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Tightening
Business
 on April 8, 2012

Tightening of the belt

Article by Cheryl Harewood 

Reduced occupancy and room revenue combined with increased electricity cost and a capital investment in refurbishment and a property upgrade resulted in 40 per cent less profit in 2011 than in 2010 for the Bougainvillea Beach Resort.
According to Mark Estwick, accountant at the South Coast hotel, “The global economic crisis has had a dramatic effect on most businesses, individuals, governments and countries in the Western Hemisphere.”
Speaking during the hotel’s annual awards ceremony, Estwick said, “We at Bougainvillea have not been spared from the fallout in declining incomes, increased taxation, higher unemployment and all the other negative impacts from this significant economic crisis”.
He said the hotel achieved an annual 90 per cent occupancy in 2008 but by 2009, was feeling the effects of the global financial crisis when occupancy dipped to an all-time low of 70 per cent, revenue declined by 18 per cent, and net profit by 25 per cent. There was a reduction in hours for staff, reduction in pay for some managers and clerical staff, and an ‘overall tightening of the belt’.   
Wilkinson further noted that 2010 was a resounding success, with occupancy at 83 per cent thanks to sound management and control of expenses.
He described 2011 as “a challenging year”.    
“Operating expenses increased only marginally by one per cent and we have been able to maintain operating expenses virtually at a constant level.
“Ideally, with a decline in revenue, expenses should reduce at some proportionate level in order to maintain profit levels. However, this was not realized, primarily because of a 26 per cent increase in utility costs.
“Management also spent $1.3 million in physical upgrade.
“Electricity is the highest single expense of the hotel, and while the installation of the energy eye system benefited the resort with an 11 per cent reduction in electricity consumption in 2011, the increase in cost per kilowatt hour charged by Barbados Light & Power went from 27 cents to 47 cents in 2011 and fully eliminated the consumption gains, resulting in a significant increase in utility expense.
“We have taken the decline in profitability with great care in our outlook forward.
“Employment levels will be maintained unless occupancy deteriorates to such an extent that this policy becomes untenable for the continued operation of the hotel,” he added.

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