• Moves comes after prior 10-15% all-in rises
• Power bill jumps from $475k to $600k-plus
• Out Island hotels: BPL hikes ‘just killing us’
By NEIL HARTNELL
Tribune Business Editor
The Bahamas Out Island Promotion Board’s president yesterday said his hotel will likely have to increase rates by “another 5 percent” in 2024 to break even with fellow hoteliers revealing that soaring light bills “are just killing us”.
Emanuel “Manny” Alexiou, also the Abaco Beach Resort’s proprietor, told Tribune Business his property has already raised rates by 10-15 percent “across the board” to help offset Bahamas Power & Light (BPL) costs that have increased by “roughly 50 percent” for the year-to-date.
Optimistic that the resort will survive BPL’s efforts to recoup its “under-recovered” fuel costs, he added that smaller hotels were likely to be facing a much tougher struggle given that they have less ability to plan ahead and/or raise rates to help compensate for inflation. And the industry’s room for further price rises may be limited given that even high-end visitors are now “starting to question” the frequent increases.
Calling for increased airlift to help “counter” higher power bills, Mr Alexiou also told this newspaper that “the biggest way to increase revenue from tourism” is to drive more visitors to the Family Islands as opposed to New Providence. Besides spreading the wealth, he argued that destinations outside New Providence have the room availability to accommodate increased visitor numbers given that they traditionally “suffer from very low occupancies” in the 45-50 percent range.
“Based on this year alone, and obviously it was a gradual increase, our increase in cost was roughly 50 percent. From January to-date,” Mr Alexiou said of the Abaco Beach Resort’s energy costs. He acknowledged, though, that most - but not all - this increase could be attributed to BPL’s so-called fuel charge “glide path” strategy, which saw this component of customer bills increase by 163 percent between June-August 2023 compared to October 2022 figures.
“We added a few more services,” the Abaco Beach Resort owner said, noting that the property’s electricity costs year-over-year had risen to “$600,000 and something” compared to around $475,000 for the same period in 2022. “If that’s not 50 percent, it’s 45-48 percent. It’s a huge increase in that one line item,” he added. Even allowing for the introduction of the hotel’s new services, it was likely energy expenses had risen at least 35-40 percent due to BPL’s “glide path”.
Given that the September-October period traditionally represents the “dead” part of the tourism season, with many properties closing for renovations and upgrades as the visitor flow slows to a trickle, Mr Alexiou voiced hope that this may contain BPL costs for some.
He added that the increase in labour and other costs had been predicted and, as a result, the Abaco Beach Resort took advantage of the post-COVID surge in pent-up travel demand to raise its rates to compensate. While this had helped mitigate the impact of soaring BPL costs for its own finances and operations, the Promotion Board chief said smaller Out Island resorts will have had less flexibility to make the necessary adjustments.
“We’re going to survive, but other hotels - the smaller hotels that can’t plan too much - might have made increases of 5 percent,” Mr Alexiou told Tribune Business. “We went higher, 10-15 percent across the board; slip revenues, occupancy revenues, to compensate.
“We’re seeing now price sensitivity. Even wealthier clients are starting to question that costs keep going up and up. Speaking for ourselves, we’re looking at more services, nicer services, and improving the resort’s infrastructure. We’ll probably have to do another 5 percent increase this year coming to break even.”
Mr Alexiou said more airlift, especially the direct and lower cost variety, is vital to “drive occupancy”, visitor numbers and revenues to help “counteract” BPL’s cost hikes and other inflationary pressures. And he suggested that The Bahamas look seriously at developing a strategy to drive increasing tourism arrivals to the Family Islands without depriving New Providence of business.
“The Out Islands always suffer from very low occupancy,” he explained. ‘If we get 45-50 percent average occupancy for the year we’ve done well, whereas a hotel in New Providence will be like, if they are at 65 percent, they’re doing really poorly. They’re up in the 80-90 percent range....
“The biggest way to increase revenue from tourism, without a lot of foreign investment or anything else, is the Out Islands. We have a lot of rooms. It should be relatively easy not to move the business from Nassau, but have the increase in tourism come to the Out Islands.”
Jeff Birch, principal of Andros-based Small Hope Bay Lodge, told Tribune Business that the island’s recent power woes had caused “a lot of brown-outs; a lot of equipment is being damaged”. As for BPL’s prices, he added: “My last check, it had gone up 30 percent. That’s just killing us.
“Government have increased taxes. It’s just very difficult. We have a very good staff who seem to be doing their best to be efficient, so we’ve been able to hold on, but it’s very, very difficult. We bounced back from COVID, and had a good year last year as far as occupancy. Because we had a really good year, we were able to pay off some of our debt and do catch-up.
“But as far as taxation and cost, it’s as bad as I’ve seen it. If it continues, and occupancy drops, and there’s any sort of downturn or fall-out from the US election, it’s going to be tough - not just on me but all brothers and sisters in hotels. This year we’ve had reasonable occupancies, and have been able to hold our own and bounce back a little from COVID,” Mr Birch continued.
“But now we’re facing very high costs and taxes. If occupancies are good, and we break through that and break even, it’s a very good life, but if occupancies are lower and costs are as they are, it’s going to be crippling. It’s not just electricity. Food is up something like 20 percent.”
Still, Mr Birch said he believes the Family Islands and their resorts have “a leg up” when it comes to coping with such pressures because of their “relaxed” culture. And he pointed out that Small Hope Bay Lodge has survived previous recessions, such as the 2008-2009 financial crisis and subsequent recession, with the “smaller, more nimble hotels” able to adjust more rapidly.
“Unless the economy has a melt down we should make it through next year without too much crippling,” Mr Birch said. He also praised BPL for “not standing still” and at least starting to focus on introduction of solar into its generation mix.
BPL’s all-in electricity rates increased by 70 percent for the period June-August 2023, compared to October 2022, due to the imposition of a so-called ‘glide path’ strategy to recover fuel costs that the utility had failed to recoup from passing them on to customers. This resulted in the utility’s fuel charge increasing by some 163 percent from 10.5 cents per kilowatt hour (KWh) in October 2022 to 27.6 cents for that three-month summer period.
The Government has never precisely stated how much this fuel “under-recovery” is costing the Bahamian people and businesses. However, Alfred Sears, ex-minister for public works and utilities, who then had responsibility for BPL, last October informed the House of Assembly that the utility’s debt to Shell was around $90m.
The $90m debt to Shell was accrued because BPL held its fuel charge at the hedged 10.5 cents per KWh price even after the trades to secure extra cut-price volumes were not executed by the Davis administration. This resulted in BPL having to buy increasing fuel volumes at higher global market spot prices, but the full cost was not passed on to consumers as the 10.5 cents rate insufficient to cover this
BPL’s fuel costs are supposed to be passed on 100 percent to consumers by law, and government officials last October conceded that it had cost taxpayers “tens of millions of dollars” to hold the utility’s fuel charge at 10.5 cents. With the Government prevented from providing direct subsidies, the higher BPL fuel charges are required to reimburse the Government for paying-off Shell’s debts and effectively keeping the lights on.