Selling the Caribbean in 2026: Financial Risks and Opportunities for US Travel Agencies

Selling the Caribbean in 2025: Financial Risks and Opportunities for US Travel Agencies

A finance, accounting, and tax-focused guide to margins, supplier payments, and cash flow

Why the Caribbean looks simple but quietly erodes profit

For US travel agencies, the Caribbean remains one of the most commercially attractive outbound regions. Proximity, short flight times, familiar hotel brands, and widespread USD pricing create the perception of low operational risk, but that perception could be misleading.

The Caribbean rarely causes problems through demand volatility. It causes problems through accounting assumptions, margin leakage, and timing mismatches that go unnoticed until profitability is reviewed in hindsight.

In 2024, the Caribbean welcomed approximately 32 million international visitors, with US travelers accounting for more than 45 percent of arrivals across major islands. According to data from the Caribbean Tourism Organization, US outbound travel to the region continued to grow in 2025, driven primarily by all-inclusive resorts, destination weddings, and short luxury stays.

Commission rates on paper appear healthy, typically 10 to 15 percent on accommodations and land arrangements. Yet many agencies find that realized profit per booking is materially lower than forecast. We look at some of the financial reasons in this article.

All-inclusive pricing does not mean all-inclusive margins

All-inclusive resorts dominate the Caribbean sales mix. For US agencies, they offer speed, familiarity, and predictable headline pricing but from a finance perspective, they introduce a different risk profile.

Most Caribbean all-inclusive resorts exclude significant guest spend from commission eligibility, including things like spa services, premium dining, private excursions, room upgrades offered on arrival or on-property resort credits redeemed directly

Industry data suggests that 20 to 35 percent of total guest spend at Caribbean resorts occurs on-property and outside the original booking value. In many cases, none of that incremental spend is commissionable or attributed back to the agent.

From an accounting perspective, this creates two issues. First, agencies consistently overestimate transaction profitability when forecasting commission income based solely on room value and second, management reporting often fails to distinguish between booking value and monetized value, masking margin erosion over time.

For agencies operating on thin operating margins, this difference alone can turn a strong sales month into an average financial result.

Supplier payment timing and prepayment risk

Caribbean suppliers commonly require early deposits and full prepayment well ahead of travel. Thirty-day prepayment is standard. Sixty to ninety days is not unusual for peak season or group bookings, but this creates a structural cash-flow exposure.

Client funds may be received months before travel, but under US accounting principles, revenue is not earned until services are delivered. Agencies that do not rigorously track deferred revenue and supplier prepayments risk overstating profit while understating liabilities.

Hurricane season runs from June through November, overlapping with some of the highest prepayment periods. When cancellations occur, client refunds are expected immediately, supplier refunds are delayed, partial, or disputed and chargebacks may occur before recovery from suppliers

Agencies that treat prepayments as settled costs rather than recoverable assets often absorb losses unnecessarily.

OTA and wholesaler invoicing errors are small but systematic

The Caribbean generates a high volume of OTA and wholesaler bookings relative to trip length. That volume increases the probability of invoicing inconsistencies.

Common issues include:

• resort fees excluded from commissionable totals

• taxes embedded differently by island

• net rate assumptions applied inconsistently

• commission reversals issued months after travel

• currency conversion differences on refunds

Individually, these discrepancies are minor. Collectively, they distort revenue recognition.

Agencies that do not reconcile post-stay invoices against original booking values frequently overstate commission income in earlier periods and correct it later, if at all. Over time, this creates unreliable financial reporting and makes performance analysis meaningless. In the Caribbean market, the absence of reconciliation is one of the most common causes of unexplained margin decline.

Tourism taxes and fees are not pass-throughs

Unlike Europe, the Caribbean does not operate under a unified VAT framework. Instead, each island applies its own combination of:

• hotel occupancy taxes

• service charges

• tourism levies

• environmental or sustainability fees

• departure taxes

These charges range widely. In some destinations, total taxes and fees can exceed 15 percent of room value. Many are non-commissionable. Many are non-refundable.

US agencies frequently misclassify these charges as pass-through items without understanding how they affect:

• commission calculations

• gross versus net revenue

• refund exposure

• client disputes

From an accounting standpoint, incorrect classification leads to misstated revenue and margin reporting. From a client perspective, it leads to confusion and erosion of trust when local charges appear unexpectedly. Accurate treatment of Caribbean taxes is not optional. It directly affects profitability.

