Hotel industry steadies itself

The hotel and accommodation industry says it is steadying itself in the light of a very difficult 18 months.

Such factors as a shortening of the booking window, increased consumer expectation and in some cases a lowering of room rate have become the norm as individuals find that whilst they may have less disposable income they still want to come on holiday to luxury locations.

“2010 has proved to be better than 2009 in some places and in others a little more of a challenge,” confirmed Jaime Moench, sales manager at the Ritz-Carlton, Grand Cayman.

“The shorter window impacts us in different ways from an operations perspective in terms of planning and also in longer-term planning for the year.”

She added that for the first time it had been observed that day-before bookings had been taken which was unusual for high-end hotels, particularly outside big cities.

Hotels across the Cayman Islands expressed similar thoughts but as hoteliers seek to adjust to the new metrics, there are encouraging signs that new approaches are paying dividends, too.

“2010 was a great year for us, and our results are much better in Revenue Per Available Room, Average Daily Rate and in occupancy than in the last year,” added Maria Laura Skec, sales manager at Grand Cayman Marriott Beach Resort, who have weathered the storm well.

The first year of the new decade had different pressures and opportunities as it went on, said Thomas Mason of Comfort Suites.

“We saw a complete change in consumer expectations; we began to compete regionally and there was a lot more discounting and added value to the products [in general]. The consumer is now a lot more demanding; they’re shopping a lot more and we’re competing more for that kind of customer. There’s been a drop in corporate business due to the economy but the competition is more island-by-island and the rates in the market have dropped significantly.”

Rather than compete purely on room rate, which is seen as counterproductive within the industry, the move is to have added value experiences; this may be free trips to attractions such as Stingray City, discount coupons for local restaurants and other innovations including public-private sector seasonal deals such as the Summer Splash promotion, which offered extra nights free and a host of sea activities for kids.

Flat window
In the condo and accommodation sector, Penny Cumber of Cayman Villas has observed the booking window as ‘flat’ during 2010. She noted that whilst added value was not as much of a factor, customers expected discounts nonetheless.

The cost of doing business has also increased in the Cayman Islands, with work permits, fuel costs and other fees pressurising already thin margins.

The challenge with work permit fees, added Mason at Comfort Suites, is that they are charged at the same rate despite the size of the establishment.

“So we are paying the same as Ritz-Carlton or Marriott who are four or five times the size of us and with revenues as much as seven times the size.

“We had to also implement an energy surcharge fee to the guests [this year]. The 2 per cent increase on duty and on produce, when you put them all together basically there’s less rate and increased costs,” he said.

This additional squeeze has a simple effect on the accommodation industry.

“Less profit means difficulty in increasing salaries/Xmas bonus, adding needed staff, etc,” said Cumber, succinctly.

Going forward into 2011 the hotel and accommodation sector feels that it has in general reassessed what needs to be done to maintain or even increase its share; with certain caveats, as Skec explained.

“Grand Cayman hospitality industry continues to have a high cost operation. For a successful outcome it is key to constantly monitor the cost of the different hotel areas. 2011 looks promising; still the trend of short booking window persists what make difficult to do an accurate forecast.”

Island rallies
The island has rallied in general, added Thomas Mason, and has generated better occupancy figures for the latter part of 2010 going into 2011 as a result.

“As a group [of hotels] we should celebrate the fact that we didn’t sit back; we’ve gone out and competed aggressively in the global marketplace and managed to generate more occupancy,” he said.

Mason also observed that business in the local corporate segment had dropped which was indicative of the economic conditions, something ultimately out of anyone’s hands. Comfort Suites, he said, had gone out and chased new business in an aggressive way, as Cayman is competing with other Caribbean destinations often with lower operating costs.

There are other elements that are an issue to Cayman tourism and attracting people to the island. Penny Cumber said that feedback from some people wanting to book at the last minute over Christmas and New Year had brought an issue into focus that needed attention.

“Most of last minute guests are saying that the air fare is too high as airlines do the reverse [of last-minute hotel discounts] and charge more for last minute bookings! The high airline fares compared to other islands in the Caribbean have always been a major deterrent to bookings here.”