Adrian Loveridge, Peach and Quiet

The Adrian Loveridge Column – Capitalizing on the Weak British Pound

Adrian Loveridge

Adrian Loveridge

To partially offset the value of Sterling when compared to other currencies, particularly to the US Dollar, several British tour operators are becoming increasingly more creative to help cushion the holiday cost differential to their clients. Giant Thomas Cook for instance recently introduced an interest-free plan where their customers can spread the overall package price over a year when paying by debit card, rather than risk losing market share.

The consumer online and telephone comparison and switching service, uSwitch recently reported, in their words, that ‘the drop in the value of the Pound since the Brexit vote has led to many Brits blowing their 2016 summer holiday budget, with nearly three-fifths sinking into debt’.

Adding ‘families overspent by an average of GB Pounds 491.78, this summer, with nearly half (45 per cent) who blew the budget blaming the poor exchange rate for their extra spend’ and ‘one in three put the extra cost on a credit card, while one in ten put it on their overdraft’. uSwitch also concluded that ‘those who didn’t blow their budget said they curbed spending while on holiday, putting a dampener on their getaway, with nearly a fifth (19 per cent) dining out less and another one in five buying fewer gifts for friends and families’.

And perhaps the most alarming indicator for us ‘if the Pound stays low, fewer holidaymakers will book next year as nearly half (40 per cent) say they will delay going on holiday again until it becomes cheaper to buy foreign currency’.

It’s a catch 22 situation for many. Tour operators systematically watch critical minimum booking numbers to justify the inclusion of any product in their offerings. Last minute bookings are often the least valuable in terms of overall profitability but the industry has of course, encouraged it over decades. As a former tour operator, we avoided this scenario like the plague, instead applying any cost saving to those willing and able to pay up front, well ahead of travel dates.

There will always be a sector of our market, irrespective of where they live, who will be almost immune to increased prices, but in the case of Barbados they are in the minority.  So my thoughts are, that especially in the case of the Brits, we need to demonstrate that better value for money can be offered. Of course, it is not always about discounting, but more about the consumer feeling that his or her purchase, whether it is accommodation, car rental, dining out, activities and attractions has been money well spent.

Frankly I have been surprised that, as a destination, we have seemingly not taken greater advantage of the Sterling exchange rate by sourcing more essential imported items from the United Kingdom where there are considerable savings to be made.

From a personal perspective it has never been easier to identify and compare bottom line prices on the Internet. Shipping costs to the Caribbean (including Barbados) from the UK are still relatively low and I certainly have not seen many of our local suppliers and distributors capitalise on this and the current exchange rate.

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21 Comments on “The Adrian Loveridge Column – Capitalizing on the Weak British Pound”

  1. David September 12, 2016 at 7:44 AM #

    The views of Harry Russell appear to side with many on BU.

    WILD COOT: The Sandals folly

    Harry Russell, quijote70@gmail.com

    Added 12 September 2016

    wild-coot-new

    I DO NOT BELIEVE that even now we fully understand the height of folly reached in granting total tax concessions to Sandals until 2030 or thereabouts.

    The upshot first was that all other hotels cried foul and rebelled against the uneven playing field. Then so as to make peace, we manufactured rules so that a few players could acquire the same concessions. But that is still playing with fire as the playing field has become even more uneven.

    When a new hotel proposes to come to Barbados, how are we going to tell it that those concessions that Sandals enjoy cannot apply to them? Hoteliers at Hyatt, Sam Lord’s Castle and Four Seasons will insist on the same tax concessions. This will increase the pressure on Government to cede similar concessions to existing hotels. We then have a hotel industry that is taking advantage of our prime asset and contributing little to the whole tax effort.

    Furthermore, other investors will be looking for similar tax breaks (sounds familiar). In the meantime, citizens are inundated with confusing tax impositions. We see it in the previous and the last Budgets.

    So it was the pinnacle of folly for our Government to make the offer to Sandals. I am made to understand that the deal is so secret that we (the citizens) are not allowed to see the agreement. Why?

    Now let us examine what the concessions mean or do not mean to Barbados and Barbadians. What we get: An increase in the number of tourists who come to Barbados, most of whom will spend their time in all-inclusive hotels. Some Barbadians will be employed in the building of the hotels and later in the running of the hotels. What we do not get: Hotels will be fully using our infrastructure (water, electricity, telephone, roads, and so on) and some without paying tax for the essential running of the country in which the hotels exist. Pure folly!

    Here is what I understands happens. When a tourist books a hotel room, 90 per cent of the time it is done through a booking agent abroad; with Sandals this may be 100 per cent of the time. That foreign currency stays abroad. I am made to understand that even with local hotels, most of the foreign currency stays abroad. Will that be happening with the hotels that we are considering building?

