Tourism Outlook 2015

During the recent Grand Bahama Business Outlook 2015 the Tourism Development Corporation CEO David Johnson spoke on Grand Bahama Tourism Development post Cuban Embargo, New Investment and Employment moving forward.

He stated that it is accurate to conclude that had it not been for the Cuban Revolution and Fidel Castro, the development and launch of Freeport/lucaya would simply not have happened when it did and with the players it attracted.

Then moving forward he said our focus should be on sustaining and building upon the momentum we have achieved over the past 12 month of a 33% growth rate in stopover or more than 20% points above the country's average.

" As we embark on new growth and new repositioning strategies that would ensure that Grand Bahama’s tourism gain and maintain it’s solvency, while maintaining a growth path even as Cuba Reopens there are a few specific core pursuits we must accomplish in short order.

   

1.     "We must secure long term partnerships with the proven suppliers now to ensure their on-going and expanded commitment to the destination going forward. In the cruise tourism sector we must now conclude terms under which our current anchor supplier would have a base in Grand Bahama, representing a substantial investment they must feed with an increased level of traffic to the destination well into the future.

2.     "Similarly, our development strategy for land based tourism must include advancing the expansion of Sunwing’s footprint in GBI. They have proven their ability to deliver significant new business and are poised to enter into a much expanded relationship with existing landlord Hutchison Whampoa in a partnership with government, which when concluded will ensure further increase in airlift to the island that would extend to long haul source markets such as the UK in short order. 

"I reached out to Sunwing’s CEO to obtain from them a sense of how they viewed Grand Bahama future potential given the projected changes surrounding cuba’s unrestricted reopening to us travelers.

"I will quote Stephen’s written comments to me two days ago, which were as follows:

"David,

"Re: Cuba

"As the largest provider of tourism to Cuba in the world we have seen Cuba in the recent years getting ready to go after all types of tourism business once the embargo is lifted.

"Specifically, in the last two years they have built about 10 state of the art marinas, 9 new golf courses and over 5,000 new rooms and have 14 new hotel projects on ‎the go to be completed this year.

"The lifting of the US embargo on Cuba brings both challenges and opportunities to GBI.

"As you know, operating costs in Cuba are more than 60% less than GBI. Therefore, a lot of ferry, personal boats and cruise traffic will be diverted to Cuba in the medium and long term. This is something that will undoubtedly hurt GBI and could mean that the government will need to heavily subsidize these operations in order to keep them and/or preempt them by securing long term deals with cruise lines.

"The ‎biggest threat to GBI is the ongoing high cost of operation and specifically energy and consumables (duty taxes). The island needs a lot more good beds which will drive more air traffic however in order to get more foreign investment the government must create an environment that the hotels in GBI can compete against other neighboring islands.

"The strength of GBI is two fold:

 "(a) the youth employment opportunities. At Memories Grand Bahama we have a lot of young enthusiastic employees that want to learn and are able to provide service well above that of the Latin Caribbean (biggest threat). If the environment could be created by the government for the investment there is great opportunity to rework the existing schooling infrastructure to accommodate world class hospitality training that could be used in GBI and of course exported as well.

"(b) gaming - it will be years before Cuba allows any type of gaming and probably will not be seen in our lifetime therefore a good long term strategy is to focus on gaming‎. You know I have some ideas about this for GBI but again the environment needs to be there.

"The lifting of the bans on Cuba should not be taken lightly and I strongly believe if serious measures are not taken immediately then there will be dire long term affects particularly in The Bahamas due to the proximity to Cuba.

"Stephen."

Mr. Johnson noted that there was nothing in Stephen's offerings regarding Grand Bahama's natural strength that we has not discussed and agreed some four months ago after he had reviewed 2014 first year's operating results at Memories Grand Bahama.

  

"He felt then that a laser like focus on upgrading our service taking advantage of the excellent pool of young workers avaialble that are willing to learn is the surest route to achieving a complete recovery in GBI’s tourism. We agreed then that we should pursue and exploit this opportunity, well before the issue of Cuba’s reopening to Americans arose.

"What is worth noting here is the fact that we have a visonary leader of the fastest growing travel company in north America who delivers the largest share of his business to the Latin

Caribbean advancing his belief that Grand Bahama, although unable to compete today or in the midterm with the very low cost structure in Cuba, Dominican Republic and Mexico, or even Jamaica; does have the ability to distinguish itself in the delivery of service quality levels that these destinations cannot if we commit to and pursue acquiring this distinction.  In addition, his group is fully prepared to join us and others in a partnership to make it happen on Grand

Bahama island.

