Analyst: The Caribbean is still a long way from recovery.

According to PKF Consulting senior vice president Scott Smith, the Caribbean hotel market is gradually attracting attention from developers and vacationers, but it is still far from the recovery seen in other regions.apartments ner me

“What you’re seeing is that the Caribbean is still lagging behind the United States in terms of resort recovery, in that occupancy, average daily rate, and RevPar [revenue per available room] haven’t returned to pre-recession levels,” Mr. Smith said. “We’re still on the rise, but there’s still a long way to go.”
During the financial crisis, the leisure segment suffered, but “that’s beginning to improve now as travelers have more expendable, disposable income to spend on leisure activities,” according to Mr. Smith.
According to the latest Caribbean Trends in Hotel Industry study from PKF, the average net operating income (NOI) for the Caribbean increased 10.9 percent in 2012 over the previous year. According to the consultancy, this is the second year of double-digit rises in NOI and the fastest annual profit growth for Caribbean hotels since 2008.
“The leisure segment began to recover in 2011 and 2012, and they were the ones driving up demand for the Caribbean segment in terms of both occupancy and [average daily] rate,” Mr. Smith explained.

This year, the industry’s success has improved even further. According to the firm’s most recent results, RevPar increased 10.5 percent from a year ago this spring, increasing from $146.12 to $161.95.

“It’s a lot of rooms [for the region], and it’s a huge question mark in a market that hasn’t recovered yet.”

However, there are a number of factors that could slow or stop the region’s hotel market from fully recovering. In April, American Eagle flew its last flight from Tortola to San Juan. Some routes have been picked up by JetBlue and other airlines, but there is concern about a drop-off in flights to the area.

Mr. Smith explained that the Caribbean is extremely vulnerable to airlift, and that “if you don’t have airlift, you can’t get your visitors.”

Hoteliers are also worried about a planned carbon tax by the European Union on foreign flights into and out of European airports, which would boost travel prices.

According to STR Global’s pipeline survey, there were more than 200 hotel rooms under construction in five countries in the area in June. The Baha Mar project in the Bahamas is expected to produce approximately 2,200 rooms, prompting market observers to speculate on the effect of the additional supply.

Mr. Smith told WPC News that “those destinations would be OK,” such as Aruba, Jamaica, Puerto Rico, and the Dominican Republic. “It’s a lot of rooms [for the region], and it’s a huge question mark in a market that hasn’t recovered yet.”

This year, the luxury hotel segment has guided rises in net operating income, and the firm anticipates that the area will sustain a 10% rise in RevPar through the end of the year, compared to 2012.

According to Mr. Smith, new building isn’t the best choice for investors in the future. Existing properties are more valuable than trying to create a new one, he claims.

He said, “There’s a lot of opportunity [in the Caribbean].” “The trick for the investor is to buy at a discount or expand at a discount, if at all possible.”