CARRIBEAN ASSOCIATION OF INDIGENOUS BANKS
Sue SpringerNovember 19th 2008
Overview
The importance of Tourism BusinessState of the IndustryEconomic Analysis of major markets Operating CostsIdeas for working together to survive this challenge?
The Tourism BusinessThe Caribbean is a region that is the most highly
dependant on tourism in the worldDespite economic decline a vacation is still high
priority WTTC continues to predict growth in travel and
tourism of some 3% year on year over the next 5 years world wide
State of the Industry
Different for each Island Spanish speaking islands with lower prices Atlantis hotel in Bahamas laid off 800 staff Barbados 4% decline in long stay arrivals for October
compared to 2007 Overall arrivals decline of 0.6% to end of October 2008 Projection by FTO bookings up 15% for 2009 at the present
time Dynamic times & the situation changing DAILY
Economic Analysis - Canada Higher oil prices & slowing economy @ a more rapid rate
than anticipated - affecting all areas Canadian $ fell to US$0.93 cents Economy forecasted to grow by only 1.7% in 2008, down
from 2.7% in 2007 40% of Canada’s GDP generated from exports to USA Auto & auto parts largest export – All 3 major US auto
makers cutting production in plants in Ontario & Quebec.
Economic Analysis - USA
Burdens of both high oil prices & the sub-prime banking crisis wrought havoc on the economy of the USA
Exacerbated most recently by the demise of Lehman Bros. ect
Today General Motors, Chrysler & Ford have requested Federal monies to stay in business – (US$25Bn)
Biggest fall of US wholesale in 60 years - down 70% Overall lack of consumer confidence Causing consumers to rethink travel habits Unleashing a ‘stay at home mentality’ or “Stay-cations” Election fever over
Economic Analysis - UK Alistair Darling – Chancellor of Exchequer recently said
“Britain faces ‘arguably the worst’ economic downturn in 60 years”
Fresh economic data = a feeling of austerity, after yrs of debt-fuelled spending
12.7% decline in property prices during September compared to the same month a yr. ago
BOE left interest rates unchanged @5% for the 5th month Expected that interest rates may change this week Inflation 4.4% more than double the target rate expected to
increase to 5% by yr end.
Economic Analysis – UK Contd. Real inflation including Fuel & Mortgage = 10.6% (per the
Financial Times) Household savings @ their lowest level since 1950’s People trading down of groceries – Supermarket own-label
goods up 6% New car registrations down 18.6% in August lowest since
1966, the hardest hit the more expensive makes, BWM down 40%, Land Rover 58%, Jaguar 41%, Mercedes 35%
Unemployment projection of 2M by year end. The exchange rate for the pound declining daily now below
Bds$3
Economic Analysis - Caribbean & Latin America All the Caribbean islands facing high prices on oil, utilities &
food. Major investments with high end product, both hotels and
villa multi use complexes have been halted or are on a slow down
Challenges with capacity in airlift at peak times Major challenge with price of air fares Majority of the price includes high governmental taxes
Operating Costs in Barbados Electricity bills increased over the past six months as much
as 45 to 65% Improved valuation on lands showing increases of 60 to
80% = increased land taxes A Wage increase for hotel workers in December of 5.5% a
total of about 12% over two years when compounded 50% Excise tax added to alcohol – impacted on the All
inclusive hotels as rates are fixed for the next year. An active hurricane season in the region may impact on
insurance rates for Barbados
Despite all of these increasesHOTELS CANNOT INCREASE RATES
AS WE LIVE IN A WORLD OF DISCOUNTS & /OR VALUE ADDED
A Discounted WorldDue to the global economic tsunami that we all faceDiscounting or value added is the name of the gameJamaica hotels discounting rates by 30%Free air fares being offered in some casesFree flights for childrenHalf price for a companion flying Tacticals being offered in the market place by
everyoneThe world is on sale!!!!
Ideas for working together to survive this challenge?
Moratorium on loan principal - hotels to only pay interest or even to capitalise the interest depending on the level of debt – Limited period 1 yr to 18 months
Hotels unable to service the loan will close & what do we do with these properties
Redundancies equal possible challenges re personal loans
100 staff with an average loan of $30,000 = $3M to be written off
Ideas for working together to survive this challenge contd.Globally Governments facilitating monies to bail out
entitiesGovernments could create a guarantee system for
hotels in troubleEnterprise Growth Fund in Barbados – set up with
funds for 9/11, small hotels initiative, environmental retrofit project ect.
EGF – create an equity position in the business
Ideas for working together to survive this challenge contd.
Reduced Cash FlowAdditional facilitation e.g. soft loanLower Overdraft interest rates Temporary financing facility
Ideas for working together to survive this challenge contd.
Reschedule DebtHotel funding in the original state historically a
challenge Length of repayment given in first phase too
aggressiveIncrease period of time for repayment of loans
-10 yrs to 15yrs, 15yrs to 20yrs
Ideas for working together to survive this challenge contd.ExpediencyAll assistance to be confirmed within a 30 day periodAllows business to plan their next months business
cycleAssists with managing cash flow
Ideas for working together to survive this challenge contd.
Tourism is the primary industry in the CaribbeanAppears that there is a disconnect with the tourism
industryPossibility of a Tourism specialist to be on the staff in
the banksLack of knowledge can cause conservatism
Ideas for working together to survive this challenge contd.Some companies forced to go abroad for loansResistance to the industry due to instability Often tourism is described as a high risk industryTourism is not an industry but a businessIt is the main export for many of the Caribbean
islandsHistory has proven that TOURISM recovers &
bounces back after disasters – 9/11, SARS, Iraq War, Terrorism, Tsunami, Hurricanes, Recession
Help us to survive!
We will survive & bounce back after this economic tsunami
Help us to be one of your surviving customers
I thank you!
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