A warning today that the island’s hotel sector and the Barbados brand are in danger of deterioration if hoteliers are unable to quickly access promised concessions from Government.
President of the Barbados Hotel and Tourism Association (BHTA), Sunil Chatrani, sounded the warning as he reported to colleagues attending the BHTA’s quarterly meeting at the Hilton resort that commercial banks had lost confidence in the sector.
He lamented that some 17 months after the Jamaican-owned Sandals chain had signed a Memorandum of Understanding to access concessions which were also promised to local hotels, Government had not yet delivered on its promise to local hotels while Sandals was already benefitting from the arrangement.
Though lauding Government for its “bold move” in amending the Tourism Development Act (TDA) to offer the suite of concessions, Chatrani said “with all good intentions, policies and now even law, we are still without these concessions”.
However, in an almost immediate response, Minister of Finance Chris Sinckler told journalists it was a matter of time before hoteliers started benefiting from the concessions. The tax breaks, under the revised TDA, include a waiver of duties and taxes on food and beverages used by hotels.
The package of concessions is to be expanded to include qualifying restaurants.
Chatrani said although the BHTA, Ministry of Finance, Ministry of Tourism, Barbados Revenue Authority, Customs and Excise Department, Barbados Tourism Investment Inc., Barbados Agricultural Society and other industry players had been working “through the mechanics” of the concessions, they had come up against a number of obstacles.
“I honestly stand here today and cannot tell you what the next single obstacle is that we need to work through. It is now a total of 17 months since the MOU was signed with Sandals, who are now open to business and accessing these concessions, while the rest of the sector continues to pay high duties and taxes on all consumables and food and beverage,” the BHTA president said.
He added: “The industry has been struggling financially for some time now and has not been able to reinvest back into the product. As a result, we have tired rooms across the island with most hotels in default on their loans with financial institutions. The commercial banks do not have the confidence in the sector because the hotels cannot demonstrate adequate cash flows to support the level of reinvestment required to make the hotels viable.”
Chatrani went on: “The hotel sector is one of the most highly capitalized sectors, which requires constant reinvestment to remain relevant in the market place. The food and beverage concessions were meant to be available to the sector for the winter to be able to demonstrate to the commercial banks that the business model now makes financial sense.”
Chatrani said had hoteliers been able to access the concessions, they would be able to borrow to renovate their product. This, he said, would allow hotels here to compete on quality rather than price, as is currently the case.
“This is obviously not a sustainable situation and can only go on for so long before we start to see a deterioration of our market share and brand Barbados. When the brand starts to lose its appeal, it will be much harder and expensive to rebuild,” the BHTA president said.
Sinckler called on hoteliers to exercise a little more patience, noting the committee that was set up to ensure everything was in place was working feverishly. He explained that while Sandals was one entity, the entire sector had multiple players and this meant it would take a longer time to deliver the same concessions.
“I have spoken to the Comptroller of Customs and she has issued a memo in relation to the law that has been passed, informing the staff that they are to facilitate the hoteliers and whoever will be eligible under the TDA. I know the Minister [of Tourism Richard] Sealy has been writing the instruments to allow them to be able to go to Customs to be able to get access. So it is basically just a matter of time. Yes, they have waited a pretty long time for it but good things come to those who wait,” said Sinckler.
He cautioned hoteliers that once the concessions become accessible, they should exercise discipline and carry out the necessary upgrades to their plants to make them more attractive and competitive.
“We are talking about a wider range of products and services and, of course, the country is making a tremendous sacrifice in terms of giving up duties and taxes to facilitate this. So there has to be discipline in it,” Sinckler said.
“He added: “When people compose their list, they should put things that they know are important and essential to making their properties more competitive and giving the guest the ultimate experience and the highest quality, not just throwing things in because you have duty free and you want to put everything on.”
“I am not saying that is what people are doing but that is the level of discipline we have to exercise,” he said.
Sinckler also reminded the tourism players that they should first seek to source items from the local agriculture and manufacturing sectors before looking overseas.