Inducing Performance From A Tired Tourism Plant

Adrian Loveridge – Hotel Owner

If any single statement made so far this year, should have sent a wake-up call to our tourism policymakers, it perhaps was the one made recently by the President of the Barbados Bankers Association (BBA), Horace Cobham at a luncheon meeting of the Chamber of Commerce.

‘That of all the commercial bank loans that were more than three months behind (non-performing), 43 per cent were from hotel and tourism clients’.

Not only is this a damning indictment of the state of our most important foreign currency earner but what compounds the seriousness of the situation, is the timing. Traditionally, most tourism enterprises make their monies in terms of revenue and profits during the four winter months. Once you get past Easter, both occupancy and average room rates plummet in most cases. Therefore, simply put, if such a large percentage are struggling to keep up with loan repayments now, imagine what it could be like by October or November.

While many perhaps do not want to be reminded, our (Barbados) performance for the first three months of 2012 was less than impressive, with a figure, depending on the source, of somewhere between 1.6 and 2.3 per cent increase in long stay visitor arrivals, across all markets over the same period, when compared with last year. Whilst some of our neighbours are reporting up to a 20 per cent hike for the identical first quarter. Questions have to be asked, including what is being done to redress the situation for the eight long summer months?

In terms of our largest single market, the United Kingdom, the blame for falling numbers has been firmly linked to the increases in the APD (Advanced Passenger Duty). But if this was the case, then why would St. Lucia record a nearly 30 per cent increase in British long stay visitors arrivals between January and the end of March, while we witnessed a 1.9 per cent fall from Europe?

All sorts of excuses have been proffered, with the most popular being that we are too expensive. Yet is it still possible to buy a return British Airways flight from Gatwick with 7 nights accommodation at a west coast hotel with airport transfers for as low as GBPounds 629 per person throughout June including all taxes. Cheaper, in fact than Barbadians can usually purchase the flights only.

For those that prefer, the all-inclusive product, Virgin Atlantic flights with 7 nights at the newly renovated and renamed SoCo Hotel can be purchased at GBPounds 849 between 15th September and 15th October. So it has to be more than the initial holiday price.

Pundits keep talking about targeting the more upmarket traveller, but the reality is that we do not have a sufficient critical mass of ‘high-end’ accommodation up to the standard where we can ‘demand’ increased room rates. Nor, from the figures disclosed by our commercial banks is there anything approaching the viability to move our product to a higher level.

There appears to be only one simple option. Reduce taxation and operating costs.

The other questions that has to be asked is what interest rates are being paid on these ‘non-performing’ loans?

Have the banks helped to restructure them?

And why hasn’t Government exerted pressure on our banks to lower the ludicrously large spread between the dismal interest paid on deposits and excessively high lending rates?

If ‘we’ are ever going to be ready to take advantage of any post recession recovery, it sadly will never happen with such a high proportion of tired old plant.

0 thoughts on “Inducing Performance From A Tired Tourism Plant

  1. @Adrian
    Any thought on why the disparity in 2012 percentage increases between us and others? do you have a link to the stats?

    You mentioned a reduction in operating costs….how could this be done specific to this sector?

    Any comment on the 17 million? worth it? generating results? is it building a foundation or infrastructure to prepare for growth?

    And lastly, how many more are there whose plant will not be in a good enough position to capitalise when people are starting to return? Is there room for the private sector or are they too afraid post-Almond?

    Sorry if this is too much but the tourism sector is new to me so I have my pen and notebook open and ready 🙂 Much thanks.

  2. Observing,

    No problem.
    I am afraid that I do not have al the answers but collectively within the industry I am sure most of them are there.
    The increase in VAT was a mistake, as was the 50 per cent increase in land tax at a time when so many other costs were going up. We have to implement a plan where we address certain cost/revenue issues. For instance reduce our dependency on tour operators to ensure a higher revenue is going to direct to the service provider (ie: hotel/ancillery service).
    My proposal (many years ago) which was called 10/10 was to develop a plan to increase the annual occupancy of our 120 small hotels by 10 per cent and average room rate by US$10 would have (if adopted) increase every properties income by 34 per cent, making them very much more viable and better able to upgrade.
    Government has relentlessly retained a civil service estimated at around 32,000, paid for with a ‘working’ populaton of around 170,000. It simply does not make any financial sense.
    We also have to serious address exactly what the BTA is supposed to do. Can we make it a leaner, meaner marketing machine that siezes opportunities and where a higher proportion of its budget goes into promoting the destination.
    Read the 2007/2008 DLP manifesto concerning tourism and then compare what has actually been achieved.
    Sorry, you mention 17 million. I am not sure which 17 million you are refering to.

