BRIDGETOWN, Barbados — The Caribbean is enjoying a sustained period of strong hotel demand and performance, but a cooldown looms.
Travelers can’t seem to get enough of the Caribbean, said Kristina D’Amico, managing director of the Caribbean region for HVS, at the company’s Caribbean Hotel Investment Conference & Operations Summit. Air arrivals to the region hit a record in 2023 and that record likely will be surpassed this year. Year-to-date arrivals as of September are already 8% higher than the same period last year.
It's a trend she said won’t slow down soon.
And where hotels are, guests go. The Dominican Republic continues to be the country with the largest share of room supply — holding 40% of existing supply — followed by Jamaica, Puerto Rico and the Bahamas.
But that traveler profile has changed a bit, D’Amico said. Travelers from the U.S. used to make up more than half of all visitors to the region, but the U.S. number has dipped to below 50% while the number of travelers from Canada has grown.
Airlift is a persistent issue in the region, but D’Amico pointed out both international and regional airlift is improving.
“American Airlines is offering 11% more flights to the region this winter, which shows us the airlines are all-in on the Caribbean right now,” she said.
The region also benefited this year from a quieter hurricane season.
The tourists descending on the islands are spending more, too, when it comes to hotel rates.
This year hotel average daily rate growth in the Caribbean outpaced the U.S. Year over year, the region’s ADR has grown 5% to $341 overall, excluding Cuba. That rate growth continues to be the major contributor to revenue per available room growth of 6%, according to CoStar data.
“We are seeing more pricing power here across the board than what we see in the U.S., but that’s slowing down,” said Hannah Smith, senior analyst for STR, CoStar’s hotel analytics division. “ADR is stabilizing, occupancy has stabilized over the last two years. We’re reaching that point similar to in the U.S. where we will see things level out.”
As with the rest of the world, luxury travelers demanding luxury hotels and resorts are shaping the high end of hotel performance. Luxury ADR in the Caribbean jumped from $379 in 2019 to $524 on average this year, according to CoStar data. But trends in luxury ADR in the Caribbean historically follow those in the U.S., meaning that a slowdown is inevitable.
“Two years ago, the U.S. luxury market started to flatten and we’re starting to see that in the Caribbean as well,” Smith said, about rate growth for that class. “I would expect next year we’ll see that trend continue, and we may not see that same pricing power going forward.”
Beyond traditional luxury hotels, those in the ultra-luxury category that demand ADRs of $1,000 or higher are seeing even stronger performance, D’Amico said.
“These hotels have nearly doubled their ADR in the last eight years,” she said.
But both speakers cautioned that hotel developers should watch out for too much supply growth, even amid an environment with seemingly unstoppable demand for high-end hotels and resorts.
“Yes, ultra-luxury is incredible, but let’s be cautious about that segment and how much we can add to supply,” D’Amico said.
High-end hotel rooms dominate the pipeline across the region, Smith said. And while the countries that see the most flights and tourists have the majority of the pipeline — like Dominican Republic and Jamaica — more undersupplied countries are seeing some needed development.
Grenada, for example, recently got a Six Senses, and the tiny island nation has a pipeline of rooms that’s 17% of its existing supply.
Overall, hotels in the region are getting larger over the years too, Smith said. In 1987, hotels on average had less than 80 rooms. In 2023, the average room count was just under 120 rooms, and the median room count in the pipeline is just under 140.
Large resorts, particularly all-inclusives, skew those numbers up. Barbados has long been planning an all-inclusive Hyatt Ziva resort with 380 rooms and 40 condominiums. The project is now underway and has a projected 2026 opening.
Other notable branded hotel and resort openings planned for 2025 include the St. Regis Cap Cana Resort & Residences, which will add 200 rooms and 70 residences to Dominican Republic; the Grand Hyatt Grand Cayman Resort & Spa, adding 190 guestrooms and 252 condominiums to Grand Cayman; and the all-inclusive Secrets Saint Lucia, adding 355 rooms to Saint Lucia.