80% Of All AIs Losing Money

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Ken

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Jan 1, 2002
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Interesting article in the latest issue of The North Coast AdScene reports that a recently released study by the Department of Dominican Internal Revenue indicates that 80% of the AIs in the country operated at a loss during the period 2005-2009. The full report is said to be available on the Internal Revenue's website Direccion General de Impuestos Internos

No doubt that some of the conclusions were based on creative bookkeeping by the resorts, but the lack of sufficient maintenance at many of these resorts seems to support the idea that revenue is low.

My observation of the few hotels I have had contact with suggests that a major reason are the contracts the hotels make with the tourism companies in Europe and elsewhere at prices that are not adequate to make a profit.
 
Robert

Robert

Stay Frosty!
Jan 2, 1999
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dr1.com
If you look back at some of my threads over the past few years on this topic, I have mentioned this many times.

It's a tour operator driven market and they set the rates.
They couldn't careless about the market, they are looking for good yield.
Right now you can buy room nights in some AI's for US$23.

When you don't have the $$$ yield to invest in upgrades and having a better a product, you cannot demand a better price. It's a the chicken and the egg.

The AI model is flawed and not sustainable.
 
D

DMV123

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Mar 31, 2010
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AND any and all profits are offshore and never make it here in the first place. A holding company is offshore. A management (hotel) company is in DR.

Tour Operator negotiates with hotel, pays holding company offshore. Management company provides service to Holding company who transfers only enough money onshore to pay the bills. Done. No profit onshore.

But I agree Robert - the AI, Tour Operator model is NOT sustainable!
 
badpiece33

badpiece33

Silver
Jun 24, 2002
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San Felipe de Puerto Plata, Dominican Republic
Ken2 said:
Interesting article in the latest issue of The North Coast AdScene reports that a recently released study by the Department of Dominican Internal Revenue indicates that 80% of the AIs in the country operated at a loss during the period 2005-2009. The full report is said to be available on the Internal Revenue's website Direccion General de Impuestos Internos

No doubt that some of the conclusions were based on creative bookkeeping by the resorts, but the lack of sufficient maintenance at many of these resorts seems to support the idea that revenue is low.

My observation of the few hotels I have had contact with suggests that a major reason are the contracts the hotels make with the tourism companies in Europe and elsewhere at prices that are not adequate to make a profit.
Click to expand...

I have some good friends in The Barcelo resorts and some others in Playa Dorada, These hotels all have less than 10% occupancy except on weekends when Dominicans goto the resorts for the weekends. The north coast is dying a slow agonizing death.
 
P

PeterInBrat

Gold
May 29, 2006
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Maybe some thought should be put into finding out what the few AIs that are turning a profit are doing. Many of them seem to be built as investment scams like so many of the condo projects. Everything looks good on paper because the projected revenues are completely unrealistic.

A Dominican constuction developer once told me that many people come to the DR trying make millions, but it's the ones who come in with pessimistic expectations and smaller projects that end up turning any profit at all.
 
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the gorgon

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Sep 16, 2010
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i have written many postings about the concept of leakage before, and taken a lot of flak for it. now, the data has come out that the AI hotels have a collective loss of nearly 7 billion pesos for last years cycle. creative bookkeeping notwithstanding, those are dire statistics. i concur with minds like those of Robert, who opine that the concept is not sustainable, and is a colossal waste of time and effort, at least where the country is concerned. someone might be making money, but it sure as heck is not the Dominican people.
 
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the gorgon

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Sep 16, 2010
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Badpiece states

I have some good friends in The Barcelo resorts and some others in Playa Dorada, These hotels all have less than 10% occupancy except on weekends when Dominicans goto the resorts for the weekends. The north coast is dying a slow agonizing death.

correction , sir. it already died.
 