  3. Barbados’ tourism is nothing like it used to be in the 70s and 80s.

    One thing about those days was that driving along the West Coast and South Coast – night or day – presented a touch of regality, an air of national pride, a sense of the importance of the country providing the right type of tropical ecological and physical mix/balance.

    Now today driving along these two main tourist belts there is no longer those feelings.


    One set of reasons. There is a sense that DLP/BLP governments over the years – in fulfilment of their own greedy villianous money objectives – have got too much involved in tourism planning and have allowed therefore too much unsuitable building development.

    These ossie moore governments have thoroughly got it wrong improperly equating physically building development in tourism, with building national development including ensuring tourism development.

    For, there has been seen since the 90s way too much unsightly unaesthetic building development and which has itself so muchly been unadroitly mixed into what was there before that it has thereby ruined the natural regal pleasance and ambiance and vistas of the two Coasts.

    So not many people are going to invest in Barbados’s tourism plant for the love and passion of doing so when they are so meanly exploitative and money grubbing and thereby pay such less attention to and respect for Barbadian human social and natural subtleties.

    Also, not many millions beyond the ordinary are going to come to visit the country and having seen what they have seen are going to be coming back so many times in the future, saying that they have fallen in love with the people and the cultures and their sceneries when the natural pristine feel and spirit have been almost irredeemably destroyed with overly ruffian dull unBarbadian monolithic structures and features and attitudes which leave undelightful tastes and sounds in many local and non-local mouths and ears.

    A drive along that Hastings stretch provides an example of what Barbados’s tourism product has become – very depressed and overexploited.

    This is partly as a result of imposing tourism and other models that are totally inappropriate to the energy fields that Barbados has been accustomed to over the years.


  4. Observing,

    Sorry, only just got my Nation and read about NIS loan to BTA.
    This is part of the problem, the lack of accountability and dismal failure to make public, timely audited accounts so we can ALL see where the money goes and how cost-effectively it is spent. It didn’t even seem to make a difference when an accountant was BTA CEO/President.
    Once again we are left to guess. Is this $17 million to pay the bills of the last financial year end?
    Is it part of the approved $92 million budget for the same period?
    What interest rate are they paying on this loan and over what period?
    Questions, questions, questions and very few answers.

  5. @Adrian
    re the 17 million, have a look here$17%20Million.pdf

    U mentioned the civil service, are you of the opinion that it needs trimming? if so, how do we mitigate the “human/social” impact? Where would they be sent?

    i had also forgot about the land tax increase but do remember one of the opposition MP’s referencing hotels as a group who would suffer.

    As for the manifesto, well, if we had to put the amount of fulfilled promises as a percentage, line by line, it would be in low single digits. but that’s for another thread.

    Can you explain what is/was or should be the primary mandate of the BTA, and your opinion as to if they are fulfilling it? or if they ever did for that matter?

    thanks much again for the “free info.” I’ll return in kind on other issues. lol

    Not knowing is the start of knowledge 🙂

  6. forgive me, last thing…. what’s the net impact of a 4 season going up and succeeding, but a lot of small hoteliers closing or suffering???

  7. I hear $ 58 Million approved from IADB to restart Four Seasons….wait how many times this project RESTART now ?

  8. If we go by some of the debate in the Senate yesterday the NIS will get a good return of 7+ %. Senator Boyce was quick to make the point this is a good return in the current market. He accepted the point that diversification of the NIS portfolio is always uppermost in the mind but one can’t invest internationally for the sake of it given the vagaries of the investment climate since 2008 (BU paraphrase).

