Caribbean hotels are enjoying their continued run of double-digit net operating income (NOI) growth according to the newly released 2015 edition of Trends® in the Caribbean Hotel Industry by PKF Consulting (PKFC), a CBRE Company. According to the report, the average Caribbean hotel experienced a 17.3 percent increase in NOI during 2014, marking the fourth consecutive year that Caribbean hotels have seen a double-digit increase in NOI.
Revenues and Expense
The Caribbean hotel industry is made up of a large number of unique resort properties in various destinations which provides the opportunity to generate profits from a variety of services and amenities.
Rooms revenue (57.6 percent of total revenue in 2014) continues to be the greatest source of revenue for Caribbean properties. Last year, hotels in the Trends® survey sample saw rooms revenue increase by 7.4 percent, mainly driven by a 5.1 percent increase in average daily rate (ADR).
“During 2014, Caribbean hotels with an ADR greater than US$300 were able to raise their rates without hurting occupancy. The types of travelers these properties attract are less price-sensitive and can afford the higher costs,” said Scott Smith, PKFC managing director. “On the other hand, the more modest-priced properties were not as successful raising their rates. These properties are facing increased competition from the all-inclusive resorts that represent a strong price-value proposition to rate-sensitive travelers.”
The average Caribbean hotel in the survey sample was able to translate 5.0 percent revenue growth to a 17.3 percent increase on the bottom line. “The primary reason for this enhanced flow-through was the ability of Caribbean hotel operators to limit expense growth to just 2.2 percent. Particular strides were made in the area of labor costs,” Smith said.
For the region, total labor costs increased by 1.6 percent versus a 3.7 percent increase at comparable U.S. resorts. “In most Caribbean countries, available labor is abundant, and wages are relatively low. The Caribbean region has yet to see the levels of employment growth that have driven up wages in the United States,” Smith added.
Utility costs in the area historically have been high compared to the U.S. However, for the second consecutive year, study participants noted a decline in utility costs at their hotels. “Caribbean resorts have been at the forefront of green and sustainable practices for both financial and ethical reasons. They now are beginning to reap the rewards of these energy saving practices,” Smith noted.
Read full article at: Hotel Online