The average Caribbean hotel experienced a drop in bottom-line profits of 16% in 2008, according to a PKF Hospitality Research publication.  Global economic recession is the primary reason, and profits are expected to continue to decline in 2009.

Numerous Caribbean hotels are putting various marketing strategies into place to combat these effects, including incentive packages and targeted advertising.  The report tracked the changes in expenses and operating revenues for these hotels during the years 2007 and 2008, and found that visits to the Caribbean dropped by 4% in 2008 due to the recession.  Expenses were cut by hotel managers, but this was not enough to offset the decline in total revenue.

Caribbean hotel managers do not have much control over utility and insurance costs, which are a major concern.  Also due to the economic recession, planned hotels have been delayed and the ones already in progress have stopped construction.

In an effort to cut costs, hotel managers have cut staff and reduced wages since labor is the biggest expense.  Wages are commonly lower in the Caribbean than in the United States, and a combination of this factor plus the large number of available workers in certain areas have helped lighten up the labor expense ratio.

The report compares the performance of Caribbean resorts in relation to United States properties that are similar.  Ultimately, Caribbean hotel profits were lower than those of comparable US resorts by 18%.  Going green is becoming a trend in the Caribbean, and although utility costs are currently high, implementing sustainable technologies is expected to reduce energy costs in the future.

The U.S. hotel industry is experiencing an increasing number of hotel foreclosures and loan defaults as things seem to continue to go downhill.  In just the last 60 days, the number of hotels in default or foreclosure has increased by 125 percent in California, and other states seem to be following suit.

During the time period of mid-May through mid-June, 175 hotels are now in default with 31 being foreclosed on in California alone.  The county leading in these unfortunate events is San Bernandino, with 19.6% of the results.  Riverside County follows with 16.1%.

As the economy continues to decline, it seems that all hotels are being affected, not just the smaller ones.  A large percentage (87%) of foreclosures are accounted for by nonfranchised hotels, but franchised hotels seem to make up the largest portion of default properties at 59%.

According to Alan Reay, president of Atlas Hospitality, every hotel is struggling in the current economic situation unless they are debt-free.  Independent hotels as well as branded properties in primary locations are experiencing problems.  It appears that full-service hotels are getting hit exceptionally hard.

States that appear to be feeling the brunt of the economic downturn are Arizona, Florida, Nevada, the Caribbean and Texas.  In the Midwest where there was not a substantial increase in rates, it appears that hotels may not get hit as hard as the rest of the U.S.

Recently, Starwood Hotels & Resorts reported revenue per available room drops of almost 30 percent for the second quarter of 2009.  Annual average rate drops were reported at nearly 20 percent.

Starwood reported that overall, system-wide RevPAR dropped 27.7 percent for the quarter.  This is a slightly higher percentage than the drop the Marriott experienced according to BTNonline on July 16th.  International RevPAR dropped 30.6 percent, taking the biggest brunt of the decline.  North America RevPAR dropped 25.4 percent.

The largest declines were seen in luxury brands and upper upscale brands, with St. Regis and the Luxury Collection down 24%.  Worldwide, average daily rates for the quarter decreased by 18.4 percent.  During the quarter, according to Starwood CEO Frits van Paasschen, swine flu worries cost Starwood approximately $10 million in revenue.

Worldwide, occupancy for the second quarter was down 8.1 percent, and most brands drops in occupancy were within that range.  W was the exception, with a drop in occupancy of only 4.4 percent.

As we were last speaking of the 5-E’s that Bob Gorman feels could benefit any hospitality related industry, here are the explanations of the 5-E’s:

Engage Professionals - Engaging with experienced professionals will help enhance owners understanding of their strengths and often reveal opportunities that are less obvious.  These professionals can analyze the physical and operational situation, which helps in implementing strategies for repositioning.

Establish a unique position or niche - In order to be competitive, you must first understand how your property is perceived, so that you can create a “new” place.  Put your business against the competition in every aspect:  Qualities of food, arrival experience, recreation offered, ambiance, etc.  You can zero in on what you may be missing, or can add to your services to make your business stand out on its own.

Elevate the e-Profile - You must get your business noticed!  In current times, people rely more and more on the internet to search for reservations.  Create a well-designed site that clearly states your brand.  Entice your visitors with special packages and access to events and activities.

Expand Average Daily Rates - Offer choices that keep guests at your location longer than anticipated.  Offer choices in types of lodging, activities that are unexpected and beautiful settings that are above the norm.  In simple terms, offer an experience like never before.

Encourage Repeat Visits - Provide high quality at a value.  Service, food, accommodations should all be exceptional yet affordable.  Special attention and a personal experience will continue to bring guests back time and time again.

To compete in the resort destination market successfully, you need a complete understanding of the available resources.  You must know your limits, and the opportunities that are there for enhancement.  The sixth E - “In this environment, a resort must no only deliver quality and value, but also the opportunity to take home a memorable experience.”

While the economy continues to be in the slumps, people are changing the way they vacation.  Although they may not travel as frequently as they once did or go as far, they want the best value available.  This calls for establishing a clear competitive position for the smaller and older resort destinations.

According to Bob Gorman, RLA, FASL, principal at Mahan Rykiel Associates, resorts need to find unique and creative ways to differentiate their resorts so that customers get an improved and noticeably different experience than before.  Using existing resources and accommodations to expand beyond the basics of guests expectations is the focus.

Gorman feels that whether a property is a small, one-of-a-kind destination, large, older or new, there are 5 distinct categories that improvements can be made in to maximize available resources and give a particular resort business a competitive edge.  According to Gorman, this 5-E approach can be put effectively into place by nearly any hospitality related industry.