See below for more info on tax rates.

FX exposure still exists, even when pricing is in USD

The Caribbean is often described as a USD market. That description is incomplete as, while many suppliers quote in USD, their underlying cost base is frequently denominated in local currencies such as:

• Jamaican Dollar (JMD)

• Dominican Peso (DOP)

• Barbadian Dollar (BBD)

• Eastern Caribbean Dollar (XCD)

FX risk is therefore embedded into pricing, refund behavior, and supplier flexibility.

When local currencies weaken, suppliers may resist refunds or delay settlement. When they strengthen, pricing buffers are adjusted quietly. Agents experience the impact indirectly through, mismatched refund amounts, delayed credits and reduced willingness to renegotiate terms

Weather disruption creates accounting blind spots

Hurricane risk is not hypothetical. It is seasonal, predictable, and financially asymmetric. Clients expect immediate refunds or rebooking flexibility. Suppliers often require extended processing time or apply penalties. Chargebacks may occur before supplier positions are resolved.

Without disciplined tracking of refund liabilities, supplier receivables, disputed amounts and chargeback exposure, agencies underestimate their true financial risk during peak disruption periods.

Many agencies only recognize the impact months later, when cash balances fail to reconcile with reported profit.

Which Caribbean business models perform best financially

Not all Caribbean bookings are financially equal, for example large branded all-inclusive resorts offer predictable commission but limited upside and high ancillary leakage. Independent luxury resorts offer stronger per-booking margins but higher prepayment and refund risk. Island-hopping itineraries increase transaction value but introduce complexity, higher admin cost, and greater exposure to timing mismatches. Cruise extensions often deliver volume but dilute margins unless service fees are applied deliberately.

Agencies that understand these distinctions outperform those that sell the Caribbean as a single category.

Final Antravia perspective

The Caribbean is not a high-risk destination but financial impacts could be high risk and Agencies that treat it as operationally simple often discover too late that margins were eroded through accounting assumptions rather than poor sales.

At Antravia, we work with US travel agencies to:

• identify margin leakage

• correct revenue recognition

• improve commission reconciliation

• strengthen cash-flow discipline

• structure Caribbean sales for real profitability

Selling well is not the same as earning well. In the Caribbean, the difference is financial.

Ready to review how your Caribbean bookings actually perform?
Contact Antravia to assess your margin structure, supplier exposure, and accounting treatment before the next peak season.

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Selling Africa in 2025: A Financial Guide for Travel Agents
Selling Dubai: What Travel Agents need to know

Selling the Caribbean in 2025: Tourism Taxes and local fees

Tourism taxes and local fees vary widely across the Caribbean and, in many destinations, can exceed 15 percent of the room value. These charges are frequently misclassified by US travel agencies as simple pass-through items. In reality, most are non-commissionable, many are non-refundable, and several behave differently during cancellations, creating both margin leakage and client disputes.

In the Dominican Republic, one of the heaviest-taxed markets, accommodations are subject to 18 percent ITBIS (VAT) and a 10 percent service charge, pushing the total tax and fee burden close to 28 percent. These levies are not commissionable, and refunds are typically limited to documented cancellations only. In 2025, additional infrastructure-related charges introduced a further drag on group bookings, often embedded quietly into supplier pricing rather than shown as separate line items.

Jamaica applies a layered structure including 10 percent GCT (VAT), a 2 percent environmental levy, and a nightly stamp duty. While VAT may be partially commissionable depending on supplier contracts, the remaining charges are not. Refunds can also be affected by Jamaican dollar movements, particularly where suppliers incur local costs but invoice agents in USD.

In The Bahamas, agents face a combination of 10 percent VAT, a 7.5 percent accommodation tax, and nightly environmental fees, taking total charges to approximately 18 percent. These amounts are non-commissionable and non-refundable. New cruise-related departure taxes introduced in 2025 have also increased the cost of land extensions indirectly, as suppliers bundle these charges into package pricing.

Aruba applies 12 percent sales tax, nightly occupancy charges, and tourism levies that together typically fall between 15 and 18 percent. While VAT components may be commissionable in some cases, most additional fees are not. Sustainability-related charges were increased again in 2025, further narrowing margins on shorter stays.

