Bahamas Hotels: 18 Months From Full Recovery

The hotel industry is "about 18 months away" from a position where it can start to exceed 2008 comparative numbers, the Bahamas Hotel Association's (BHA) president said yesterday, as he warned that sector employment was likely to be "one of the casualties" of the recession.

Robert Sands, who is also Baha Mar's senior vice-president of external and governmental affairs, said the industry's employment levels were likely to take much longer to recover than occupancies and room rates, with resort properties unlikely to re-hire many of those let-go.

The BHA president's comments are the starkest warning yet that the estimated 2,000-3,000 hotel industry workers who lost their jobs in the run-up to Christmas 2008 and beyond are unlikely to all regain the same posts when the hotel industry - and wider Bahamian economy - sees an upturn in its financial performance. Mr Sands said many Bahamian resort properties had generated efficiency gains from being able to do "more with less", and going forward would place the emphasis on obtaining increased productivity from their existing workforce, rather than adding to staff numbers.

"The employment issue will take much longer to resolve and get back to those pre-recession levels," Mr Sands told Tribune Business. "We'll get to where we were on occupancies and room rates quicker than to where we were on employment levels.

"Companies are looking for increased productivity with less, but at points in time they will add to their employee numbers where business demand dictates.

"I believe one of the casualties in this whole economic downturn is that we will not get back to the same employment numbers we were at pre-recession. The employment of those persons, and other persons, will be absorbed by new business ventures driven by demand for those businesses."

Following the late 2008 downturn, Mr Sands said Bahamian resort properties had placed "a tremendous amount of effort on enhancing production with less, rather than working with more".

He added: "The 'new normal' is that it has forced us to work smarter, employ best practices allowing us to do more with less, be creative in how we attract business and pay attention to outlays in terms of operational expenses in an effort to be more efficient going forward.

"The way we did business a year ago is changing, even as we do business today. This period introduced a whole new approach in the way we operate, just to remain viable."

For 2009, New Providence's 14 major hotels achieved an average monthly occupancy of 60.9 per cent, compared to a 63.4 per cent average for 2008. Mr Sands said that to be "operationally sustainable", for most resorts "the preferred position is closer to 70 per cent".

When asked how close Bahamas-based resort properties were to getting back to pre-recession occupancies and rates, Mr Sands told Tribune Business: "I think we're about a year-and-a-half away - about 18 months.

"It will take us this year to gain some ground, the first quarter of next year to get back to where we were, and the mid-quarters to begin to exceed 2008 numbers."

Data published for the first eight months of 2008, immediately prior to the Lehman Brothers bankruptcy and Wall Street crash, highlights just how badly the Bahamian hotel industry was affected when these figures are set against their 2009 comparatives. For March, which last year contained the Easter holiday, the average occupancy rate at the 14 major New Providence hotels dipped to 69.7 per cent compared to the previous year's 81.2 per cent.

For the same month, the average daily room rate (ADR) fell from $315.41 in 2008 to $269.14 in 2009, with revenue per available room (RevPAR) down at $187.51 compared to $256.10 in 2008.

As a consequence, room revenues declined by 27.9 per cent year-over-year for March 2009, reflecting a 15.5 per cent drop in room nights sold and a 13.5 per cent fall in air arrivals. March was a slightly extreme example for the first eight months in 2009 but, apart from January and April, which suffered room revenue falls year-over-year of 16.8 per cent and 10.6 per cent respectively, all other months saw declines in this category of 21 per cent or more.

The 2009 figures only began to exceed their comparatives in September, largely due to the weakness induced by the Wall Street collapse, coupled with fears about hurricanes impacting the Bahamas.

Still, for the 2009 full-year, the average RevPAR generated by major New Providence hotels fell from $156.29 in 2008 to $138.66 last year, the year-end turnaround not enough to compensate for the performance during the first three quarters.

Mr Sands said the figures released by the Ministry of Tourism and BHA were an aggregate of all New Providence-based properties, and were heavily weighted towards Atlantis and Kerzner International's high-end properties. "I would say that for most properties, if they can average on an annual basis occupancy rates in the mid to high-60 per cents, and an average rate in excess of $100 per night, your head should be above water," he added.

Occupancy rates were, on average, well below this level in 2008, holding in the 50-low 60 per cent ranges, and Mr Sands said that improving this position and generating increased demand was the main priority for most resorts, as opposed to rates.

The BHA president said that apart from the recession, other factors such as the threat of hurricanes may have impacted occupancy levels at a particular point, but he acknowledged: "We need to get back to those 2008 aggregate levels, and not judge by 2009. It appears that hotels are achieving forecasted levels for this year, which is showing some growth over last year, so for the first three weeks that is a positive indicator.

"2009 was not a year we want to celebrate in any way, but it should certainly be a bottom benchmark for us, not a ceiling."

Mr Sands said that while indicators were showing signs of a turnaround, and that there could be improvements "in the third quarter and fourth quarter of this year", the Bahamian hotel industry wanted to see a trend of sustained, monthly occupancy and room rate increases year-over-year before pronouncing that a sustained recovery was occurring.

Many resorts were also involved in promotions and other initiatives to stimulate demand, Mr Sands adding that a true test of any rebound would be if it lasted beyond when this support was reduced. "Emphasis is being placed on workplace development and customer satisfaction," the BHA president added. "Most properties in the Bahamas have committed, notwithstanding the softness of business, to an approach that they don't want any customer leaving the destination unhappy. That will go a long way to retention and positive word of mouth in the marketplace."