Caribbean hotels endure Zika, strong dollar, new supply
 
Caribbean hotels endure Zika, strong dollar, new supply
19 MAY 2017 7:55 AM

Headwinds from Brexit to Zika to Hurricane Matthew have had less impact on hotel performance than might be expected. 

Over the past 18 months, Caribbean tourism has been burdened with weakened demand and buying power from Europe thanks to Brexit and an unforeseen health crisis with the spread of Zika throughout the region. As if that weren’t enough, Hurricane Matthew tore through the region in the fall of 2016.

However, the Caribbean has survived all of these headwinds with surprisingly low impact to performance. For the trailing 12-month period, demand for the region was down a mere 0.4%, with strong growth in visitation to Cuba and Bermuda balancing out the declines on other islands that have been negatively impacted like Puerto Rico.

Rate growth continues to be a challenge with the weakening of the British pound, the euro and the Canadian dollar causing average rates to decline 2.7% through March. Since the end of 2015, the pound has declined 17% and the Euro has dipped 14% versus the U.S. dollar. Moreover, the Canadian dollar has been sliding against the dollar for more than four years, dropping from a premium in late 2012 to less than 75% of the dollar over the past month.

As the chart below illustrates, room rates in the Caribbean maintained a fairly steady premium in room rate to U.S. resorts between 2011 and 2015. However, over the past 15 months, that premium has eroded to a mere 18%.

Room supply is also increasing in the Caribbean with more than 4,800 rooms slated to open in 2017, the largest one-year increase in supply in 10 years. A large portion of the new rooms are the result of the opening of the Grand Hyatt Baha Mar as part of the first phase of the resort complex finally opening at the end of April.

Nevertheless, the outlook for 2017 remains optimistic with the Easter holiday shift bolstering demand in the first quarter (+0.3%) and April looking stronger as well. Continued growth in Cuba and the America’s Cup in Bermuda this summer will bring additional demand to the Caribbean as well.

The American economy is also very strong and comprises almost half of Caribbean visitation. The robust nature of the American tourist base is expected to buoy occupancy in the area, with only a modest decline of 0.8% anticipated this year. Exchange rates will continue to weigh on room rates, but should taper towards the latter half of the year. Average rate for 2017 is anticipated to decline only 1.5% overall.

This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.

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