Hotels unanimous on 'unsuccessful' VAT

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian hotels unanimously believe the Government will be “unsuccessful” in implementing Value-Added Tax (VAT), and that it will ultimately deter inward investment.

Charlene Lewis-Small, a KPMG (Bahamas) director, confirmed to Tribune Business that every Bahamian resort which responded to its 2013 Caribbean Hotel Benchmarking Survey gave a resounding ‘No’ when asked whether VAT would ensure the Government achieves its fiscal and tax reform objectives.

“Many governments in the region face financing ‘challenges’ and have to look at new revenue streams,” the KPMG report stated.

“A number of jurisdictions have introduced, or are contemplating introducing, VAT, for example. They are, however, keen to ensure that this does not have a negative impact on tourism.”

Worryingly, perhaps, from the Christie administration’s perspective, the KPMG survey found: “A majority of reporting hotels do not believe that new revenue streams such as VAT will be implemented successfully in the region.

“The overwhelming opinion is that such measures may ultimately act as a deterrent to inward investment.”

Some 62 per cent of hotels that responded to the KPMG survey expressed concerns that VAT will not be implemented successfully and could deter foreign direct investment (FDI).

When asked by Tribune Business how great a proportion of that 62 per cent came from the Bahamas, Ms Lewis-Small replied: “All the Bahamian hotels responded ‘No’.”

While she gave no percentage figure, the majority of that 62 per cent are likely to be based in the Bahamas, as this is the only nation implementing VAT this coming year.

Elsewhere, Ms Lewis-Small said the KPMG Survey produced a mixed outlook from Bahamian resorts, with many joining the general regional notion that strong growth will only resume in 2015.

“Generally, the sentiment is that real growth will not be experienced until 2015 and beyond,” the KPMG accountant said.

“There isn’t a great deal of optimism that 2013’s performance will be better than 2012’s, plus confidence in the industry for 2014 is equally muted. These sentiments are largely predicated on concerns about travel costs and the economic climate in source markets.”

She added: “The primary concerns are reduced airlift (and corresponding increases in travel costs), as well as recovery of the key feeder markets - the US, UK and Europe.

“The feeling is that 2014 will be a watershed year in terms of seeing a meaningful turnaround in these factors. Generally, there is a feeling of cautious optimism, but the industry has suffered greatly in recent years, and so hoteliers are naturally somewhat nervous about the sustainability of any recovery.”

The Bahamian resort industry also exhibited differences in its 2013 financial performance when compared to its regional counterparts.

“The Bahamian hotels participating in our survey reported improved occupancy, flat ADR (average daily room rate) and improved RevPAR (revenue per available room) for 2012, whereas our wider survey showed ADR and RevPAR up, but occupancy down, across all participants,” Ms Lewis-Small said.

“Looking at industry reports through year-to-date September 2013, ADR is up for the Bahamas but occupancy and RevPAR are down. This contrasts with the Caribbean, where all three key performance indicators are up over the same period.”

This indicates the Bahamas continues to lag behind its Caribbean counterparts on hotel industry recovery, with much relying on the anticipated impact of Baha Mar’s $2.6 billion Cable Beach project to drive arrivals and yields growth come 2015.

“Given its scale and ambition, the role Baha Mar is of critical importance to the Bahamas tourism industry. The industry and country definitely need the project to do well,” Ms Lewis-Small told Tribune Business.

“A successful Baha Mar may introduce the Bahamas to new markets in addition to encouraging past visitors to return for our new product offerings.”

Both Baha Mar, and the Bahamian resort and casino gaming industry in general, can still draw encouragement, though, from the favourable demographic trends in this nation’s key source market, the US.

KPMG’s Caribbean benchmarking survey said total Caribbean stopover visitors grew by 3.55 per cent in 2012, and added: “The number of affluent households in the US is expected to grow from 10.5 million in 2011 to 20.5 million by 2020, and their total wealth is expected to grow from $39 trillion to $87 trillion.

“Luxury hotels and resorts dominate the preferences of affluent Americans when it comes to vacation accommodation. Furthermore, it is estimated that in 2013 affluent travellers will increase their spending on vacations by 10 per cent.”

And there are also indications that the proposed casino gaming reforms, and Baha Mar’s $2.6 billion investment - with its casino-centric model - are well-timed.

“During 2010-15, the global casino industry is expected to achieve a compound annual growth rate (CAGR) of 9.2 per cent, growing to a market size of $182.8 billion in 2015,” KPMG said.

“The gaming industry (measured in terms of ‘wins’) grew at a CAGR of 3.9 per cent in the US for the period 2010-2012. Nearly one-third of the US adult population gambled in casinos during 2012, with total consumer spending at commercial casinos increasing by 4.8 per cent in 2012, reaching a total of $37.3 billion.”

And the KPMG survey added: “Business travel spending is expected to experience strong growth in the next 10 years with a CAGR of 5.5 per cent in the US and 6.9 per cent in the Caribbean.

“In 2012, US businesses spent $34 billion on international travel and $225 billion on domestic travel, supporting 3.7 million jobs and generating $35 billion in taxes.”

Asked what this meant for the Bahamian tourism and resort industries, Ms Lewis-Small told this newspaper: “This is good news for our market because it speaks to the recovery of these segments.

“Of course, there are a limited number of Bahamian hotels serving the gaming and business traveller markets. However, there is a broader opportunity for our smaller boutique properties to capture more of the affluent segment. To do so, they will need to address several issues, including access to the right distribution channels and ensuring that service and amenities are in line with rates charged.”

Describing the Bahamas’ various tourism markets as “huge”, Ms Lewis-Small added: “Winning their dollars has become increasingly competitive, not only regionally but also globally.

“While the Bahamas has certain advantages like airlift, proximity to the US, infrastructure, room count and an enabling legislative landscape, we continue to be challenged by high costs and service issues door to door, inclusive of flight, ground transportation, restaurants, excursions/tours.”

Comments

john33xyz says...

So are the hotels now going to change all the restaurant bills from saying "A 15% gratuity has been added for your convenience" - to (in July) say "A 15% VAT Tax has been added for your convenience" ??????????????

Posted 21 December 2013, 8:11 p.m. Suggest removal

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