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Blue Skies For Puerto Rico Tourism

Hoteliers And Industry Analysts Predict The Best Winter Season Since 2000


October 2, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

High hopes for the Caribbean: Puerto Rico, the Dominican Republic, the Bahamas, Jamaica, and Cancun expect a more favorable 2004, despite lingering concern about economy and safety

Industry experts are forecasting blue skies for Puerto Rico tourism this winter—the Caribbean’s high tourism season, which runs from Dec. 15 through April 15—continuing the pickup registered over the summer.

"I believe Puerto Rico will have a good 2004 winter season, at least better than the past two winters, but it is much more difficult in this economic environment to make forecasts," said Scott Berman, partner of the global hospitality & leisure practice at PricewaterhouseCoopers in Miami. "I think—given the level of promotion, new hotels coming online, and decent air service from primary markets—the island has everything in place for a successful season."

Travel analyst Mark Lunt of Ernest & Young in Miami is also confident Puerto Rico will have a good fiscal year (FY) 2004 winter (FY 2004 began on July 1 and ends June 30, 2004). The question is whether it will compare to FY 2000, when hotel occupancy reached 70.7% and room rates fluctuated between $200 and $250 per night.

"Preliminary reports indicate that occupancy levels at Puerto Rico hotels have gone up 3.1% in FY 2003 compared with FY 2002, whereas most of the U.S. mainland markets and Caribbean destinations had lower occupancy in 2003 than in 2002," Lunt said.

According to the Puerto Rico Tourism Co., hotel registrations for FY 2003 totaled 1.96 million, compared with 1.82 million in FY 2002 and 1.83 million in FY 2000. Hotel occupancy for FY 2003 was 64.9%, up from 61.8% in FY 2002 but down from 67% in FY 2001.

"I don’t see anything to indicate we are going to have a poor winter," said Rick Newman, past president of the Puerto Rico Hotel & Tourism Association. "The economy seems to be coming back slowly, and there’s tranquility in the region."

Fiona Taylor, director of Caribbean marketing at travel wholesaler GoGo Worldwide Vacations in New Jersey, said advance bookings in Puerto Rico are significantly ahead of last year’s numbers.

"We’ve done a year-to-date snapshot of what we had on our books and Puerto Rico is way ahead of the game," said Taylor. She noted that there were 536 room nights booked for winter in August, compared with the 175 booked in August 2002.

Kevin Matier, director of Caribbean product at Travel Impressions in New York, said advance bookings for Puerto Rico are slightly behind pace, following the pattern of other Caribbean islands, because travelers are still booking trips closer than ever to the departure date.

"Nevertheless, if we go by summer numbers, which were way ahead, the winter season should be a success," Matier said. "Customers are still price-conscious, but there is demand for high-quality resorts. If hotel demand rises this year, so will room rates."

Are happy days here again?

There are other reasons experts are predicting this winter will be better than last. The stock market seems to be rebounding and corporate spending seems to be increasing. The financial health of the airlines seems to have stabilized, though the tourism industry must remain cautious after 9/11.

"Caribbean tourism appears to be past the lowest point of the downswing, and the numbers coming in from member countries show there are signs of recovery," said Jean Holder, secretary-general of the Caribbean Tourism Organization (CTO).

According to the CTO, tourist arrivals to the region should increase by 6% this year to 7.5 million visitors, compared with 7.1 million in 2002. Cruise ship passenger arrivals are expected to jump 5% from 7.3 million in 2002 to 7.7 million in 2003.

Tourism analysts interviewed by CARIBBEAN BUSINESS believe that despite lingering concerns about the economy and safety, the region’s top destinations—including Puerto Rico, the Dominican Republic, the Bahamas, Jamaica, and Cancun—as well as jet-setting islands such as Anguilla, St. Barts, and Aruba, are well-positioned to have the best winter in the past couple of years.

Willem Pleight, general manager at the InterContinental San Juan Resort & Casino, said reservations for winter are up 4% to 10% over last year. Additionally, the average room rate is considerably higher, about 10% to 11% more than in 2002. Still, Pleight said this year’s rates are about 5% lower than in 2000.

"We are slowly but surely moving back to 2000 rates," Pleight said. "The volume we have on the books is higher than we had last year, which means we don’t have to go looking for cheap business."

