Economic Recession Adversely Affects Caribbean Hotel Profits
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.
