Support for small hotels still strong

No. 59 Friday, February 26, 2010
Small hotels represent a third, or just under 10,000 of Jamaica's hotel room stock, and de­spite the all inclusive concept, have contributed significantly to the growth of the hospitality sector over many years.

   They represent the entrepreneurial spirit of many Jamaicans, President of the Jamaica Hotel and Tourist Association (JHTA), Mr. Wayne Cummings tells JIS News, and they must receive continuous support. "They may not necessarily have the resources to be innovative, but they employ a lot of people, they are in a lot of places and they are truly representative of what Jamaica is," he says.
   Mr. Cummings explains that small hotels have taken a beating from the global economic recession, as they are naturally less competitive due to their higher operational costs. "It's been quite difficult. There have been some successes, however. There are some properties that have found their niche on the Internet as well as in specific marketplaces - case in point are some of the hotels on the west end of Negril," he notes.
   Added to overheads is the fact that occupancy on average for small hotels have been far less than for the larger hotel category. "If the national average was about 62 per cent in 2009, I would say that they did closer to 45 per cent, which in many instances does not necessarily equate to breaking even," Mr. Cummings informs.
   He says the JHTA has done a lot of work with the small hotels, especially toward the .
end of 2008 when the recession was bearing down. "We spoke With them about some of their operational needs, gave them pointers with regard to renegotiating their con­tracts, particularly their buying contracts," he notes. The Association also helped the hotels to assess the strength of their management tools, particularly in hiring, and their purchasing power.
   "A number of those (measures) have worked quite significantly for them, so that continues. We also tried to have them ramp up their marketing, particularly with the established trade shows on the marketing calendar," he outlines.
   He points out that the pro­file of visitors to small proper­ties vary, and include an interesting mix of people, such as the budget conscious, and those who are looking for a more intimate vacation experience, but do not necessarily have less of a disposable income.
   The support and assistance being provided by the Government has proven to be critical. Mr. Cummings says the government has been playing its part in keeping small properties viable, with the strengthening of the regulatory framework. He also notes that ensuring that minimum standards are kept for operating any accommodation, has been the mantra of the Tourism Product Development Company (TPDCo). "We believe that there has been reasonable consistency in that regard. The JHTA is a little wary of over- regulation, but you do need to have minimum standard," he tells JIS News.
   Announcing the Fund in July, 2008, Tourism Minister, Hon. Edmund Bartlett, had said that the initiative was to ensure that communities as well as small and medium enterprises within the tourism industry are given an opportunity for development, and for them to play their part in driving job creation as well as providing the income flows for communities and the economy.
   Mr. Cummings says that one of the challenges that was faced by the TEF in releasing the funds was that many small hotels did not have their Tax Compliance Certificates (TCC). However, the TEF Board agreed to allow these properties to use some of the funds to put their accounts in order, so that their TCCs could be issued,
   Later in the year, Prime Minister, Hon. Bruce Golding announced a stimulus package
for the sector, which offered a 50 per cent cut in General Consumption Tax (GCT), a loan scheme, and an increased marketing budget.
   Mr. Cummings asserts that beyond the TEF facility, the GCT waiver, which the sector was able to access from January to September 2009, was perhaps the most aggressive and meaningful facility that was available to the sector. "From what they would have had to turn over to the Tax Ad­ministration Department, they were only required to turn over half of it, which provided a lot of space for them to be able to retain employment and maintain cash flow. Last year was very tough ... prices contracted, occupancies fell and they couldn't access commercial loans as bridge financing, so the GCT was meaningful, more so than the others," he adds.
   Executive Director of the TEF, Mr. Ian Neita, explains that separate from the GCT reprieve, the $100 million line of credit, which was introduced as part of the stimulus package, targeted two specific areas of the sector.
   These included transport, for which a total of $50 million was allocated to assist contract carriage operators within the industry to purchase new vehicles. Each operator could access $1 million, at an interest rate of three per cent, over a five-year period. Additionally, the TEF provided a special assistance package of $50 million to small properties to allow them to continue to focus on marketing, systems improvement, and product development in the tourism sector.
   By July 2009, Minister Bartlett announced in the House of Representatives during the Sectoral Debate that the stimulus package had enabled the provision of cash flow support of $634 mil­lion to the sector, to sustain jobs and maintain growth.
   Speaking to plans for the sector, Mr. Neita discloses that another entrepreneurial fund is to be launched, but will be different from the Spruce Up Jamaica Entrepreneurial Fund, whereby "if you want to access this fund, you have to actually match it with some equity of your own. We are yet to determine the ratio," he says.
   This fund is geared mainly toward new, start-up, and young businesses, to allow them room to maneuver against high interest rates. Another $100 million has been set aside for this fund. "It is a time of re-examination of the way business is done. There is going to be a need for partnership - private and public sector," Mr. Neita ob­serves. He says that in devising policies that will drive this vital sector, the crime situation must be tackled.
   The Executive Director emphasizes that the small hotel has its place in the industry, as they generate employment, and provide a unique product that visitors like. "We intend to support that," he assures.