    In the case of commercial banks, they hold their foreign currency on behalf of the Central Bank and it is part of the total Barbados holdings. Not so with the hotel agents abroad. If that money is not repatriated, then it is not part of the Barbados holding.

    At least when, and if, profits are declared by a local hotelier, the Barbados Revenue Authority has an opportunity to have some of that foreign exchange remitted to Barbados in the form of taxation. So then we are not maximising our main asset, and the folly of the Sandals giveaway created a bad precedent. We should not boast about folly.

    No wonder then that even with an increase in tourist arrivals, there has been a drop in foreign exchange, especially with lower oil prices existing.

    Our Central Bank now seems to be heeding the advice of Mr Owen Arthur to stop printing money. We need to ask if it is too late; what damage has the $3.8 billion done to the economy, the savings of the country and to the viability of the National Insurance Scheme?

    We wait to see whether or not the call to halt printing will result in insufficient money to pay civil servants and make transfers to the statutory corporations on monthends. Just the other day, Tanzania attempted to lay off 18 000 public workers as a way of balancing the budget. Sir Lloyd Sandiford reduced the salary by eight per cent. Unions, be warned!

    We need also to reinstitute limits on access to foreign exchange, especially through credit cards. When all was well with our foreign exchange, we had limits for the commercial banks in dispensing foreign exchange and there was no underground. We had to take our passports into the bank. There is a limit to modernisation if you do not have the resources.

    It’s time that people have a look at that agreement with Sandals and, if necessary, make concrete modifications in favour of paying some sort of tax on the benefits acquired by the hotel having almost exclusive access to our premium commodity.

    Harry Russell is a banker. Email: quijote70@gmail.com

    – See more at: http://www.nationnews.com/nationnews/news/85400/wild-coot-sandals-folly#sthash.0p0CJmXb.dpuf

    Like

  2. lawson September 12, 2016 at 11:47 AM #

    Everything secret why? you are absolutely correct….. but I am not surprised.. we have a butch running Ontario as well.

    Like

  3. Tron September 12, 2016 at 1:28 PM #

    I told you so before: All-inclusive-hotels are the Barbadian plantations of the 21st century. 3rd rate jobs for locals in Butch´s sweet..eh…sweatshops (eg as cooks and chambermaids), no incoming foreign currency, no local taxes, no revenue at all. The frustrated businessman told us the same about the cruise ships. And do not think that the deal with Sandals can be revoked: a deal is a deal.

    To sum up: All the high numbers in tourism will not save Bimbadum.

    Like

  4. Colonel Buggy September 12, 2016 at 2:02 PM #

    And do not try to target those Barbadians who have returned home from the UK, with a Staycation. As they too, are feeling the pinch in their reduced UK Pensions

    Like

  5. chad99999 September 12, 2016 at 3:50 PM #

    It is always interesting to see how people get caught up with the hotel tax issue.
    If all that foreign exchange “stays abroad”, how does Butch pay his bills in Barbados? Ha Ha!

    Like

  6. David September 12, 2016 at 4:01 PM #

    @chad99999

    That is easy, he transfers ‘enough’ to cover operating expenses.

    Like

  7. chad99999 September 12, 2016 at 4:42 PM #

    ‘Enough’ is nearly everything he gets, David. Have you seen the income statements of Caribbean hotels?

    Like

  8. Tron September 12, 2016 at 4:48 PM #

    We do not know what quality the operational transfers have. Could also be Jamaican-dollars converted to Barbados-dollars. Clearly less valuable than USD, GBP, CHF and EUR. And many bills are not paid in Barbados, since Butch gets food, furniture and other stuff into Barbados duty free and fully paid abroad.

    There is a certain reason that the Sandals-deal is not open for the public. The low foreign currency reserves indicate at least that Sandals does not boost the reserves. Quite the opposite. The consideration of several duty free zones from December on is another indication that something is wrong with the reserves. This measure is the ultima ratio.

    Like

  9. David September 12, 2016 at 5:01 PM #

    @chad9999

    Sandals is a private company as you know therefore one would have to guess the state of the P&L.

    Like

  10. chad99999 September 12, 2016 at 5:58 PM #

    My point is that a Jamaican company would presumably be keeping its profits outside Barbados anyway. He has to convert foreign exchange to pay his staff and utilities in Barbados dollars.
    Why aren’t you proposing better agriculture so Butch can buy most of his food locally and increase Barbados’ take?
    All of the top hotels on the island leak foreign exchange big time.

