CARIBBEAN PERSPECTIVES

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An in-depth focus on Caribbean issues

by Sandra Ann Baptiste

Tourism officials urged to address Taxation and Bureaucracy

INTERNATIONAL tourism and aviation industry leaders have urged Caribbean tourism policy makers and finance officials to re-examine taxation policies and remove bureaucracy, which is harming the industry’s growth and competitiveness and turning off investors.

Peter Cerda, Regional Vice President of the Americas for the International Air Transport Association (IATA),
Peter Cerda, Regional Vice President of the Americas for the International Air Transport Association (IATA),

Peter Cerda, Regional Vice President of the Americas for the International Air Transport Association (IATA), told participants at the Caribbean Tourism Organization’s (CTO) State of the Industry Conference (SOTIC) that aviation taxes increase the cost of travelling to the Caribbean and make the islands less competitive relative to other destinations.
His message to the recently concluded forum was clear: “The simple truth is that this region is a very expensive place for airlines to do business.” It’s a message the Caribbean Hotel and Tourism Association (CHTA) has been trying to get across to finance and tourism decision makers in the region for some time.

Apple Leisure Group’s CEO ,Alex Zozaya
Apple Leisure Group’s CEO ,Alex Zozaya

The Chairman of the CTO’s Aviation Task Force (ATF), Antigua and Barbuda’s Ambassador Brian Challenger, in an invited comment on these observations, told me that there is a need for “intensified dialogue” between governments, tourism operators and airlines to review creative responses to this problem, including possibly trial periods during which time taxes are lowered.
Challenger, in acknowledging the continued concerns about the level of taxes and charges on the industry highlighted at the CTO Conference in the United States Virgin Islands (USVI), noted that the current level of taxes are, among other things, a major contributor to high inter-regional air fares.
In his presentation to the Aviation Day forum, which preceded the State of The Industry Conference, the IATA official chided the management of two Jamaican airports – Montego Bay and Kingston – for proposing airport tariff increases of over 100 percent, to attain a return of capital of around 20 percent a year.
Cerda believes that measures such as these do not encourage or support the development of the industry in the region. He urged regulators to act strongly and swiftly against such “big increases.”
He also recommended that Caribbean Governments foster positive business environments through consultation with the industry and transparency “to ensure win-win situations for all.”
Noting that fuel typically represents about a third of an airline’s operating costs, Cerda also observed that fuel expense across the Caribbean is around 14 percent higher than the world average.

Chairman of the CTO’s Aviation Task Force (ATF), Antigua and Barbuda’s Ambassador, Brian Challenger
Chairman of the CTO’s Aviation Task Force (ATF), Antigua and Barbuda’s Ambassador, Brian Challenger

For the Caribbean as whole, he calculated that each $1 of ticket tax could lead to over 40,000 fewer foreign passengers, US$20 million of reduced tourist expenditure and 1,200 fewer jobs.
The IATA Executive argued that for the region’s tourism industry to deliver the most benefits to Caribbean citizens and spur additional tourism and trade “we need to be able to compete on a level playing field and have the infrastructure capacity needed to grow.”
He also pressed for the use of technology to address bottlenecks at peak operational times at airports in the region.
The keynote speaker at SOTIC, Apple Leisure Group’s CEO Alex Zozaya, cautioned that the region cannot afford the levels of bureaucracy that now exist. “The Caribbean needs to step out of its comfort zone, be pragmatic and run tourism like a business. Put the political agendas aside, and you will move faster.” Pennsylvania-based Apple Leisure Group is the worldwide leader in travel to the Caribbean, sending more visitors to the region than any other company.
According to Zozaya, fragmented regulations and lack of continuity in policies scare investors and taxation and investment barriers create uncertainty.
He also pointed to the need for detailed and up to date statistics and identified the lack of a comprehensive energy plan as another contributor to the high cost of doing business in the region.
Zozaya issued a reminder that in the Caribbean, tourism and the aviation sector facilitate and support 140,000 jobs and contribute US$3.12 billion, roughly 7.2% of the Caribbean’s Gross Domestic Product (GDP).
With stiff competition from other warm-weather destinations such as the Seychelles, Thailand, and Croatia, Zozaya also said the region had to stop competing against itself.
He lauded Jamaica for doing a “much better job than other places” and observed that `Brand Jamaica’ has great positioning in the US, which he cited as the Caribbean’s major competitor.
Zozaya pointed out that the Caribbean region has proximity to the most important tourism market in the world, the U.S. “I don’t see why the U.S. alone cannot provide the 30 million visitors a year that the region has set as its goal by 2017.”
Following the annual CTO Forum, the CTO Secretary General and CEO Hugh Riley told me that a renewed effort will be made to find the right mechanism for funding and sustaining the marketing of the Caribbean. “This will require the CTO to look for answers within its own organisation but also to work closely with regional partners. There is also an expectation that there will be increased partnerships with media outlets that might be willing to support regional marketing by apportioning advertising funds toward a budget to be managed by the Caribbean Tourism Development Company.”

An example of CTO’s collaboration with the media is the current campaign with Caribbean Journal. Ten percent of the advertising revenue from all qualified business placed with this media outlet will go into a Caribbean marketing fund.

Riley also reported that while the CTO awaits the results of the taxation study currently being conducted by IATA in association with a number of agencies, steady progress is being made in key areas related to the passenger experience.

This includes standardising the Embarkation/Disembarkation cards, which passengers are required to complete and regularising the issues relating to secondary screening of passengers traversing multiple Caribbean destinations on the same itinerary.
Among the priorities of the CTO’s Aviation Task Force (ATF) are supporting facilitation within the Organization of Eastern Caribbean States (OECS) as a first step towards hassle free travel and advancing the CARICOM Multilateral Air Services Agreement (MASA).
Another item that is high on the CTO’s agenda and which received widespread consideration during the USVI Conference is the issue of entry visas. “There is a growing sentiment that the Caribbean must find a way to return to the domestic space/common visa arrangements which were instituted seven years ago during Cricket World Cup,” Riley said.
The region’s immigration, home affairs and security officials need to be decisive in this area and take visible action to address this long overdue initiative.
Regional governments, will also, hopefully, take seriously the observations from the IATA and Apple Leisure Executives on the harmful impact the current level of taxes and bureaucracy is having on the major foreign exchanging earning tourism and hospitality industry, which is the lifeblood for many of the region’s economies.
Barbados Tourism Minister Richard Sealy, the new CTO Chairman, has promised to focus on “some of the vexing problems that we have right now with tourism.”

(Sandra Ann Baptiste is a Business Consultant, Writer and Specialist in Caribbean Affairs)