Market not so friendly to small hotel operators - JHTA head
Published:Wednesday | May 11, 2011 | 12:00 AM
Avia Collinder, Business Writer
Jamaica's small leisure properties are experiencing occupancy levels as low as 25 per cent, according to industry spokesman Wayne Cummings, and will hit headwinds strong enough to derail their businesses unless income streams improve.
The accommodation sector's small players, said Cummings, president of the Jamaica Hotel and Tourist Association (JHTA), need cash-flow support and money to invest in targeted marketing as well as timely property upgrades.
The assessment, coming out of April's JHTA council meeting, suggests that while all-inclusive properties are now experiencing occupancy above 60 per cent, hotels with rooms numbering 15 and under are averaging 25-50 per cent.
And, while stopover visitors are now increasing in the most robust manner since the financial crisis of fall 2008, guests are choosing larger properties which provide more value for dollars spent, the JHTA president said.
"The annual numbers are up and travelling consumers are pushing ahead for vacations, but with a clear sense of price consciousness and a greater demand for quality than previously stated," said Cummings, who holds the job as director of business processes and administration at Sandals Resorts International, the largest hotel group in Jamaica.
"Port Antonio continues to run at an average of 27 per cent, and other small hotels, especially those located in Negril and Montego Bay, are averaging 50 to 60 per cent. Those with higher room count are the larger properties and those brands which are recognised."
The hotelier notes that of about 30,000 rooms available locally, some 30 per cent, or 10,000, fall in the small-hotel category, of which one third are medium-to-small villas or guest houses of 15 rooms or less.
Some 60 per cent of total room count are all-inclusives and branded properties.
Cummings said the smaller properties tend to feel the impact of utility costs and taxation charges more than larger hotels, while their marketing budgets are insufficient to drive the business needed to keep the cash-hungry operations sated.
Those with an eye to investing will have to enter the Jamaican market with deep knowledge of the market, policy environment and trends likely to impact operations, or be prepared to fail, the JHTA head said.
Regardless of property size, he said hotel operators will face utility costs which are much higher than in neighbouring Caribbean countries.
"Electricity per kilowatt now is averaging US 30 cents per kilowatt, compared with US 20-25 cents in other islands. This is coming from five years ago when Jamaica was running at half the rates of other islands," said Cummings.
"Something is wrong with the way the tariffs are being calculated."
not able to plan
In the general policy environment, the industry spokesman said taxes are unpredictable and change from administration to administration.
"You are not able to plan," he said, in scenario where competition from the cruise lines, Caribbean neighbours, and now even the United States is increasing.
"We pay 33 per cent corporate tax ... and 10 per cent general consumption tax on rooms. We have a way of subtracting this room charge against GCT spent on operational costs, but if you are not constantly spending large amounts of cash, then the room tax becomes an absolute charge," said Cummings.
Inside the domestic accommodation sector, the small properties must also compete with large properties and all-inclusives. The market remains skewed to the latter.
"It's no longer just a concept, it's a way of life; the traveller has become appreciative of a particular quality for a particular price," he said.
Small properties tend to offer service under the European Plan 'pay as you go' model, whereas all-inclusives combine services at one price.
highly efficient
In the European-plan four-star hotel, said Cummings, single occupancy charge could run to US$150 per night, single occupancy, while a meal could cost US$50.
"On a daily basis, this hotel could cost US$350 per individual, compared to US$250 per person at an all-inclusive with three meals, snacks, water sports, airport transfers, everything built into the price," said the JHTA head.
"The all-inclusive is highly efficient, with certain brands also able to attract more guests at higher rates, depending on their popularity,"
Some small properties have kept their businesses viable by pounding the pavement in the main markets linking with the right travel writers and travel agents, niche marketing, and effective use of social media, he said.
"You have to be out there selling your product. It takes a lot of money and a lot of energy," said the JHTA head.
"I lift my hat, respectfully, to some of those who decided to throw in the towel. You cannot keep spending and spending until there is nothing left."