PHILIPSBURG--Some of the economic difficulties being experienced by the country are self-inflicted and will only continue to grow should government not work together with the private sector partners like St. Maarten Hospitality and Trade Association (SHTA) to address social ills and properly promote the destination, according to SHTA board members led by President Emil Lee who met with the Central Committee of Parliament in a public session on Thursday.
Lee and board members Keith Graham and Lorraine Talmi pointed out the sharp increases in the cost of food and the effects this would have on the overall cost of living and business expenditures. They also underscored the need for Parliament and Government to seek ways to improve the investment climate as businesses are confronted with escalating cost via taxes and red tape that cost time.
The hotel sector is confronted by "extreme seasonality," decreased room rates and occupancy.
SHTA presented a "work in progress report" that compared occupancy and room rates of the country with those of Aruba and the rest of the Caribbean. The association was not keen on having this report disseminated to the public as yet in light of the upcoming St. Maarten/St. Martin Annual Regional Tradeshow (SMART) next week.
Lee, giving some highlights of that report, painted a very worrying picture for the tourism industry. He described the finding of the occupancy comparison with Aruba as "shocking" because that country maintained a 65-70 per cent room occupancy rate in the off-season while St. Maarten's rate dropped as low as 35 per cent.
Aruba was chosen as the comparison because its tourism source market is mainly the United States, as is St. Maarten's, and the two countries have similar political setups, Lee said.
"This shows that our business is extremely seasonal. This shows why short-term labour contracts are in place. Unfortunately, the reality is our business is very short-term. Businesses need to make their profit in the Christmas to Easter months and after that they are similarly just surviving; just struggling to make ends meet."
If St. Maarten had occupancy comparable with Aruba, there would be more consistency and investment in hotel infrastructure, and personnel would operate on a different level such as permanent staff, Lee said.
He also noted in the meeting that marketing spending for the destination had dried up somewhat with the "Hurricane Lenny" Economic Recovery Fund (ERF) in 2009. SHTA "doesn't know what is happening in the Tourism Ministry." He added that the country's marketing representative in the United States had "not been paid for months" by government, thus there was no promotion.
A structured approach to promotion is "necessary to move the island further," such as the National Tourism Organisation, the setting-up of which has been pending for more than 15 years. Aruba has been successful because the "people, businesses and government work together."
The "lack of profitability" in the hospitality sector has had a spiral effect, as the hotels cannot invest in upgrading their infrastructure and become less competitive.
Sliding rates
The visitor arrivals for 2010 were comparable to 2003, after a spike between 2004 and 2009. This was attributed to the ERF contributions, according to Talmi.
Comparing St. Maarten's average daily rates of 2008 to 2010 with those of Aruba and the rest of the Caribbean, SHTA found that Aruba's daily rate was about US $50 more than here. The average daily rate for the rest of the Caribbean is about $30 more than St. Maarten.
"We feel that the Caribbean average is something to take note of. This includes significantly cheaper destinations like Mexico and Jamaica that are drawing the average rate and even then we are still underperforming," Talmi said.
A random sampling of bars and restaurants was carried out and while the temporary closure of Pelican Resort Club was taken into consideration, Talmi said businesses were seeing declining revenues compared to the same period in 2010. However, these businesses have seen a raise in their Turnover Tax (ToT).
Speaking about the yachting sector, she said statistics had been tracked only recently after the acquisition of Simpson Bay Lagoon Authority Corporation (SLAC) by St. Maarten Harbour Group of Companies. The number of "unique" arrivals of yachts was down 20 per cent for the year 2009, due to the high bridge fee and other expenses of using the lagoon. The Marine sector is working with the Harbour Group to bring rates down further.
Cruise tourism
Cruise arrivals have been doing better overall, Talmi said, adding that the Harbour Group has been doing a good job of sustaining its numbers and growth could be attributed to cruise tourism being run "like a business." The other tourism sectors are not run as businesses, but "very ad hoc and not cohesively."
However, shops and vendors who supply the cruise passengers and crew are reporting lower average spending, so "with the increased arrivals we are not getting much spending per day."
Quoting a Florida-Caribbean Cruise Association (FCCA) report, Talmi said around 50 per cent of cruise passengers who visited St. Maarten were willing to return for a stay-over vacation within three years of their cruise visit. "We as a destination must get better at converting those cruise ship passengers to stay-over tourists and take advantage of them already visiting our lovely destination."
More for food
Graham said the occupancy figure is one of the "most misleading figures" to track growth in the economy "or in comparison with other places, it means absolutely nothing." He said electricity cost in April was up 19 per cent compared to the same month last year and cooking gas 21 per cent.
A "spot check" found that full cream milk cost eight per cent more now than last year, olive oil 20 per cent, pineapple six per cent, shrimp 14 per cent, chicken breasts 33 per cent, toilet paper three per cent and bleach eleven per cent. The cost of Budweiser beer and Coca Cola did not show any increase.
The net increase for the hotel industry to provide food to guests is about 10 per cent more than last year. For a single hotel property like Sonesta Great Bay Beach Resort, this means "tens of thousands of dollars" in cost that "comes off the bottom line and it is very, very frightening."
Shipping cost is up some 33.4 per cent compared to last year and this gets passed on to consumers, added Lee.
Hotels that offer all-inclusive rates cannot pass on to visitors the increased cost of doing so, because the packages are contracted to tourism wholesalers well over a year in advance, the SHTA president said.
SHTA Board Member Kenrick Housen said government needed to put regulations in place to improve the business climate. Certain problems need to be "tackled from the top down," as is the case in places such as St. Kitts where government has established standards that must be followed.
Lee also called for coordination between government departments to regulate matters of interest.
On the budget, Lee said there was a lack of discussion about how to increase the Gross Domestic Product (GDP).
Quality and training
Members of Parliament (MPs) shared some of their concerns and pointed out areas where SHTA and other private sector partners could do more to assist in improving the destination by stimulating growth and quality of service.
MP Patrick Illidge (Independent) said the hotel properties could not expect to receive more in room rates if they didn't invest in upgrades and comparison with Aruba would be futile if service levels were not "jacked up." A decision also has to be made about whether the country wants quality or mass tourism, because there can be "no halfway product."
The destination has done well through "word of mouth" awareness, said MP Jules James (UP) who called on the industry to "invest in local talent." He challenged SHTA members to show where they had put aside money for training personnel on a continuous basis.
MP Romain Laville (UP) criticised in particular the hospitality sector for taking advantage of the labour situation and continuing with the six-month labour contract, a practice that prevents people from living the St. Maarten dream.
MP Roy Marlin (DP) said government could not increase taxes to carry out marketing and the only way to gain momentum was to look at alternative revenue sources that later would sustain tourism marketing.
MP Louie Laveist (NA) said businesses had to stop the "price terrorism" and "price gouging," and called on government to take control of the situation now. He added that responsibility for things in the past was not the issue and focus should be on how things could be fixed.
MP Leroy de Weever (DP) said price control must be looked at properly, especially offshore companies that took their profits off-island. He said items shipped via St. Maarten to Saba and St. Eustatius cost less and this was an area that should be looked into. He is also "scared for the environment" and worried that it cannot take anymore abuse, such as neglect in upkeep of properties.
MP Johan "Janchi" Leonard (UP) said the issue of the high cost of electricity had to be addressed and accountability given by GEBE.
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