The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must work with the airline industry “to put a ceiling” on travel costs to the destination, a senior hotelier is asserting, as this nation “doesn’t need any more taxes” included in ticket prices.

But Robert Sands, the Bahamas Hotel and Tourism Association’s (BHTA) president, while acknowledging frustration that taxes are now higher than the cost of airline tickets themselves nevertheless told Tribune Business the situation cannot be viewed in isolation or without understanding what they pay for.

Of the roughly $150 in taxes and fees built-into airline tickets, he explained that The Bahamas accounts for around two-thirds of this sum - some $90-$100. And, of the latter figure, the largest component is a passenger user fee which finances repayment of the $409.5m debt funding for Lynden Pindling International’s (LPIA) transformation into a “world class facility” demanded by Bahamians and visitors alike.

Without such a stopover visitor gateway to facilitate the growth in air arrivals, Mr Sands told this newspaper that The Bahamas and its largest industry would be “dead in the water”. The BHTA chief, though, conceded that this nation’s status as a high-cost destination was pricing some potential visitors out of the market, and the resort industry was eyeing ways to reduce access costs to the destination.

“There’s no question that the cost of airline tickets continues to escalate, and that may have an impact on some passengers’ ability to travel to a destination,” Mr Sands said, adding that the Association and various tourism Promotion Boards “certainly support examining ways in which air tickets and air transport access costs can be reduced”.

However, he noted: “There are also some realities that we have to be prepared to address, and one of the issues that has surfaced is the value or amount of taxes that are included in the airline ticket prices. Some are saying they are very high, others are saying enough is enough.

“The reality is that taxes on tickets for people travelling to The Bahamas are not the highest in the region but maybe in the middle. There are a number of issues that contribute to that. Of the $150 that is maybe charged on a ticket, approximately $50-$60 are US-based levies for coming to The Bahamas from the US, and approximately $90-$100 are Bahamas-based taxes.”

Suggesting that these are better defined as “user fees” than taxes, Mr Sands said the largest Bahamas-based levy is the user fee “that was introduced to contribute to the development costs of LPIA. Bahamians demanded a world-class facility, and our visitors require it.

“It was introduced when we were expanding LPIA, and at the time we were growing the rooms at Baha Mar and expanding the passenger count by 400,000 a year. The point I’m making is not that LPIA was introduced for Baha Mar, but the trends in tourism numbers indicated that LPIA in its former state could not sustain growth in tourism in The Bahamas,” he added.

This made LPIA’s redevelopment imperative, and the only way to finance it the necessary infrastructure and capital improvements was to charge users a relatively modest fee built into their airline tickets so that lenders could be repaid. Mr Sands pointed out that another significant component of the ‘taxes’ built into airline tickets is the departure tax levied on visitors.

“While I agree that we don’t need any more taxes, and should find ways to reduce those costs, a lot of this is associated with strategic infrastructure and the expectations of Bahamians and visitors,” he told Tribune Business. “A lot of worldwide security measures, some of these fees cover elements of those costs for the benefit of Bahamians and visitors transiting through.

“The whole debate has to be taken into context. Are airline tickets higher than we would like them to be? Absolutely yes. But a lot of airlines are yield-managing for higher demand destinations. The Bahamas is one of those high demand destinations. We need to continue to have open collaboration with the airlines to see if there are ways in which we can.... I want to say, put a ceiling on some of these costs.

“That’s for the future, but understand we have benefited from these infrastructure works and capital developments, and that we are proud of LPIA as a world-class airport. There are so many elements one has to consider in looking at this issue. We should not pick on user fees without understanding the rationale and reason they were put there in the first place,” the BHTA chief continued.

“It is unfortunate The Bahamas is a high-priced destination where the costs are much higher than other places, and it is more costly to operate in the Family Islands, which manifests itself in the air fares to attract airlines to The Bahamas. The reality is we’re looking to do infrastructure and capital developments through multiple islands to grow tourism.

“The Government funds a significant part of the improvements, but some of it is going to come from user fees. Citizens depend on it, visitors require it, otherwise we’re dead in the water in terms of product offering and value in this destination.”

Mr Sands spoke after Kerry Fountain, the Bahamas Out Island Promotion Board’s executive director, last week questioned “what’s on the drawing board” to reduce the high access/airlift costs into this nation as he revealed that ticket taxes for his recent flight to Nassau from Fort Lauderdale were 13.4 percent higher than the actual ticket cost.

Taxes worth a combined $163.35 accounted for 53 percent of the total ticket price, and Mr Fountain told the Eleuthera Business Outlook conference: “I need to address this. I’ve heard it mentioned again yesterday on a sales call by some of the hotel partners, and that is the cost of getting to this island of Eleuthera. Some are paying $1,200 or whatever it is.

“The other day I was flying from Fort Lauderdale to Nassau. My ticket cost $144, but the taxes were $163.35. That’s more than the cost of the ticket. We always talk about, when we are writing a business plan for The Bahamas, about our proximity but what we have failed to do is translate or convert that proximity into affordability....

“The point of the matter is that because of the high cost of getting here the number one market for The Bahamas is Florida; Miami and Fort Lauderdale. You could jump on a Carnival cruise from Miami, Fort Lauderdale for $400. That’s almost equal to the cost of an airline ticket. Florida is our home court. We’ve given up that advantage. What are we doing? What is on the drawing board to reduce the high cost of ticket taxes to The Bahamas.”