of the whole Caribbean region,´ he said.

Fortuño pointed out that the pipeline here is strong. He said the Sheraton Puerto Rico Hotel & Casino across from the
convention center is the first hotel on the island with more than 500 rooms to be constructed in 10 years. Additionally, the
recently opened W Retreat & Spa on the island of Vieques is Puerto Rico¶s first five-star property. In 2010, more than 600
new rooms will debut on the island, he said.

Outlook
Speakers were mixed on the economic outlook for the region. Baumgarten said he sees a very muted recovery for the
Caribbean in 2010, while Carlos Vogeler, regional representative for the World Tourism Organization, said the recovery has
already begun. Crandall gave more of a dour picture, warning hoteliers about the negative effects that higher taxes and
interest rates²both across the region and in the mainland U.S.²would have on their businesses.

Mark Lomanno, president of Smith Travel Research, gave a mostly positive presentation, noting that the recovery was
taking root across the islands.

³We¶re going to be back in growth [mode] in 2010,´ he said.

Lomanno said the percentage change in occupancy for the Caribbean was -4.7 percent in 2008, -4.1 percent in 2009 and up
3.1 percent in Q1 of 2010. Following a similar trend, the percentage change in ADR for the Caribbean was -10.2 percent in
2008, -13.5 percent in 2009 and up 4.3 percent in Q1 of 2010.

Much of Lomanno¶s quiet optimism for hoteliers here stemmed from the way he sees the recovery shaking out.

³We think that from a lodging industry perspective, it will be a top-down recovery. The higher-end properties will do better
very quickly, starting at the high end,´ he said.

For a region with a large percentage of upscale and luxury properties that caters to affluent U.S. travelers, that may have
been the best news Caribbean hoteliers heard all week.
Developments, luxury segment is focus in Caribbean
sector
March 3, 2010 By: Paul J. Heney Hotel and Motel Management

Miami²There was plenty of dire economic news to focus on at the inaugural Caribbean Hotel & Resort Investment Summit,
held at the InterContinental Miami in February.

Mark V. Lomanno, president, STR, laid it on the line for attendees.

"The markets that seemed to be the most affected in 2009 were the ones that relied on group business, which really fell off,
no matter where you were," he said. "The U.S. market¶s group business was off almost 30 percent.´

Lomanno also explained that while there should be significant recovery in 2010²at least compared to what it was in 2009²
that doesn't mean we'll quickly be back to the room rates of the past peak.

"It is going to take years for most of these areas to get back to the levels of performance from a RevPAR standpoint or ADR
standpoint that existed in 2007. « In the U.S., Europe and the Caribbean, it¶s going to take some time,´ he said.

The other issue for the Caribbean is that there are multiple places for travelers, especially in the coveted luxury segment, to
spend their money. More choices abound, including condos, second homes and even cruise ships. This has pushed
demand lower in the region.

³If you look at lodging demand from about mid-2006 on, it¶s been trending down, which is not at all like the resort markets in
the U.S. and other places around the world," said Lomanno. "There has been a little more of a challenge [in the Caribbean]
from that resort demand perspective. « The good news is that it¶s less negative in the past couple of months.´

And Lomanno again stressed that it will be a long road back.

³During the last downturn, it took six years for the lodging industry to recover the rates they had in 2000," he said. "We¶re
thinking that in terms of inflation-adjusted dollars, it¶s probably going to take 8-10 years for the rates to come back.´

Following are photos and selected thoughts from other panelists at CHRIS 2010.


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Hotel Price Index shows Caribbean and Latin America
rates hold steady
October 8, 2010 Hotel and Motel Management

DALLAS, TX ² Caribbean and Latin American hotel rates have remained

steady for the first half of 2010 according to Hotels.com who released their
biannual Hotel Price Index unveiling a global 2% increase in average hotel
room rates for the first time since the end of 2007.
Despite this worldwide increase, hotel room rates in the Caribbean and
Latin America rose less than 1% versus the previous HPI report while
Cancun experienced one of the greatest average hotel price reductions in
2010, dropping to an average rate of $171 per night ² a -6% change from
its $182 average nightly room rate six months prior. Cancun proved to be
among the declining minority, as prices in such popular Latin American and
Caribbean destinations as Rio de Janiero (+12%), Nassau (+14%), Sao
Paulo (+7%) and Buenos Aires (+5%) all posted an increase in respective
hotel rates over the same six-month period.
¢




 

 


 
 
 "Hotel rates in Latin America and the Caribbean remain steady and strong,"
said Miguel Oliveira, director of Global Merchandising Strategy for Hotels.com. "Since the U.S. traveler spends on average
$161 per room when staying abroad, the Caribbean and Latin America markets continue to offer phenomenal savings.
There are amazing deals to be had for hotel rooms in such places as Monterrey, Mexico; Buenos Aires, Argentina and
Negril, Jamaica."

Top Caribbean and Latin America Destinations The Caribbean continues to be a top destination for U.S. travelers due to its
close proximity to the U.S., as well as offering sweeping oceanside vistas and diverse, vibrant cultures. Latin America also
continues to be a popular destination among U.S. travelers due to the fact that the U.S. dollar can last a lot longer in most of
Latin America's 20 countries.

Since 2009 there has been an increase in the number of Caribbean and Latin American properties, which has greatly
impacted rates and increased room availability, making it easier and more affordable than ever for travelers to visit. New
Yorkers booked the most rooms in the Caribbean and Latin America, while hotel guests originating in Los Angeles, San
Francisco, Chicago and Houston rounded out the top five respectively.

The HPI revealed that the most expensive destinations across the region included locations in Bermuda, the Bahamas,
Saint Lucia and the U.S. Virgin Islands because these areas all contain higher-end hotels and resorts, attracting luxury
travelers, willing to pay for more lavish vacation experiences. Additionally, average prices for hotels in resort markets in
Mexico and Costa Rica are skewed by the growing prevalence of all-inclusive properties with rates including
accommodation, meals, gratuities and taxes.