Andrew Papoutsis, general manager at Westin Rio Mar Beach Resort & Golf Club, agrees that rates are inching their way back to 2000 levels. "Rates are still slacking a little behind; once occupancy becomes solid, however, the rates will go up," he said.

Travel analysts also believe there is a good chance that Puerto Rico’s hoteliers will be able to raise rates this winter. Revenue per available room (RevPAR), which is a combination of rate and occupancy, has dropped 10% to 15% and rates have fallen 8% to 10%.

"Hotel chains are going to use different strategies this winter, either maintaining their average room rate and seeing occupancy drop or holding on to the number of people in the hotel but doing so at a discounted rate," Lunt said.

Berman expects higher room rates simply because hoteliers will be better able to manage their rates as occupancy increases.

Richard Cortese, vice president of Wyndham Resorts in the Caribbean, is looking forward to a relatively strong first-quarter (1Q) 2004 for Wyndham properties in Puerto Rico. "Our occupancies are slightly higher than 1Q 2003 and we are implementing some rate increases," he said. "I see rates bouncing back because everyone is going to start controlling the Internet rates, which are heavily discounted."

Most online travel sites, including Travelocity and Expedia, focus on the leisure market. Accordingly, those sites flourished when business customers began cutting back on travel in 2001; together they sold more than $35.7 billion in 2002. According to travel intelligence firm PhoCusWright Research, the industry saw total bookings decline by 5% in 2002, but the online segment grew 37%.

"I think hoteliers have done a good job of targeting segments to get bodies in the beds, but it’s been accomplished at discounted rates. There’s no question the Internet and certain websites selling hotel rooms have had a significant impact on how rooms are bought and sold," Berman said.

"In some cases, we’re seeing that 25% or more of the occupied room nights are generated by the Internet, and those rooms typically are priced 30% to 50% below rack rate [full price] in season and out of season."

A better product

A substantial room supply and the forthcoming convention center in Isla Grande are two points in Puerto Rico’s favor.

"Puerto Rico has made great strides in offering travelers new or upgraded hotel products," Lunt said. "The other islands haven’t gotten the same infusion of new hotels. Also, most are suffering from an inability to meet the needs of the group-travel segment, whereas Puerto Rico is moving full-speed ahead with its new convention center." The meeting facilities in Barbados and Curacao, for example, are said to be obsolete.

That doesn’t mean Puerto Rico can rest easy. "I think the Bahamas, because of its proximity to Florida, is a major competitor in the region," Berman said. "There’s also pressure from Mexico and Jamaica because of heavier discounting."

The Dominican Republic is doing exceedingly well, despite the fact that the country is undergoing an economic crisis.

"There has been devaluation of the Dominican Republic’s currency, and the demand in terms of room mix and occupancy lags behind Puerto Rico," Lunt said. "There is little overlap between the two islands because the customers traveling to the Dominican Republic are different; they are more budget-conscious travelers looking for a sun-and-sea destination in a packaged deal."

Greg Thorne, vice president of Inter Island Tours in New Jersey, predicts the Caribbean will fair better than other destinations on the basis of proximity to the U.S. mainland, price, and air service.

"Puerto Rico has done better than other destinations because it knows how to position its product and take it to the next level," Thorne said. "The U.S. Virgin Islands continue to do well because they are closer to home and Americans feel they are on U.S. soil. Aruba does well this time of year because tourists feel the island is hurricane-proof. The Dominican Republic remains a classic success story, with its high occupancy levels and good value for a good price."

Some Caribbean hotels, as well as airlines serving the region, offered a Freedom Sale this summer in an effort to jumpstart travel before the Dec. 15 start of the winter season. Hotels reduced room rates and airlines slashed fares for customers who booked and paid for their travel arrangements by Aug. 29.

"We all did quite well during the Freedom Sale," Thorne said. "There will be other sales and promotions coming out soon, if not from the airlines then from the hotels. The word ‘sale’ has pull in the Caribbean."

Airlines boosting service to Caribbean this winter

Major U.S. airlines are increasing service to the Caribbean for winter, the high tourism season, which runs from Dec. 15 through April 15, and intra-Caribbean airlines are changing their schedules to facilitate connections between various gateways.

