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A way forward for tourism

Thursday, April 19, 2018

Sometimes the fastest way forward is to step back and look at the fundamental things that facilitate or hinder the development of this sector.

In the past, tourism in T&T has developed with little or no sustained support from the State. Most of the major resort investments have taken place in Tobago, which followed the typical Caribbean marketing model of selling sun, sand and sea with a bit of local culture thrown in.

In Trinidad, tourism was primarily developed to service the business community, coupled with the annual promotion of Carnival. During the Carnival season, a disproportionate amount of the country’s annual marketing budget is spent for an activity that, from a hotel perspective, only produces full occupancy for 5- to 7-room nights.

Over the years, T&T’s brand marketing has solely relied on “visiting family and friends.” This initiative is geared to attract the diaspora of native-born Trinbagonians and has been successful particularly around the Carnival period. However, little effort has been made to target the 30 million tourists that visit the Caribbean region on an annual basis.

In Trinidad, there have been a number of attempts to attract the Meeting and Convention Market (MICE) with significant sums spent on international consultants to develop detailed plans. Despite this ‘initiative’ most, if not all, of these reports ended up gathering dust in some tourism technocrat’s desk, having never been acted upon.

Every few years, the political party in power develops a new master tourism plan. The consistent characteristic of these plans is that they never get implemented. There seems to be an unwritten policy that whenever there is a change in administration, everything that the previous administration did was considered bad and corrupt, and must be stopped, investigated, and eventually discarded. This is exacerbated by the abundant reshuffling of Cabinet members—a typical “Caribbean thing.” When these reshuffles take place, the freshly appointed minister usually has their own new agenda, and in many cases, starts the cycle all over again. This unwritten policy was taken to new heights during the tenure of The People’s Partnership with the installation of four ministers of tourism: Messes Griffith, Cadiz, Sharma and finally Hadeed.

This trend continues today, as the new PNM administration has shut down the TDC, terminated its entire staff, and replaced it with three new companies. For those of you who do not know the history, the Tourism Development Authority(TDC)—also known as the Tourist Board—was closed in 1995 and was replaced by Tidco, which was then closed in 2004 and replaced by TDC, which is now closed and replaced by three companies: the T&T Tourism Business Development Ltd, the Trinidad Tourism Destination Management Company Ltd, and the Tobago Tourism Authority.

Keep in mind that throughout most of this history, the central government also had a fully-staffed Ministry of Tourism, while the Tobago House of Assembly had a fully staffed Division of Tourism.

And now we have a new Minister of Tourism—Randall Mitchell. Here we are again: two ministers of tourism in two years! All I can say is here we go again.

Throughout each successive administration, the lack of sustained policy and structure is the main reason that tourism remains undeveloped and stagnant.

Building a sustained tourism industry requires a long-term approach to business. It needs consistency, predictability and, most importantly, stability. It is not just about building a few hotels and the related infrastructure; the industry touches all sectors of the country. It requires a commitment from the majority of the population, as each individual can impact a visitor’s experience in some way. Likewise, it needs the support of the entire public service sector, in the same way that it needs continuity from successive boards, ministers, and administrations.

When a visitor previews a country’s image, it is in fact seeing a mirror image of how people live their lives. Today, tourism is more about the personality of the people than the assets it builds. Unlike other export industries, tourism cannot be developed independent of the local population.

In the past, the sole instance where serious attention was given to the industry was when oil revenues slipped and the country needed to find other economic activities to provide employment and much-needed foreign exchange. Our economy is in yet another downturn, and one can only hope that we get the infrastructure right this time.

To put it bluntly, tourism offers low hanging fruit and there is no rational reason why we are not taking advantage of its economic benefits for both for the short and long term trajectory.

Lack of infrastructure

During the PNM’s previous term (ending in 2010), it produced an excellent development plan for tourism: a vision for the country based on a view of what the country should look like by the year 2020. It brought together the public and private sector, and produced an excellent long-term plan for all sectors of the economy. For the first time, it established benchmarks to measure performance and guide progress.

Emanating from that plan was a desire to double the country’s current hotel inventory. To achieve this goal, we needed to build 2,000 to 5,000 additional hotel rooms spread across both islands by 2016. To achieve this goal, the country needed to attract investment capital in the amount of US$4-5 billion, depending on the number and quality of rooms it wished to target. It would also require direct government investment to improve the infrastructure and to service the expansion. This would be executed in the form of: new and improved roads; expansion to both airport and seaport facilities; improvement to the water and electricity supply; and implementation of new sewage treatment plants, among other things.

Perhaps the most important change would be the need to improve the service level in all segments of the country, particularly those that interface with visitors in both the private, and perhaps more importantly, the public sector.

For the plan to succeed, it would have to truly embrace the concept of public-private partnerships.

During the development of this 20/20 plan, it became clear that the majority of the proposed growth and infrastructure would have to be privately driven.

Unfortunately, once the administration changed, these plans were yet again discarded.

Hotel development

In Trinidad there are currently approximately 2,500 hotel rooms, while in Tobago there are some 1,200. Over the last 20 years, there have been few new hotel investments on either island. The most significant were: the Ambassador Hotel, Crews Inn, the Marriott, Coblentz Inn, Holiday Inn Express, Cara Suites, the Star Hotel, and the Hyatt.