In Barbados, accommodation pricing is subject to 10 percent VAT, a 7.5 percent service charge, and a 2 percent environmental levy, resulting in a combined burden of roughly 20 percent. These charges are fully non-refundable and non-commissionable. Although a temporary reduction in regional air fees has helped group pricing, high-end bookings remain particularly exposed to fee accumulation.

St. Lucia imposes 10 percent VAT, a 7 percent service charge, and nightly tourism levies, bringing total fees to approximately 17 percent. These are non-commissionable and non-refundable and are often bundled into wedding and honeymoon packages, only becoming visible when clients upgrade rooms or add nights.

The Cayman Islands apply 13 percent GST alongside nightly tourism and environmental fees. These charges are non-commissionable and non-refundable, with environmental taxes increasing again in 2025 to support sustainability initiatives.

In Antigua and Barbuda, agents encounter 10 percent ABST, nightly tourism levies, and environmental surcharges totaling approximately 17.5 percent. All are non-refundable and non-commissionable, with recent increases linked to port and harbor redevelopment.

Turks and Caicos is among the most expensive jurisdictions from a fee perspective, with 12 percent VAT and significant nightly development charges that can push total fees above 20 percent. These are strictly non-refundable and non-commissionable, amplifying financial risk on luxury bookings.

Several smaller islands, including St. Maarten, Curaçao, Bonaire, and Grenada, apply combinations of sales tax, service charges, and environmental levies ranging from 10 to over 25 percent, often with limited refundability and no commission eligibility. In some cases, proposed fee increases tied to storm recovery or environmental funding add further uncertainty.

US territories such as Puerto Rico and the US Virgin Islands follow US tax frameworks, which can allow partial commission treatment and more predictable refund rights. However, local surcharges, energy fees, and resort add-ons frequently offset this advantage and still reduce net margins.

For US travel agencies, the key risk is not the existence of these charges, but how they are classified, disclosed, and reconciled. Treating Caribbean taxes as neutral pass-throughs routinely leads to overstated revenue, understated refund exposure, and avoidable client disputes when trips change or cancel.

References and sources

Caribbean tourism volumes and market data
Caribbean Tourism Organization (CTO). Latest Tourism Performance and Outlook Reports.
https://www.onecaribbean.org/statistics

UN World Tourism Organization (UNWTO). Tourism Data Dashboard – Caribbean Region.
https://www.unwto.org/tourism-data

US outbound travel trends
U.S. National Travel and Tourism Office (NTTO). Outbound Travel from the United States.
https://www.trade.gov/national-travel-and-tourism-office

Tourism taxes, VAT, and local levies
Dominican Republic Internal Revenue Service (DGII). ITBIS Tax Overview.
https://dgii.gov.do

Jamaica Tax Administration (TAJ). General Consumption Tax (GCT) and Tourism Levies.
https://www.jamaicatax.gov.jm

The Bahamas Ministry of Tourism. VAT and Tourism Levy Structure.
https://www.bahamas.com

Aruba Department of Economic Affairs. Tourism and Sales Tax Framework.
https://www.government.aw

Barbados Revenue Authority. VAT and Tourism Related Charges.
https://bra.gov.bb

St. Lucia Inland Revenue Department. VAT and Accommodation Levies.
https://ird.gov.lc

Cayman Islands Government. GST and Tourism Environmental Fees.
https://www.gov.ky

Antigua and Barbuda Inland Revenue Department. ABST and Tourism Levies.
https://ird.gov.ag

Turks and Caicos Islands Government. Accommodation Tax and Development Fees.
https://www.gov.tc

US territories tax treatment
Puerto Rico Department of Treasury (Hacienda). Room Tax and Sales Tax Guidance.
https://hacienda.pr.gov

US Virgin Islands Bureau of Internal Revenue. Hotel Room Tax and Tourism Fees.
https://bir.vi.gov

Accounting and revenue recognition guidance
Financial Accounting Standards Board (FASB). ASC 606 – Revenue from Contracts with Customers.
https://asc.fasb.org

American Institute of CPAs (AICPA). Revenue Recognition and Client Advances.
https://www.aicpa.org

Chargebacks, refunds, and payment timing
Visa. Dispute Management Guidelines for Travel and Hospitality.
https://usa.visa.com

Mastercard. Chargeback Guide – Travel Sector.
https://www.mastercard.us

Sources are provided for reference only. Tax rates, levies, and refund practices change frequently and vary by supplier and contract. Travel agencies should confirm current treatment with suppliers and advisors before finalising pricing or accounting treatment.