    Like

  11. chad99999 September 12, 2016 at 6:04 PM #

    You can get summarized financial reports for Sandals, but you have to pay for them. For example, http://www.hoovers.com/company-information/cs/revenue-financial.sandals_resort_international_limited.c5b184137cff3ca3.html

    Like

  12. chad99999 September 14, 2016 at 11:46 AM #

    Knowing Adrian’s obsession with AIRLIFT, I though the following story from Jamaica’s top newspaper would be appropriate:

    From the JAMAICA GLEANER:
    On the eve of its 50th anniversary since gaining independence, Barbados has announced plans to diversify its airlift reducing the reliance on any given market.
    The former British territory says its winter airlift capacity will be up seven per cent over last year and unlike other Caribbean countries that are reporting a reduction in the Canadian market, Barbados’ arrivals have grown considerably.
    “Air Canada will grow its winter capacity out of Toronto over 11,629 seats as it moves to a 10 times weekly service. At the same time the carrier will grow its Montreal service by 2,254 seats through the addition of a fourth weekly service,” said William ‘Billy’ Griffith, chief executive officer, Barbados Tourism Marketing Inc.
    WestJet, also a Canadian operator, will grow its winter capacity through the addition of larger aircraft by 2,644 seats.
    Griffith was addressing the media at the State of the Tourism Industry Conference (#SOTIC2016) at the Hilton, Barbados this morning.
    The tourism executive noted that a significant number of the new airline services into the island had no revenue guarantee or co-operative marketing initiative attached to them.
    It is normal for countries to guarantee revenue to airline operators, with countries such as Jamaica adopting this practice.
    Griffith said the aim was to increase the European market as well, in the event Brexit becomes a challenge.
    In the meantime, British Airways will move to 13 flights a week during the peak winter months as of December, he noted and Virgin Atlantic will expand its Manchester service to twice weekly with the addition of a second weekly A330 service in April 2017.
    Air France will launch a new twice weekly Paris/Martinique/Barbados service initially through a code-share arrangement with Air Antilles Express in February 2017, said Griffith, adding that Condor will launch an additional weekly flight out of Munich on November 12, bringing its operation to three flights a week, two of them out of Frankfurt.
    With significant growth out of the United States, resulting in double digit growth, the CEO of BTMI, said the market will be bolstered by JetBlue which will commence a new weekly service out of Newark, New Jersey in November – their fourth JetBlue gateway.

    Like

  13. David September 14, 2016 at 11:52 AM #

    @Adrian

    Can you check this link and advise.

    http://www.aircanada.com/en/home.html

    In Book A Flight enter Round Trip

    From YYZ to BGI

    Departure Date September 13 – Return Date September 18

    Search results – Not Available

    Then search

    Departure Date October 4 – Return Date October 9

    Search results – Not Available
    In Book A Flight enter Round Trip

    From YYZ to BGI

    Departure Date September 13 – Return Date September 18

    Search results – Not Available

    Then search

    Departure Date October 4 – Return Date October 9

    Search results – Not Available

    Like

  14. Adrian Loveridge September 14, 2016 at 12:14 PM #

    David,

    13 September not available as yesterday but other dates would indicate flight was either full or not operating that day.

    Like

  15. Due Diligence September 14, 2016 at 1:06 PM #

    David/Adrian

    I have been told on good authority that Air Canada is not flying from Toronto to Barbados (and vice versa) on Tuesdays and Sundays from September 13 to October 9.

    No reason given but I expect it is due to low demand, and AC does not want to be flying half empty planes

    Like

  16. David September 14, 2016 at 1:10 PM #

    Isn’t Canada one of our key markets based on growing tourist arrivals?

    Like

  17. Due Diligence September 14, 2016 at 1:19 PM #

    Adrian

    Could it be that GOB is not adequately compensating AC (not ac) for empty seats.

    Please see what your contacts have to say.

    Like

  18. lawson September 14, 2016 at 3:10 PM #

    AC planes fly to Barbados full…that’s because they keep making them smaller that air rouge is a cattle car..what is next a Cessna. Maybe people are starting to get fed up with customs go slows

    Like

  19. David September 14, 2016 at 3:12 PM #

    The Rouge is tight for a five hour flight.

    >

    Like

  20. ac September 14, 2016 at 7:59 PM #

    more good news across the board for barbados tourism industry in spend and long stay visitors gone are the days when the poison pen articles about barbados anemic tourism industry screamed across the pages of barbados

    Like

  21. Hants September 17, 2016 at 7:54 PM #

    “who was once portrayed as a possible saviour for the failed Four Seasons project in Barbados”

    http://www.nationnews.com/nationnews/news/85388/headlines-knightmare-london#sthash.eXzVfY46.dpuf

    Like

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