These 5-E’s are:

Engage professionals
Establish a unique niche
Elevate the e-Profile
Expand Average Daily Rates
Encourage repeat visits

These categories will be expanded upon in the next posting, so stay tuned . . .

According to a recent report from PKF Hospitality Research, the downturn of the hotel industry will last longer than previously expected.  The firm says RevPAR will drop by 13.7 percent this year, with a quarter-over-quarter gain not expected until the first quarter of 2011.

The RevPAR plunge will be caused by a 6.4 percent decrease in ADR combined with a 7.8 percent decline in occupancy.  It is believed this will lead to a 30.1 percent decline in industry profits in 2009.  Fortunately, the report forecasts that the current quarter will see the most severe drops, and by mid year this should begin to moderate.

According to Mark Woodworth, President of PKF Hospitality Research, two major markets will begin to experience RevPAR recovery in the fourth quarter of this year - Minneapolis and Orange County, CA.  Also, he expects that lodging demand will increase in San Antonio and Baltimore.  However, boosts in occupancy will be over-ridden by significant increases in supply.

Most cities will experience RevPAR declines in 2010, but by 2011 through 2013, all 50 markets are expected to see gains in occupancy, ADR and RevPAR.   While this forecast does not give as bright a forecast as Smith Travel Research, it should also be considered that PKF covers only the top 50 lodging markets.

BedandBreakfast.com recently conducted a survey that found that almost 80% of travelers intend to take as many or more trips this season as they did last year.

More than 3,300 travelers responded to the survey. The results were evenly split, with about half claiming they would take “staycations”, where they stay closer to home, and “go-cations”, where they travel a further distance by driving or flying.  Of the survey respondents, 67% say that if gas does climb to $4 per gallon, they will reduce their travel plans.

Sandy Soule, Marketing VP at BedandBreakfast.com said they are relieved to learn that even with soaring gas prices over the last month, 70% of respondents still plan to take from two to four trips between now and labor day.  Since last year, the percentage of people who said they would stay closer to home has decreased, which may show more hope that the economy is strengthening somewhat.

To reduce costs, many respondents stated that they will spend less each day while vacationing, or reduce the length of their vacation.  Half of the people who responded to the survey said the motivation for travel was simply the need to get away, while 76% feel that they will travel more because of good deals being offered on lodging.

It is clear that people intending to vacation are responding to the travel bargains available.  Reduced airfares and lodging rates are enticing many to go ahead and get away from it all, at least for a few days.

According to Michael George, president and CEO of Crescent Hotels & Resorts, properly setting beer and food prices, along with other services offered by hotels, can help drive room sales.  This seems to be especially true of full-service hotels that have an attractive staff and nice atmosphere.

Also being noted is that banquets and meetings are more frequently being booked as day meetings instead of overnight meetings.  The Hilton brand Embassy Suites has been less affected by this trend because if offers value and extra services.  For example, some incentives include a manager’s cocktail hour and free breakfast.  It seems that adding value helps book rooms as well.

Style and design is another issue that is being looked into, according to Fredrik Korallus, executive VP and COO Radisson Hotels and Resorts.  Although people are looking to save money in a recession, they still notice properties that are attractive when it comes to style and design.  According to Korallus, ugly costs just as much as attractive.

The consensus seems to be that by adding value, lowering food and bar prices, and offering attractive properties with a good atmosphere, this may be the “new normal” when it comes to generating better revenues in the hotel industry.

According to Smith Travel Research (STR) the U.S. hotel industry declined in three key performance measurements during the week ending May 16 2009. Room occupancy fell 12.6% to end the week at 57.8%. The average daily rate was $98.33, a drop of 10%.

Of the Top 25 Markets, none posted increases in any of the three key performance areas. Atlanta posted the largest decline in occupancy of 18.8%. Washington, D.C.-Maryland-Virginia posted the smallest decline at 5.4%. The only states to experience average daily rate declines of more than 20% were New York, New York at 31.6% and San Francisco/San Mateo, California 22.8%.

Of the seven chain-scale segments, the largest drop in occupancy was seen in the Midscale with Food and Beverage segment. This segment declined 14.6% to 52.7%. Performance declines were led by the Luxury segment in the remaining two key performance measurements. The Luxury segment experienced a 20.1% average daily rate decline to $237.05 and a 31.3% drop in Revenue Per Available Room to $150.40

The economy has resulted in many people choosing not to take vacations - which has effected Walt Disney Co. profits for the second quarter dramatically , a whopping 46% drop in net income.  In an effort to reassure investors, Disney management dropped hints that the declining economy seems to be easing up.

Disney’s net income fell to 33 cents a share for the quarter ending March 28, which was worth 58 cents a year earlier.  The brunt of the recession appears to be hitting Disney’s parks.

According to Robert A. Iger, Disney Chief Executive, action was taken to keep visitors coming to Disney’s domestic parks, which had a predictable impact on margins.  Discounted hotel rates resulted in increased attendance during the quarter when Walt Disney attendance decreased 1%, and Disneyland at Anaheim had a 2% gain.  This helped increase occupancy, but also resulted in a 17% drop in spending per room.

Disney’s broadcasting business continued to be weak due to decreases in local ad sales, resulting in decreased revenue at Disney’s television stations.  Higher international sales of “Criminal Minds”, “Ugly Betty” and “Desperate Housewives” helped balance program expenditures.

In recent years, ABC has been unsuccessful in launching a new hit show.  Ratings have slid 3%, which could mean a rough ride in coming months.  The advance sale of commercial time will soon begin, and it is believed ABC will have a hard time maintaining its share of revenues due to advertisers having to pay increased rates for a smaller viewing audience.

Revenue also slipped for Disney’s interactive media group, which fell 17% to $129 million.  This loss was caused by a reduction of sales in Disney’s video games.