American Airlines, Puerto Rico’s dominant carrier, will boost its service from 42 daily flights to 51, adding a nonstop flight from San Juan to Los Angeles and another from Caracas, Venezuela, to Dallas / Fort Worth, Texas. On Nov. 1, it will add service from Fort Lauderdale to Port-au-Prince, Haiti, and from Fort Lauderdale to Santo Domingo. American Airlines will also offer seasonal nonstop flights from Boston to St. Thomas between Nov. 1 and May 1.

Air Jamaica is offering five weekly flights from Orlando to Jamaica, and the carrier will also serve Bonaire three times a week from its Montego Bay hub.

BonairExcel, a new airline based in Bonaire, has begun service from Bonaire to Aruba and Curacao and between Aruba and Curacao. The carrier is expected to have 14 daily flights between Bonaire and Curacao, six daily flights between Bonaire and Aruba, and four daily flights between Curacao and Aruba. The flight schedule and fares are subject to approval by the Antillean government.

Several months ago, Caribbean Sun Airlines, sister airline of Caribbean Star Alliances Ltd., started flying from San Juan to Tortola, the British Virgin Islands, St. Kitts, St. Maarten, and Antigua.

Continental Airlines now provides service from its Houston hub to Grand Cayman, the Cayman Islands, and Aruba. It also flies from Newark’s Liberty International Airport in New Jersey to Montego Bay, Jamaica, with connecting service to Kingston, Jamaica, and Santiago, in the Dominican Republic. The carrier had planned to increase service from Newark to Port-of-Spain, Trinidad, in June but postponed the move until December.

Effective Oct. 15, Delta Connection, a subsidiary of Delta Air Lines, will offer two nonstop round-trip flights a day between Grand Bahama Island, the Bahamas, and Atlanta, subject to government approval. Delta Air Lines started nonstop weekly service to Curacao in January, with Saturday service from Atlanta.

In the past few months, JetBlue has added three new scheduled flights from New York’s John F. Kennedy International Airport to San Juan. It now has six flights a day on this route.

LIAT has reintroduced two nonstop flights between Antigua and San Juan on Thursdays, Saturdays, and Sundays. Seaborne Airlines will boost its daily flights between St. Croix and St. Thomas in late fall. Seaborne currently provides 18 to 24 daily round-trip flights between the two islands. With the addition of 10 flights, the seaplane airline will create a virtual air bridge between St. Croix and St. Thomas.

Effective Oct. 26, US Airways will launch daily service from Boston to San Juan, a route which currently operates on Saturdays and Sundays only. The carrier also plans to increase service on Feb. 14, 2004 from Boston to Montego Bay (Saturdays, Sundays, Tuesdays, and Thursdays), Aruba (Saturdays), and Nassau, the Bahamas (Saturdays), subject to foreign government approvals.

US Airways also announced that on Dec. 13 it will introduce weekly nonstop service between Charlotte, N.C., and La Romana, its third destination in the Dominican Republic. On Nov. 1, it will begin nonstop service between Washington (Dulles) and San Juan; this flight will connect Washington passengers to St. Kitts and Tortola via partner Caribbean Sun.

Paradisus Puerto Rico, island’s only all-inclusive resort, opens Dec. 15

On Dec. 15 Puerto Rico will debut its first all-inclusive resort: Paradisus Puerto Rico Beach & Golf Resort at Coco Beach in Rio Grande, also known as Sol Melia. The resort is about 70% complete. Half of the main access road has been paved, and the marble floors in the main building have been installed. The prefabricated furniture for the main building is en route.

The first phase of Paradisus Puerto Rico, which required an investment of nearly $100 million, consists of 486 guestrooms in 30 two-story bungalows, a lagoon-style swimming pool, a full-service spa, a casino, three tennis courts, an air-conditioned amphitheater, six restaurants, and 29,000 square feet of meeting & banquet space including a 10,344-square-foot junior ballroom and a 12,100-square-foot grand ballroom.

"The first group scheduled to hold a meeting at the resort, an incentive group of 125 people from the U.S. mainland, will arrive in February," said Ramon Sanchez, sales & marketing director at Paradisus Puerto Rico.

A job fair has been scheduled for the last week of October to hire 250 employees, who would come on board in December.

