The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian resorts have seen their room tax and Business Licence payments increase by 66 per cent and 250 per cent, respectively, since 2010, a senior industry executive today warning this nation will “pay a hefty price” for misguided tax policies.

Stuart Bowe, the Bahamas Hotel and Tourism Association’s (BHTA) president, in a column published on Page 3B in Tribune Business today, says the sector estimates it generates $700 million in government revenues annually - a sum far higher than any other industry.

Implying that the Bahamian hotel industry was already paying its fair share in taxes, Mr Bowe said a recent Nassau/Paradise Island Promotion Board survey of a core US visitor market found that 65 per cent of respondents would come to the Bahamas if ‘access costs’ were less than $2,000 for a couple.

This, he added, showed how ‘price sensitive’ stopover tourism had become, and how the Bahamas’ competitiveness could be undermined if Value-Added Tax (VAT) or any alternative fiscal reforms significantly increased visitor costs.

The BHTA president indicated he had been prompted to respond by comments suggesting that the hotel industry was under-taxed, not paying its fair share and viscerally opposed to any form of tax or fiscal reform.

“Tourism currently generates more than $700 million in taxes annually - by far the most of any industry. Since 2010, taxation on tourism has risen more than on any other sector, including steep hikes on room, departure and business license taxes,” Mr Bowe writes.

“Now, with the proposed Value-Added Tax (VAT), that burden threatens to make the Bahamas more expensive to travel to, slow the economy, impact tourism employment, and reduce the Bahamas’ competitiveness as an international Tourism destination.”

Pointing out that $0.50 of every $1 earned by Bahamians came from the tourism industry, Mr Bowe said the World Travel & Tourism Council (WTTC) had forecast that the sector will generate over 100,000 jobs, or 54.5 per cent of total employment, in this nation in 2014.

With tourism’s importance to the Bahamas set to increase, he writes: “Since 2010, the tourism industry has seen several across-the-board tax increases. Room taxes, for example, have increased 66 per cent, or more than $19 million, to add a total of $45 million to Government coffers in 2013.

“By the middle of this year, departure taxes will have nearly doubled to $29 per person. Combined, room taxes and departure fees added approximately $160 million to the Treasury last year.

“Similarly, the Business License tax has increased substantially for both small hotels and major resorts. This year, the turnover tax on small hotels has risen 50 per cent, while major resorts now pay 1.75 per cent of turnover - a 250 per cent increase.”

Mr Bowe added that the hotel and tourism industry was not opposed to VAT or any other tax reform, only to options that further reduced the Bahamas’ price competitiveness and hurt the economy.

“Price is now a key factor in vacation buying decisions, according to an independent survey conducted by MMGY Global for the Nassau/Paradise Island Promotion Board,” Mr Bowe writes.

“The survey, which was conducted last year, queried US adults in the prime age group of 35-54, with a minimum household income of $85,000 who vacation regularly but have never been to the Bahamas or have not vacationed here in two years or more.

“A full 65 per cent said they would be willing to spend less than $2,000 for airfare, ground transfers and lodging for a four-night vacation package for two to the Bahamas. That means that our pool of potential visitors is limited and becomes even smaller as prices increase,” the BHTA president added.

“You do the math: Airfare averages $500 per person ($1,000), leaving just $1,000 to cover four nights for hotel and ground transfer expenses. In today’s high-cost environment, it becomes increasingly difficult to attract larger numbers of visitors to the Bahamas as our price points increase.

“When making the choice between the Dominican Republic, Canc�n, Las Vegas or the Bahamas, today’s travellers use price as a prime consideration. For the record, average room rates last year in the DR were $114 and $176 in Cancun. According to Smith Travel Research, the average room rate reported reported last year for The Bahamas was $264.”

Mr Bowe added that the hotel industry needed to “dispel the myths” about its tax contribution, warning: “We all stand to pay a hefty price if rhetoric drives public taxation policies.”