"Clearly we see where Cuba has not been sleeping in recent years from what stephen reports in terms of new golf, marina and resort products being launched.

"We have to our plans for further expansion in the sector in Grand Bahama, which, frankly continues firstly with inspiring the reopening and redevelopment of existing closed inventory of which we have today nearly 1000 beds with beachfront locations  requiring only vision, capital and skill to execute.

"I should also add that the surest and swiftest route to growth and expansion happens to be our ensuring that the existing players are making money!

"In this respect, although we have made great progress in a very short period given the nature of this business, we should not be spiking any balls in end zones yet! Why? Because fuelling this

rebound is still requiring a significant investment by tax payers that we must work to reduce further, notwithstanding the fact that acquisition cost for a stopover visitor today is significantly less than a year ago and substantially less than the record high cost recorded in 2012 that simply could not be sustained or justified.

"As we reach the below 30% of sales value acquisition cost level that we are projecting by end of this year, we would then have an environment where the industry can begin to sustain itself,

which is a precursor to achieving true profitability that leads to natural and not forced growth initiatives, as the latter approach tends to be more expensive for all."

"I wish to draw my remarks towards the topic’s end by simply stating that in an nutshell, our business plan must evolve around product and service redesign and improvements..

"I spent some time just 2 days ago with Mr Butch Stewart and Sir Baltron and others discussing growth prospects for his brands in parts of The Bahamas. He reported that he is enjoying a very

profitable season in each of his 23 resorts throughout the Caribbean.

"Although his company boasts a $25-30 million annual marketing budget and is one of the Caribbean’s most visible brands;  90 % of any conversation with their chairman is centered around the guest experience and his brands continued service and experience innovations.

"He is very proud of the many ex Sandals employees he gets to meet when he travels around who hold key positions in the leading business and leisure resorts in the world who remember their start and thank him for their passage.

"This gentleman tracks and reviews guest ratings of each property  on a daily basis and his focus is always on those at or near the bottom where he then dispatches the best talent he has to bring them up. 

"I prescribe Butch’s style of managing and assignment of priorities to those in the leadership positions in GBI’s tourism private sector. We have today still much work and investments to make to improve the experience and no better time to do so than when we are experiencing increased demand. And when we introduce these measures, we then almost magically will see our sales and marketing efforts beginning to gain much better traction and our marketshare as resorts and destination increases.

"Why can’t we not find that formula to re-establish the pre eminence of golf as a major draw for Grand Bahama and restore Ruby and Lucayan Golf and Country clubs, which when combined with the Reef delivers three (3) championship courses within a four mile radius making GBI a pre eminent beach, gaming and golf destination?

"It takes less than $3m to enable this and when we do, we earn the capacity to win so much more business at a much lower cost of sale to our resorts and government.   Grand bahama

This pursuit is also high on our development agenda immediately ahead for Grand Bahama as we take steps to redefine and deliver on the unique grand bahama. Set of experiences

"I share further:

"Stewart volunteered his advice to colleagues in the Caribbean concerned Cuba’s impact on their business.  His response to them, was that the Caribbean ‘s biggest threat really is an ‘awakened’ Bahamas that has more miles of white sandy beaches than the entire Caribbean!!

"Mr Stewart is correct in observing the natural advantages in tourism we have inherited but not yet leveraged to earn us a much larger share of the economic and social benefits that can be derived from tourism but must be accompanied through careful planning and management of our God-given environment.

"I cannot end without advising Grand Bahama that we must not wear our high cost status as a medal but rather do all we can to reduce cost through achieving greater efficiency because high

cost unchecked can poison our tourism well. This is the preoccupation of every successful business enterprise I know of."

To Grand Bahama itself he stated: 

"Our high energy and labour cost is a deterrent to the pace of growth we wish to see and must be addressed sooner rather than later;

"High airport and fuel costs which we have in Grand Bahama, never mind anyone who might be misinformed suggesting otherwise, is a hurdle to attracting the additional competitively priced airlift we wish for and need in order to grow our vital air stopover arrivals

"If we can trim our trimmable costs sufficiently, i.e, energy and airport related costs, while upgrading service levels, so that we can earn the premium to support our higher labour cost, I

guarantee you that the existing closed room stock will swiftly be returned and the potential to attract new development in the east, Freeport/Lucaya and west will be quickly realized.  

"Our country’s focus through the Bamsi initiative in Andros should not be underestimated in terms of what it could mean to residents and resort operators in reducing cost, while improving

freshness and quality of a variety of food products.  This must be encouraged and expanded as we grow our tourism sector. 

"Grand bahama, let’s look forward and not backwards and simply get on with and do it!"