  9. Loveridge as the guru on tourism, economics, accountancy, security and everything under the sun give us your opinion on Moody’s downgrading CDB.
    You too BU give us your opinion. Let’s see how you all contort to pin blame on Fruendel. There cannot be any link between the world economy in its worst recession in history and CDB’s plight it has to be Fruendel.
    As for Peter G*y Wickham heaven knows he will find some way along with the Nation newspaper to blame Stuart for the CDB’s fall into decline.
    With his secret and not so secret dealings with American espionage same sex marriage supporter Wickham must have the inside scoop on Fruendel’ culpability in CDB’s decline.

  10. If we accept that spend has been down, if we accept the power of an international brand in the marketing effort, if we accept that it is the high end tourism product which has been carrying Barbados of late then we should be optimistic about the benefits of a 4C. Many remain unhappy about how it is being mobilized as distinct from the concept.

  11. Hasn’t the CDB President spoke about the downgrade? Bear in mind in still retains a triple A rating. Dr. Warren Smith indicated although he was disappointed the bank will undertake to investigate and retool its risk policies. His comment seems to point to some institutional strengthening more so than other factors. BU is willing to be corrected though.

  12. Observing,

    Civil Service. Yes sadly is a trade-off but we simply cannot afford so many people without it impacting negatively on the private sector.
    The BTA’s mandate should be that it performs a marketing function. Not administration. How can you justify 130 plus staff and then still farm our functions like an overseas advertising agency and public relations company.

    The are so many unknown questions regarding the proposed Four Seasons project. What is the interest rate and duration of loan period for both NIS and Inter-American Development Bank monies?
    Are the loans on more favourable terms than available to the private sector?
    We have all witnessed the effect projects like GEMS can have on the industry.
    Another hotel (Discovery Bay) closing for six months from 1st June. How many more rooms on top of the 395 lost at ABV last month can we afford to loose without further airlift reductions?

  13. I have been observing the slow progress of the BTA over the last decade. These top positions held in BTA and the minister can only be successful if these persons truly understand Marketing and Sales. We want action and workers not great speakers with no results. It is about time that BTA get more tourist in Barbados. What is happening to Europe, Latin America, the Cheap charters from UK? There was a time when the ports were busy with tourists and movement around Barbados was evident.
    The BTA lacks the ability to supply a proper tourist hub with customers and they too shall go. For too long long we in Barbados sit back and watch our services depleting while a selected few spend and enjoy the monies among themselves.
    If there is not a radical change in the thinking of BTA top officials, Barbados will continue to go down hill.

  14. @Bajan and Adrian
    So are we really just waiting until “more tourists come” rather than “retooling ourselves” to take advantage of whatever comes out of the recession?

    Also, given the marketing mandate, is it fair to say that the HR structure of the BTA has been wrong for some time?

    I ask because we did not retool the economy when it was good…look where we are now.

    If tourism needs a revision as well, I’m concerned a bit given the uncertainty of the next 4-5 years. Especially since it is our main bread winner.

  15. David, its a very good question. With the closure of Discovery Bay (88 rooms) for six months from 1st June, that puts another one hundred staff plus on the breadline. And for the hotel it takes a staggering 16,060 available rooms nights out of the economics or what could be nearly 5,000 guests. Half the overall annual revenue potential.
    Some may argue that the business is going to the villas/condominiums, but I doubt this. Just sent a link for Group offer staying at Battaleys Mews (Mullins). After Groupon commision the property would be getting a nett US$58 per room per night or less.

  16. David,

    It would be nice to think that would happen, but I think not.
    Actually our average (destination) annual hotel occupancy barely reaches 50 per cent. Up until the ABV closure that meant nearly 3,500 rooms lay empty everything single night of the year. Caribbean average is closer to 63 per cent. I think with the scale back of airlift plus the loss of REDjet its going to be a tough summer. Discovery Bay decision to close for six months is only partially driven by refurbishment. More like conserving costs.

  17. David,
    The point I was trying to get across is that REX (Discovery Bay) do not appear to see the closure of ABV as an opportunity to fill some rooms. If ABC (161 rooms) also closes, then its almost impossible to put their combined capacity (556 rooms) all into Casuarina, who ever ends up owning it.

  18. @Adrian

    Understand the last point made but other factors/questions come into play. Their marketing strategy. What about their expense drivers?

The blogmaster dares you to join the discussion.