Two timely articles in BARBADOS BUSINESS AUTHORITY on March 31, show clearly why Barbados faces serious problems with its crucial tourism industry.
“Can Pink Sands Rival Sandy Lane?” on Page 6 and “Airbnb Giving Hotels A Run” on Page 12 together tell a worrisome tale.
Having become highly depending on the high end of the market, Barbados faces tough competition from new luxury developments on private islands. The lure for the super-rich folks is something close to 100 per cent security for guests, because there is no local population. Bluntly put, the only black people on private islands are fully-controlled employees.
The threat to Barbados becomes painfully real when Dermot Desmond, the man who rebuilt Sandy Lane as one of the finest hotels in the world, has reportedly decided to spend $240 million on a new luxury hotel on Canouan.
While it is true that the Grenadines have local populations as well as beaches that are officially “public”, the reality of Canouan is that a significant part of that island is effectively private (and the local population is too small for there to be any real problem with crime).
Canouan also has a runway long enough for small jet aircraft, making it the ideal balance of convenience and security for the type of high-end guests that Mr Desmond will be luring away from Barbados.
With the high end of the market permanently in the doldrums for Barbados, priority must be directed to attracting middle-class visitors – but they are increasingly being lured to accommodation other than conventional hotels.
Airbnb is the largest (but not the only) phenomenon on the Internet whereby the business formerly dominated by hotels is being scooped up by owners of private homes and modest apartment buildings. They have no unions, and they exploit family resources to keep their costs low.
The most damaging result of the boom in private inns and the bed and breakfast operations is the effect on average hotel rates.
Competition fostered by the Internet has caused travellers to expect lower rates everywhere.
The average rate for hotel rooms globally has not increased in the past decade (which includes some very good years as well as the recent recession).
In much of the world, it is no longer economic for conventional hotel investors to build and own hotels for the mainstream market. Depressed rates are the main reason why so many existing hotels in Barbados are in trouble, and why there is so little interest in building new hotels. The return on investment is simply too low – and because of Airbnb and other Internet bookings, it will not improve.
The only alternative is the true condo-hotel, where small investors combine their resources to create a superior product as a part of a safe investment that will always have real value for the investor. The market is ripe, particularly among Canadians – who will be retiring in record numbers for the next 20 years with sufficient pension income and investable cash to own a condo-hotel suite in Barbados.
When such a development is large enough, with excellent facilities for meetings and events, it can be full year-round.
I am the founding president of One King West in Toronto, a 325-room condo-hotel that completed 2013 with 91 per cent occupancy. We can have similar results in Barbados.
