Hoteliers caught in discounting trap
Published:Friday | January 7, 2011 | 12:00 AM
Small gains, old challenges expected for tourism in 2011
Dionne Rose, Business Report
Projections for the performance of the local tourism sector this year appears to involve more of the same despite stakeholders predicting an uptick this year on the back of small improvements seen in 2010. However, industry representatives say discounting will continue throughout the year, as the market continues to be resistant to price increases.
President of the Jamaica Hotel and Tourist Association, Wayne Cummings, is expecting the bulk of the numbers from traditional sources, noting that the industry expected a good year from its dominant North American market.
"Notwithstanding any economic shocks, we seem set to have a good year, to the extent that the source market is having a cold winter and that augurs well for the region," Cummings told the Financial Gleaner.
"The economic indicators out of the United States suggest that consumer confidence is on the increase."
But not so for Europe, the point man for the tourism umbrella group has indicated.
"Europe is still struggling with their macroeconomic outlook and this could prove challenging," he said.
These and other challenges Cummings expects to result in hoteliers being forced to continue discounting rooms to attract numbers.
The Sandals chain, for which he works, is now advertising up to 65 per cent discounts on vacation packages.
But broadly, the sector marked down prices by 30 to 50 per cent on average last year.
"The market is resistant to any change," said Cummings, who manages one of the Sandals properties.
"They are reading that if you can survive on these rates, why not continue," he said. "The consumer has no fresh mind to tolerate any increases."
In the existing scenario, Cummings said revenue would only improve if occupancy rates grow.
The sector's best revenue year was 2007, he said, when gross visitor expenditure was US$1.91 million, a 2.1 per cent increase on 2006, data from the Jamaica Tourist Board (JTB) showed.
The recession intervened in 2008, but in 2009 gross visitor expenditure hit US$1.92 million meant that earnings remained stagnant at 2007 levels.
Occupancy level for the current winter is said to be running at about 90 per cent on average.
"That means that more jobs are in place to deliver service, but will be sustained (only) if the bookings and occupancy pace continues as they are now," he said.
In 2011, the sector is baulking at prospects of further taxation. Cummings said that its cries for general consumption tax con-cessions have not been heard.
"We are knocking on a closed door," he said.
"What I feel strongly about is the government's appetite for taxes; they cannot just turn to us for more taxes, because we are not doing as well as before," he said.
Tourism Minister Edmund Bartlett believes the sector can leverage growth from new developments soon to make their market debut, such as the Falmouth cruise pier and the Montego Bay Convention Centre.
"It will open Jamaica to a new demographic, where we will be able to attract larger conventions and faith-based tourism," Bartlett said of the new mega-meeting place built by the Government in partnership with the Chinese.
Government is also expected to enact timeshare legislation to promote shared resort-property ownership.
"This will multiply the number of visitors who will be able to use the properties under timeshare," said Bartlett.
Through shared ownership, developers are able to reduce the costs for each owner, allowing realtors to successfully market and sell properties to a greater number of clients.
And new market penetration, which has been touted year after year by tourism officials, is still on the cards for this year.
"We will be making major incursion into the emerging markets - South America, Brazil and Argentina," said the tourism minister.
Stopover visitor arrivals up to September 2010