Hotel industry faces severest pressure in two decades

Ken Kennedy, Hospitality Jamaica Writer

AFTER 2004, which was an excellent year, 2005 is shaping up to be the most difficult year for Jamaican hotels in the last 15 years.

Following an early hurricane, which caused some damage, a weak summer season, massive increase in utilities, electricity rising some 60 per cent a kilowatt hour (from 14 cents to 22 cents), water rates rising from $422 per thousand gallons to nearly $500.

Last year, one of the islands largest hotels paid approximately US$1 million (J$62 million) in electricity bills, and is expecting to pay US$1.8 million (J$111.6 million) this year. An increase of 80 per cent.

Already, staff are looking to these hotels for salary-increases as a result of inflation.

The new Spanish hotels coming online who are marketing in the U.S. and making inroads in existing hotels markets, severely affecting small hotels. The impression was they would have beefed up the European markets.

FINAL BURDEN

The final burden of the difficult year was the Government's implementation of General Consumption Tax (GCT) on the tourist industry, which, with the loss of tax credits, has resulted in the average size hotel paying a 40 per cent increase in GCT.

As a result, Sandals Resorts International is discontinuing airport transfers in their packages as of January 1, a decision which will severely affect the Jamaica Union of Travelers Association (JUTA).

JUTA is the single largest conglomerate transportation organisation in Jamaica, employing some 2,000 drivers, who individually own their vehicles.

Although Sandals has offered to help JUTA to negotiate with overseas wholesalers, there is no guarantee that these tour operators will utilise the services of the local ground handlers.

In fact, as a result of this tax, JUTA is facing a serious drop in contractural business and other hotel groups may take the same decision as Sandals.

It would not be surprising to see Couples and SuperClubs taking the same stance as none of these charges can be off-set until April 2006, as all contracts are binding for the winter tourist season.

The Government does not recognise that tourism is an export industry and the GCT is a straight tax, whereas other industries claim back the payment by including it in the price offered to their customers.

The devaluation of the Jamaican dollar goes a little way to off-set these costs, but the burden is still enormous when you consider the industry is in competition with the rest of the world.