Monthly Economic and Financial Developments, February 2019

Published: Monday April 1st, 2019

Overview

Indications are that the domestic economy sustained its upward trajectory during the review month, as an increase in long-stay visitor arrivals underpinned the improvement in tourism sector output, while foreign investment-led projects supported activity in the construction sector. Reflecting the hike in the value added tax (VAT) rate and higher oil prices, the inflation rate rose modestly in 2018. In addition, monetary sector developments were dominated by the build-up in banking sector liquidity and external reserves, due to the seasonal tourism-related increase in net foreign currency inflows.

Real Sector

Tourism

Buoyed by the growth in air arrivals-the main source of stopover visitor traffic-tourism sector output continued to expand over the review period.

Congruent with the improvement in air arrivals, preliminary information from the Bahamas Hotel and Tourism Association (BHTA) and the Ministry of Tourism for a sample of hotels in Nassau and Paradise Island, showed an expansion in room revenue of approximately 48.0% during January. This outcome was underpinned by gains in both the number of room nights sold by 36.0%, and the average daily room rate (ADR) by 9.4% to $265.39. Also of note, the hotel occupancy rate was approximately 16.9 percentage points higher than last year at 69.9%.

More recent data from the Nassau Airport Development Company (NAD) through February 2019, revealed that in comparison to 2018, total departures-net of domestic passengers-strengthened by 26.4% for the month, and by 24.1% over the two-month period, vis-à-vis a 9.4% increase in the first two months of 2018. Indicative of the ongoing economic improvement in the key source market, U.S. tourist traffic firmed comparatively by 30.0% in February and firmed by 27.1% for the year-to-date. Among non-U.S. departure, the review month gained by 10.6%, sustaining a 10.9% boost over the year-to-date.

The expansion in air arrivals also sustained the growth in the short-term rental market, as data from AirDNA revealed a 20.6% increase in the total number of room nights booked in February, compared to the same period of 2018, amid gains in both the entire place (17.7%) and hotel comparable (42.2%) categories. In terms of pricing, the ADR for hotel comparable listings-which is more consistent across periods-firmed by 1.3% to $141.39; however, the average cost of entire place listings softened by 1.8% to $327.40.

An analysis of the major markets, showed that for February 2019, the number of rental room nights booked in New Providence for hotel comparable and entire place listings, rose by 44.8% and 18.7%, respectively. In contrast, the ADR for entire place listings contracted by 11.1% to $257.56, while the hotel comparable ADR edged-up by 0.6% to $117.51. In Grand Bahama, the number of room nights booked for entire place listings declined by 2.7%, as renters showed a preference for the hotel comparable category, which grew by 54.8%. In addition, the ADR for both entire place and hotel comparable listings fell by 17.5% and 7.2%, respectively, to $156.41 and $92.23. Exuma maintained its status as an attractive Family Island destination, as bookings for hotel comparable and entire place listings expanded by 61.8% and 45.3%, while the ADRs firmed by 12.4% to $168.75 and 15.4% to $437.10, respectively. Similarly, in Abaco, booked nights for hotel comparable listings expanded by 42.0%, and the ADR increased by 12.9% to $175.15, while the number of room nights sold for entire place listings increased by 14.4%; however, the ADR contracted by 15.8% to $286.48.

Vacation rental trends also broadly strengthened over the first two months of 2019, as the total number of room nights booked across the archipelago advanced by 25.0%, reflecting gains in both the hotel comparable (46.1%) and entire place (22.2%) segments, with the ADR for the former up by 3.1% at $141.90 and the latter down, by 1.8%, at $328.87.

Prices

Reflecting mainly the increase in the VAT rate, consumer price inflation-as measured by the All Bahamas Retail Price Index-rose by 75 basis points to 2.3% during 2018. A breakdown by category, showed that accretions to average costs accelerated for transport to 4.6%; restaurants & hotel, to 4.1% and recreation & culture, to 2.9%. Similarly, gains in prices were also recorded for food & non-alcoholic beverages (2.4%); housing, water, gas & electricity-the largest category-(2.4%), and healthcare (2.1%). In contrast, the average cost of communications declined by 1.4%, while less pronounced declines were registered for the clothing & footwear and education categories.

For full text reading, please download the attached document.