“I strongly believe that we have acquired one of the most beautiful properties in the entire island and we cannot wait to bring the full Luxury Included experience here. We have been voted the world’s best time and time again and have more luxury inclusions than any other resort on the planet and we promise to give the people of Barbados a resort to be proud of.” – Gordon “Butch” Stewart announcing the opening of Sandals Barbados on the Sandals website.
The total capitulation by the Barbados Government of its entire tax-raising apparatus in the case of Sandals, which took over at the former Casuarina Beach Hotel location last week, and the identical clean sheet to be given to its sister operation Beaches, which is to open at the Almond Beach Village location in St Peter in a few years, marks a fork in the road for tourism in this country.
You can read the fine print of the tax concessions on page three of last Friday’s WEEKEND NATION (November 8, 2013). You will notice that every possible Government tax, direct and indirect, except for income tax, has been waived for Sandals, not only for the inputs into the hotel property itself, but also for all non-national senior managers and staff, including their vehicles.
As for that pesky income tax, how many of them do you think will be paid locally? Did you come up with zero too?
Success story
When you have over a dozen hotels (15 now, if you include Barbados), and you are the most awarded hotel chain not only in the region but around the world, you advertise prominently in the United States market, and you have been a success story for over 20 years, it is safe to say that you are a market maker.
When the market maker comes to town, it recasts the market in its own image.
With one piece of paper, the Stuart administration created a greenfield site where taxation would never befoul the profitable streams of the Sandals river running through it.
As far as the rest of the foreign and local hotel investors go, they should be glad that Government finally removed that patently unfair 184 per cent surtax on heavy cream.
You can imagine how competitive their desserts will now become.
So, an administration that not only raised the VAT on the local hotels to half of 17.5 per cent nearly two years back, only to announce it would – gasp! – lower it to its original 7.5 per cent only last August, suddenly sees the argument that you cannot tax out of existence the companies which are bringing you precious foreign exchange.
With the return on investment (ROI) so low in the Barbados tourism industry, it is no wonder that we don’t have international chains beating a path to our door.
If you go to the Sandals site, you will find that you can buy a seven-night stay at Casuarina this month for US$2 500. This is special introductory rate, apparently, said to be 56 per cent off the regular rate.
From a random airport in the midwest (say, Wichita, Kansas) you can get return tickets on American Airlines as part of the package for US$1 500, which includes US$400 in “air credit”.
A quick look over other Sandals hotels suggests the Barbados rates are currently among the lowest, if not the lowest, on the Sandals rate rack.
People who go to Sandals are buying the resort’s version of the Caribbean experience, so the actual island itself is not as important to them as getting a Sandals vacation. It is the price point and level of luxury you decide first, or where the “sales” or special discounts may be for a particular time, rather than the specific place you are going to end up visiting in order to access that vacation.
I know that from our nationalistic point of view it might be hard to see it this way, but the Wichita Linesman wants to go to Sandals because it means for him a Caribbean honeymoon or vacation for his wife or girlfriend (hopefully not one after the other), and whether he gets it in St Lucia or Turks & Caicos, The Bahamas, or Barbados, is like me trying to remember the Broadway Theatre in which I saw that great musical. They all look the same to me.
In many respects, then, and I don’t mean this negatively, the sand under the sandalled feet of Butch Stewart’s clients could be anywhere south of Miami and north of Caracas. That is the whole point of the brand.
Each island’s specifics qualities are marketed as part of the experience once you get there, but it really doesn’t matter if we have a deep cave and they have a drive-in volcano. Once you have your Sandals vacation the rest is complementary, but not critical, to the experience.
The dilemma created for itself by the Stuart administration is how to justify this “caving in” to the demands of the market maker.
The other hoteliers, apart from their duty-free heavy cream, can only get certain import duties waived in the Special Areas, such as St Lawrence Gap or Carlisle Bay, and still have to pass along, or try to ingest and survive, that 7.5 per cent VAT.
It cannot be done, so the opportunity has now arisen for the administration to take the initiative and apply the same total tax-free regime to all of the other hotels here as it has now done to Sandals.
This will redound to the country’s benefit by making Barbados, perhaps for the first time, truly competitive in the mid-range tourism market.
You can’t open the tax-exempt door a crack and just let in one lucky player, on the basis that he is the most powerful player in the region, without letting in all the rest. If you do that, you will be destroying your market at the same time as you are depending on that one player to rebuild it.