A Silver Lining for Vacationers in the Caribbean

If the financial crisis has made you think twice about spending money on a vacation, hotels in the Caribbean are trying to sway you with discounts and deals.

Even before the latest economic news, the Caribbean's tourist industry was under pressure. Flights to the area have been cut and airfare prices have risen. An active hurricane season -- particularly devastation from Hurricane Ike -- has already spooked some potential travelers and damped demand. Indeed, bookings at many hotels began to drop over the summer. And hotel construction in the area is booming, meaning there are more rooms to fill. So, while the fall off-season has usually meant some hotel discounting, this year the offers are particularly sweet.

The Hyatt Regency Aruba Resort & Casino, for example, is offering a fifth night free, a room upgrade, and free breakfast for two every day on stays before Dec. 18. For the first time during the off-season, the Turks & Caicos Club, a small luxury resort on Providenciales island, is offering rates starting at $247.50 until Nov. 9, a 50% discount from rates at the same times last year. "We wanted to encourage people to come to the island not only because of the hurricane," (Hurricane Ike struck nearby) says spokeswoman Tiffany Dowd, "but because of the economy." Ms. Dowd says the property did not sustain significant damage during Ike.

To be sure, the travel industry overall may be in for tough times ahead: Hotels in other regions of the world have recently started to see revenue fall. But on a broad level, room rates are still rising -- as they have for several years. That isn't the case in the Caribbean. The region is the only geographic area in the world that has seen average hotel-room rates drop consistently over the past few months. In August, the average rate for a room in the Caribbean was 8.2% lower than last year, according to Smith Travel Research, a hospitality-research firm.

Online travel agencies such as Travelocity and Orbitz say they are also seeing big discounts. "We have crazy hotel promotions going on now in the Caribbean," says Brian Hoyt, an Orbitz spokesman. For example, average daily room rates for Puerto Rico during October through December are down about 11% for hotels on the site, compared with the same period last year. Average rates in Punta Cana, Dominican Republic, are down 16%.

In addition to dropping rates, hotels are offering added perks like free meals, resort credits and airfare reimbursement to keep travelers coming before the typically busy winter holiday season.

Sandals Resorts has extended a promotion, first offered earlier this summer, which gives guests an airfare credit of up to $550 when they book a three-night stay by Oct. 23 for travel through Dec. 20. The all-inclusive resort, which caters to couples, is also offering additional perks like spa credits this year, says Mitchell Nover, media coordinator at Unique Vacations, which handles sales and marketing for Sandals Resorts.

Hotels are hoping that their deals will offset the pain of higher airfares for travelers. For years, the Caribbean has been able to depend upon a wealth of good, cheap flights. But airlines have been cutting their schedules in the region. About 15% fewer flights are expected into the region from the U.S. this December compared with last December, according to OAG Back Aviation Solutions. And prices for the flights that are left are rising. Online travel agency Travelocity says that airfare into the Caribbean from the U.S. is up about 10% this fall and winter compared with last year.

In Cancun, Mexico, which isn't as affected by airline-route cuts but is often considered part of the Caribbean tourism region because it is competing to attract similar travelers, some room rates are also falling.

"It's been a tough second half, no doubt about it," says Chris Calabrese, director general for the plush JW Marriott Cancun Resort & Spa and its slightly less-expensive sister property, CasaMagna Marriott Cancun. When the hotels noticed weakening demand earlier this year, they dropped some rates and created packages they hoped would attract guests. Until Dec. 15, CasaMagna Marriott is offering a $109 base rate, and the JW Marriott Cancun's base rate is $130. Mr. Calabrese says those rates are 20% cheaper than last year at the same time.

Most hotels say that bookings still look strong for the busy winter holiday season, but that they aren't as booked up as usual at this time. So some are offering winter deals, too. Travelocity is offering an average room rate of $300 per night (from Dec. 15 through Jan. 15) at The Somerset on Grace Bay, a 46% discount compared with what the modern luxury resort in the Turks and Caicos offered last year. At Las Casitas Village & Golden Door Spa in Puerto Rico, owned by LXR Luxury Resorts & Hotels, the site's average rate during the winter period is $527, a 43% discount from last year.

Some hotels are on the lookout for weakened demand from recent negative financial news even into late winter and spring and are offering pre-emptive deals.

Grace Bay Club, owned by Grace Bay Resorts, a luxury property in the Turks and Caicos, hasn't yet seen business weaken, says Nikheel Advani, chief operating officer and principal of Grace Bay Resorts. But last month the hotel started offering a series of deals -- a fourth night free through Dec. 16, a $500 resort credit for stays of three nights or longer and a fifth night free, Jan. 4 through Feb. 12. In addition, children under 12 eat free until Dec. 20. "Just watching news, seeing Wall Street, and talking to guests," it's clear travelers will respond to value, Mr. Advani says.

Ritz-Carltons in the Caribbean and Mexico have an attentive eye on bookings over the coming months. "The unknown is how leisure travel will be impacted by what is happening to the economy," over the last few weeks, says Ezzat Coutry, senior vice president of The Ritz-Carlton Hotel Company.

By: Sarah Nassauer
Wall Street Journal; October 8, 2008