In 2009, the Carlton Savannah opened just in time for the Commonwealth Heads of Government Conference, only to be closed shortly thereafter. It has since been sold by the bank and remains closed today.

In recent years older hotels in south Trinidad have undergone significant refurbishment, primarily to service business traffic a result of a booming oil and gas sector. These hotels include: Paria Suites, Trade Winds, Cara Suites, and the Royal Hotel. In the north, Kapok, Chaconia Inn and Coblentz Inn also undertook major refurbishments to service the same oil and gas sector.

The Hilton Trinidad was renovated in time for the 2009 Commonwealth Heads of Government Conference and the Summit of the Americas. There were a few smaller hotels that upgraded their facilities to service the eco market like Castara Retreats in Tobago, Asa Wright Nature Centre and Le Grande Almandier at Grande Riviere to name a few.

In Tobago, a number of condominium developments are run as condo hotels. The island has developed a significant number of second homes or rental villas which, when added together, provide another 720 rooms to the room stock. The bulk of these can be found at Tobago Plantations, Samaan Grove/Golden Grove, Englishman’s Bay, and Grafton.

In 2014 Blue Waters Inn in Tobago was upgraded from a three-star to a four-star hotel while at the same time Inn on the Bay and Manta Lodge went into administration, with the THA purchasing Manta Lodge along with the partially completed Sanctuary Hotel.

Today a significant number of these rooms are run down as the owners and operators have not reinvested either because they do not have access to capital or because they have no confidence in the country’s commitment to develop a sustained tourism industry

From an investment point of view, the tourism industry cannot be characterised as a vibrant sector of the local economy.

Industry performance

In the last five years, there has been a significant reduction in visitor arrivals to Tobago, which has resulted in the reduction in both the room rate and the occupancy levels.

In Trinidad, on the other hand, occupancy levels have been much more stable—a result of ongoing business activity in the oil and gas sector.

In a recent document published by the Hotel Association, Tobago’s foreign visitor arrivals for 2017 totalled 18,000, down from 96,000 in 2005. This gives an average occupancy level of 20 per cent based on the current room stock. This is nothing short than a financial meltdown for those who invested in the sector.

In Trinidad, arrivals have been more stable, but the numbers are relatively flat. The earnings per room are at a level that most should be profitable.

The average nightly room rate in Trinidad ranges between US$110 to US$300, while in Tobago, the performance is significantly less. These rates are a reflection of poor destination demand and also reflect the quality of the tourism plant—facilities and rooms. With few exceptions, there have been no significant private sector investments in the existing plant in recent times.

Based on our understanding RevPar (revenue earned per available room) from the branded hotels the Hyatt, Marriott and Hilton hotels have been excellent. These hotels have benefited from government spending and from past activity in the oil and gas sector. With the decline of this sector and our failure to develop alternative markets, one feels uncertain about their future.

Today, there is still no plan to develop the leisure market on either island. The stillborn meeting-and-convention opportunities remain locked up in reports which are buried in the Ministry of Tourism’s archives.

Government continues to send mixed signals. The best example of this was reintroduction of a land license requirement for all overseas investors in February 2007. The Foreign Investment Act, introduced in 2000, repealed the Aliens Land Holding Act and sent a strong message to foreign investors that T&T was ready and open for business. No land license was required for the purchase of any property under five acres on both islands. Then in 2006, the THA succumbed to misleading and false information about foreign investor practices in Tobago and got the Central Government to trigger a clause in the act, which required a land licence for any foreigner wanting to purchase property on the island.

This clause was originally meant to protect heritage sites and buildings, environmentally sensitive areas, and specific areas that the state wanted to reserve for local ownership. It was never meant to govern large parts of the country.

Despite extensive pleading from the private sector, the government deemed that all of Tobago would required a land license. They then took three and a half years passing regulations that allowed investors to acquire land on the island.

Because of this time lapse, the three major tourism projects under development in Tobago were shut down by their investors or by their financiers. The bank levied on security pledged by Tobago Plantations.

In 2017, the shareholders had to inject significant funds to settle the bank indebtedness. The Golden Grove development, which was a very successful project, was shut down. Plans for the second phase, which included development of some 500 new resort rooms, was put on hold indefinitely.

In 2012, the Culloden Estate was levied on by its bankers, while the Indigo Bay development, a condo hotel under construction, had to return approximately US$3 million in deposits.

Today the rotting foundation is a living testament to poor government decisions. Not long after Inn on the Bay was also levied upon and sold.

Although yachting contributes a small part of the tourism sector, the industry had previously shown tremendous promise, with almost 3,000 boat arrivals in the year 2000. It was one of the tourism success stories developed mainly by the private sector with little direct investment by the state. However, by 2017, new arrivals had fallen to 650. The industry continues to decline due to a host of issues, most of which are state sponsored.

A near death blow was delivered by the government in 2016 when VAT was levied on all financial transactions dealing with boat repair and servicing, even though everyone knew this was an export industry and not subject to VAT.

In 2017, this tax was reversed by the Minister of Finance, but by then the damage had already been done. Once again there is a committee that has been set up to deal with the industry challenges but one wonders if the horse has not already bolted.

—Kevin Kenny, a tourism consultant, has been involved in the industry for the last 30 years. He is a past president of the Trinidad Hotel Restaurant and Tourism Association and a past regional vice president of Caribbean Hotel and Tourism Association.

Tourism consultant


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