"The Paradisus Puerto Rico resort is very important to Sol Melia. We are putting all our efforts into making it one of the most successful operations of Sol Melia Hotels & Resorts," Emanuel Schreibmaier, executive vice president of sales & marketing in the Americas for Sol Group Corp., told CARIBBEAN BUSINESS during an earlier interview. "The marketing process has already started. With the Puerto Rico Tourism Co. and the Convention Bureau, we are making every effort to launch the property in over 35 countries."

Paradisus Puerto Rico will be an all-suite resort with larger-than-usual rooms occupying 540 square feet to 1,200 square feet. The standard hotel room is 340 square feet to 360 square feet.

The resort will have five two-bedroom Garden Villas, each with its own walled garden with a terrace and outdoor dining area. This area will also have a private swimming pool. There are 16 standard one- and two-bedroom suites; 12 honeymoon suites with private Jacuzzi; 96 Royal Service suites with private swimming pool, 24-hour concierge, and butler & maid service; and one Presidential Suite.

The resort’s 7,500-square-foot grand casino will have 172 slot machines, 11 table games, an entertainment area with live music, and a fully equipped bar with premium brands. There will be six restaurants: El Mirador Grill, a buffet eatery overlooking the ocean; Azucar, serving Caribbean & international cuisine; Tuscano, a Northern Italian-style restaurant; Avocado, serving contemporary California cuisine with steak selections; Taino, serving international cuisine; and Bamboo, which will fuse Chinese, Japanese, and Thai food.

Paradisus Puerto Rico sits on a 1,000-acre peninsula in Rio Grande owned by industrialist Arturo Diaz, who, through his CBM Investment Co., is a partner in the resort’s development.

Sol Melia is the 10th largest hotel chain in the world, with 350 urban and leisure hotels in 30 countries, and the second largest in Europe. Paradisus, an all-inclusive five-star product, is one of the company’s four brands.

Willowbend Development Corp. is developing 36 holes of golf designed by Tom Kite as a prime component of Paradisus Puerto Rico. Diaz has a majority stake in the golf courses and in other projects on the site.

Executive Team at Paradisus Puerto Rico

Jose Carrasco, general manager

Carlos del Pino, hotel manager

Edgar Motta, operations director

Ramon Sanchez, sales & marketing director

Ricardo Bagnasco, food & beverage director

Francisco Garcia, engineering director

Arturo Ortiz, human resources director

Ramon Ventura, comptroller

Carlos España, chef

High hopes for corporate travel in 2004

Business travel will be the wild card in 2004, said Scott Berman, partner of the global hospitality & leisure practice at PricewaterhouseCoopers in Miami.

"The indicators in the economy suggest better movement from corporate travel; however, the 2004 travel budgets are being prepared during a weak economic climate," Berman said. "I expect a slight increase in corporate travel and meetings, but I think leisure business will carry the day."

Berman believes the corporate segment of the travel business is the most difficult to predict. "However, as long as we see that the global markets are improving and corporate earnings announcements are favorable, that should trigger more demand in corporate travel," Berman said. "I think it’s important to remember what we learned in the hotel industry over the past 25 years—that there are [peaks and valleys]. We’ve just been in a valley, but if history is any indicator, there will be a rebound in 2004."

According to the American Express International Business Traveler Survey, the vast majority of business travelers expect to maintain or increase their travel levels over the next year. "True road warriors, those who travel across the globe, apparently aren’t slowing down," said Mark Webb, senior vice president of American Express Global Business Partnership, which serves the company’s largest corporate customers.

Richard Cortese, vice president of Wyndham Resorts in the Caribbean, says his properties in Puerto Rico have seen an uptick in group bookings. "We were more dependent on leisure travel last year but our group base is starting to come back," he said.

Willem Pleight, general manager of InterContinental San Juan Resort, has also noted an upswing in corporate travel, the livelihood of most of San Juan’s major hotels. "We have seen in the quiet month of September that business travel bookings are moving in the right direction," he said. "Customers are putting meetings back on the books, particularly those that had been postponed. The pie might not have grown larger in Puerto Rico, but InterContinental has grabbed a bigger slice."

This Caribbean Business article appears courtesy of Casiano Communications.
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