May thru August indicators in general moved closer to our 2008 benchmark. Projections for the next several months are fairly flat year on year. Year to date, NPI hotels reported modest gains. Some Family Islands have had healthy gains, while others have lagged. Abaco was poised for good year on year growth but this was dampened by the BEC power problems this summer. Grand Bahama continues to struggle.
The good news is that ADR has largely been maintained throughout the recession, with many of our promotional offers focusing on value packaging rather than rate slashing. This should improve the cash picture for many hotels sooner rather than later. Smith Travel Research recently reported that hotels which slashed rates post 9-11 took over nearly seven years to return rates to their pre-9-11 level. Our climb back should be much quicker.
Indications are that we’ve held share well in the leisure market since the recession. Efforts over the past several years towards increased airlift and reduced air travel costs, combined with the Companion Fly Free promotional campaigns, have been key to the marginal but steady improvements since last fall. Our real challenges lie with the return of group business and in the Family Islands — stimulating cheaper airfares.
During the past 10 years group business has grown to represent on average 25-30% of NPI’s business, fuelled primarily by Kerzner’s new convention facilities and the extension of the US convention tax credit to Bahamas travel. In 2009 due to the recession and the so-called AIG factor, group business dropped nearly 40 percent.
There are encouraging signs that the group business is returning. Most groups book well in advance and based on definite and tentative business, growth should become evident next year.
In the midst of struggling to re-grow our business and capture market share by containing costs and offering consumer’s value, we were faced in May with the sober realities of the Bahamas Government’s fiscal dilemma. With few options to raise essential revenue, the Prime Minister announced that the hotel occupancy tax would jump from six to ten percent and the departure tax would go up by five dollars effective July 1, 2010. With 18 cents out of every government tax dollar going to service debt and a growing deficit which could impact generations of economic activity, the Government indicated it felt it had no other choice. In addition Government budgets were reduced, including the Ministry of Tourism’s.
Upon learning of the intention to increase the room tax and departure tax, we were told that this was a necessary action and not a debatable matter. We understood Government dilemma. In the ensuing weeks, arguments were made for providing some measure of relief to the room tax increase for prepaid business and to address other matters of concern to the industry. Some of that has been addressed and is described further in this update to members.
Without question, these continue to be difficult times for both the public and private sectors. We are faced with the multiple challenges of generating business while minimizing our operating costs, improving service and improving our product.
At no other time has it been essential for industry to rally together and for all hands to be on deck. A strong and viable hotel association backed by the support and engagement of its members is critical to our future success. Over the coming months we will be challenging more members to become involved in BHA and consider appointments to the Board of Directors and Officer positions. I invite you to help us make a difference.
Robert D.L. ‘Sandy’ Sands
President, Bahamas Hotel Association