R

RacerX

Banned
Nov 22, 2009
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Not true Frank. There are always venture groups and LLCs that await this opportunity to buy up defunct hotels and the land they sit on. It wont be profitable for the Dominican populace but those here that can get with Hoteliers throughout the world will have the place locked down. The AI isnt sustainable for the DR, but it is for the people who own are major movers in the hospitality industry. The future will be like Club Med, or Cabo San Lucas or Cozumel or Vegas where one hotel chain will own a Fantasay Island size parcel of land(1000 acres or so) and have EVERYTHING a 1-week visitor would want to do there. And then between the hotels and public there will be a buffer, so the visitor nevers sees the riff raff or the poor, unless he is trolling for hookers or something. I can see it now, my cousin Detroit will fly here and stay in a Elizabeth Arden, DisneyWorld sized Fantasy Island for a week or so and then do it all up. The places will be so huge you will actually think this is the real country AND the jobs will be so good that there will still be a premium to working in a resort.
 
frank recktenwald

frank recktenwald

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Jun 18, 2007
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RacerX said:
Not true Frank. There are always venture groups and LLCs that await this opportunity to buy up defunct hotels and the land they sit on. It wont be profitable for the Dominican populace but those here that can get with Hoteliers throughout the world will have the place locked down. The AI isnt sustainable for the DR, but it is for the people who own are major movers in the hospitality industry. The future will be like Club Med, or Cabo San Lucas or Cozumel or Vegas where one hotel chain will own a Fantasay Island size parcel of land(1000 acres or so) and have EVERYTHING a 1-week visitor would want to do there. And then between the hotels and public there will be a buffer, so the visitor nevers sees the riff raff or the poor, unless he is trolling for hookers or something. I can see it now, my cousin Detroit will fly here and stay in a Elizabeth Arden, DisneyWorld sized Fantasy Island for a week or so and then do it all up. The places will be so huge you will actually think this is the real country AND the jobs will be so good that there will still be a premium to working in a resort.
Click to expand...

I sincerely hope that you're right and that I'm wrong but I fear it's wishful thinking.
 
R

RacerX

Banned
Nov 22, 2009
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frank recktenwald said:
I sincerely hope that you're right and that I'm wrong but I fear it's wishful thinking.
Click to expand...

I dont know what the hell I m talking about. I just listen to the taking heads on the business shows. But then again they dont know what the hell they are talking about either. Alice in Wonderland, man...
 
aarhus

aarhus

Long live King Frederik X
Jun 10, 2008
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Comparing

frank recktenwald said:
It's like comparing apples with oranges.
Click to expand...

Well I know Cuba and the DR is for sure more developed. Havana is a nice museum. Soon I will see Columbia. Maybe Panama some day. Could be that they are better developed. But both are also supposed to be among best economies in Lat.Am.
 
D

dulce

Silver
Jan 1, 2002
2,524
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Robert said:
If you look back at some of my threads over the past few years on this topic, I have mentioned this many times.

It's a tour operator driven market and they set the rates.
They couldn't careless about the market, they are looking for good yield.
Right now you can buy room nights in some AI's for US$23.

When you don't have the $$$ yield to invest in upgrades and having a better a product, you cannot demand a better price. It's a the chicken and the egg.

The AI model is flawed and not sustainable.
Click to expand...

Where and when can you get an A1 room for $23?
 
frank recktenwald

frank recktenwald

Platinum
Jun 18, 2007
14,280
503
113
www.rentalmetrocountry.com
John Boyter said:
Well I know Cuba and the DR is for sure more developed. Havana is a nice museum. Soon I will see Columbia. Maybe Panama some day. Could be that they are better developed. But both are also supposed to be among best economies in Lat.Am.
Click to expand...

The DR is among the above mentioned the number one tourist destination but Colombia and definitely Panama are a lot better developed.
I was really surprised how Panama had developed during the 3,5 years that I was out of the country.
 
E

Eddy

Silver
Jan 1, 2002
3,668
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The AI?s are partly responsible for the demise of the DR, at least the north coast. Back in the 80?s all we had were small hotels and everyone was booked mostly at 100% during high season. The tourists had $$$ and spent it. I remember paying US$50, 00 per day for a small room with kitchen during my first trips back in 82/83. Tourists, mostly Canadians, filled these hotels and spent a lot of $$ in local restaurants and bars. With the arrival of the A.I. things changed. A different class of people, mostly Europeans, with a smaller budget flocked to these AI?s, seldom went out and the bars and restaurants suffered. Now these hotels are suffering the consequences of their sell outs. No pity from this guy.
 
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