While hotels may see a return in the numbers of visitors to their properties it will be at least three to four years before that translates to profitability.
So says economist Dr Justin Ram, who said he expects hotels to see some form of profits between 2023-2024.
Dr Ram said with a COVID-19 vaccination already being administered in some countries persons would be more inclined to travel.
However, he said it would not be easy for hotels in Barbados to attract those visitors as they would be competing with destinations all over the world.
“We’ve seen a vaccine and it has already been approved for rollout in some countries. Certainly, the rollout in England is good news for us here in Barbados.
“It is difficult to say exactly, but I think there is likely to be some pent up demand. People really want to get out of their countries. They want to travel and of course for many of them their first port of call will be Barbados,” Dr Ram said during the Intimate Hotel of Barbados’ Annual General Meeting today.
Dr Ram said hotels in Barbados would have to offer discounts to attract those tourists and that would likely lead to a decline in profits.
“So initially I thought that maybe around 2022 we might see the numbers. You’re probably going to have to do something to attract those numbers so you’re probably going to have to provide discounts because you’re competing now very much against everyone in the world because hotels in Greece and Thailand will want to attract those British tourists.
“So you’re going to have to do discounting and that’s why the numbers may be back up maybe by the middle of 2022 but your profitability may take a bit longer. It might take maybe a year after that to recover because I think your average daily rates in real terms perhaps will not return to where they should be by 2023-2024,” Dr Ram pointed out.
“So you’re going to see perhaps the numbers coming back, people having a pent up demand, but because there is going to be such a demand for those tourists all around the world, everybody is going to be discounting and so the arrivals might be up, your profitability might not and that’s why I was saying now is the time to transform because you have to think about how you reduce your costs because ultimately if your average daily rate is down you obviously have to do something on your costs to help you to improve on your profitability.”
Dr Ram recalled that after the 2007 to 2009 financial crisis it took around 55 months for average daily rates to return to normal.
He said this was due to the fact that hotels had to offer discount rates to attract visitors.
Dr Ram said the COVID-19 pandemic had factors associated with both 9/11 and the financial crisis.
“With 9/11 people were a bit scared to travel and after the financial crisis households’ budget and balance sheets were damaged. With the pandemic there are both of those at play here,” he said.
(randybennett@barbadostoday.bb)
