The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Hotel and Tourism Association’s (BHTA) president has warned that “across the board tax increases should be a last resort” when it comes to fiscal reform, with this nation’s relatively high prices driving lower resort occupancy levels.

Stuart Bowe, responding to Tribune Business’s questions, called for the Government’s fiscal reform plans to “include much greater discipline on spending, and a much higher collection rate on taxes than we’ve seen”.

Essentially echoing the Coalition for Responsible Taxation’s position, and calling on the Government to extract more from the existing system before looking for new monies, Mr Bowe said the hotel industry had accepted the 2010 tax increases and realised there was a need for further rises “in some manner”.

But, given that increased taxes will inevitably translate into higher prices and rates for visiting stopover tourists, Mr Bowe said consumer data for the last five years showed cost was “the primary motivator” for choosing a vacation destination.

“We know that the higher the price of a vacation, the smaller the market share one can draw from,” Mr Bowe told Tribune Business. “General value for money, price of travel and the price of accommodation are critical.”

Tribune Business revealed on Tuesday how the BHTA, in an April 3 presentation, had warned that their market share in a key visitor demographic could “dwindle to less than 19 per cent” were the initial Value-Added Tax (VAT) proposal to be implemented.

Its presentation suggests that this nation has already ‘priced itself’ out of 65 per cent of the middle-aged couples market in the key New York and South Florida areas.

The presentation drew on a survey of 500 New York and Miami/Fort Lauderdale residents, aged between 35 to 54 years, that was conducted by MMGY Global last year for the Nassau/Paradise Island Promotion Board.

The survey, focusing on respondents with an annual household income of $85,000 and who had not visited the Bahamas for two years but remained interested in doing so, was intended to measure consumer price sensitivity to price changes when it came to hotel, airline and ground transfer price changes.

Basing these on a couple staying for four nights in the Bahamas on an all-inclusive package, the survey found that the collective $2,097 cost was more than 65 per cent of those surveyed were willing to pay.

Thus, with the Bahamas’ high vacation costs restricting it to just a 35 per cent share in a key demographic for its core US east coast markets, the BHTA appears to have calculated that VAT at 15 per cent would slash this further - to just 19 per cent.

Mr Bowe acknowledged that while a segment of the market would always be prepared to travel to the Bahamas, further travel and hotel cost increases meant this nation would not generate the visitor volumes necessary to sustain the largest private sector employer.

“To sustain the size of our industry and the ensuing benefits to the country in employment levels, spin-off businesses and tax revenues to the Government, it requires a large number of visitors,” the BHTA president told Tribune Business.

“Our data is very clear: As prices go up, the market we can draw from goes down. The key is to provide exceptional value for the price points on offer.

“While we’ve made good progress in recent years in improving the value of the visitor’s experience, much more must be done given our existing price points.”

Mr Bowe said that while the Bahamas “receives higher marks than most of our competitors” when it came to visitor experience, there came a point when this was outweighed by vacation cost.

He confirmed the estimated shrink to 19 per cent market share with VAT at 15 per cent, which would leave rival Caribbean states able to attract more than twice that percentage.

And Mr Bowe also confirmed that pre-VAT, a Bahamas vacation already costs 25 per cent more than the Caribbean’s “growth destinations”.

The BHTA presentation also revealed that stopover visitors to the Bahamas have fallen by 11 per cent during a period when the Government’s tax take from the hotel/tourism industry has risen by $264 million.

When it came to the collective departure taxes paid by stopover and cruise visitors, the BHTA presentation showed that the Government’s revenue take from this line item had jumped by almost $46 million - from $68.9 million in the 2009-2010 fiscal year to $114.5 million in 2012-2013.

That represents a 66.2 per cent increase upon the Government’s departure tax take prior to when air departure tax rates rose from $15 to today’s $25, and cruise departure levies increased form $7-$8 to $13-$14.

As for room taxes, which were increased from 6 per cent to 10 per cent under the former Prime Minister, the Government’s revenue take had risen by $19 million annually - from $25.1 million in 2009-2010 to $45.1 million in 2012-2013.

This represents a 79.7 per cent increase upon the pre-increase revenue take. And, with some $40.9 million and $43.3 million generated in room tax revenues for 2010-2011 and 2011-2012 respectively, the BHTA presentation suggested that the rate increase had produced $53 million in extra monies for the Government over three years.

And, with the new departure taxes providing $102.5 million and $101.6 million in 2010-2011 and 2011-2012 respectively, the BHTA said that when the three post-increase years were combined, the Government had gained an extra $211 million from this measure.