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.