CARRIBEAN ASSOCIATION OF INDIGENOUS BANKS Sue Springer November 19 th 2008.

CARRIBEAN ASSOCIATION OF INDIGENOUS BANKS

Sue SpringerNovember 19th 2008

Overview

The importance of Tourism BusinessState of the IndustryEconomic Analysis of major markets Operating CostsIdeas for working together to survive this challenge?

The Tourism BusinessThe Caribbean is a region that is the most highly

dependant on tourism in the worldDespite economic decline a vacation is still high

priority WTTC continues to predict growth in travel and

tourism of some 3% year on year over the next 5 years world wide

State of the Industry

Different for each Island Spanish speaking islands with lower prices Atlantis hotel in Bahamas laid off 800 staff Barbados 4% decline in long stay arrivals for October

compared to 2007 Overall arrivals decline of 0.6% to end of October 2008 Projection by FTO bookings up 15% for 2009 at the present

time Dynamic times & the situation changing DAILY

Economic Analysis - Canada Higher oil prices & slowing economy @ a more rapid rate

than anticipated - affecting all areas Canadian $ fell to US$0.93 cents Economy forecasted to grow by only 1.7% in 2008, down

from 2.7% in 2007 40% of Canada’s GDP generated from exports to USA Auto & auto parts largest export – All 3 major US auto

makers cutting production in plants in Ontario & Quebec.

Economic Analysis - USA

Burdens of both high oil prices & the sub-prime banking crisis wrought havoc on the economy of the USA

Exacerbated most recently by the demise of Lehman Bros. ect

Today General Motors, Chrysler & Ford have requested Federal monies to stay in business – (US$25Bn)

Biggest fall of US wholesale in 60 years - down 70% Overall lack of consumer confidence Causing consumers to rethink travel habits Unleashing a ‘stay at home mentality’ or “Stay-cations” Election fever over

Economic Analysis - UK Alistair Darling – Chancellor of Exchequer recently said

“Britain faces ‘arguably the worst’ economic downturn in 60 years”

Fresh economic data = a feeling of austerity, after yrs of debt-fuelled spending

12.7% decline in property prices during September compared to the same month a yr. ago

BOE left interest rates unchanged @5% for the 5th month Expected that interest rates may change this week Inflation 4.4% more than double the target rate expected to

increase to 5% by yr end.

Economic Analysis – UK Contd. Real inflation including Fuel & Mortgage = 10.6% (per the

Financial Times) Household savings @ their lowest level since 1950’s People trading down of groceries – Supermarket own-label

goods up 6% New car registrations down 18.6% in August lowest since

1966, the hardest hit the more expensive makes, BWM down 40%, Land Rover 58%, Jaguar 41%, Mercedes 35%

Unemployment projection of 2M by year end. The exchange rate for the pound declining daily now below

Bds$3

Economic Analysis - Caribbean & Latin America All the Caribbean islands facing high prices on oil, utilities &

food. Major investments with high end product, both hotels and

villa multi use complexes have been halted or are on a slow down

Challenges with capacity in airlift at peak times Major challenge with price of air fares Majority of the price includes high governmental taxes

Operating Costs in Barbados Electricity bills increased over the past six months as much

as 45 to 65% Improved valuation on lands showing increases of 60 to

80% = increased land taxes A Wage increase for hotel workers in December of 5.5% a

total of about 12% over two years when compounded 50% Excise tax added to alcohol – impacted on the All

inclusive hotels as rates are fixed for the next year. An active hurricane season in the region may impact on

insurance rates for Barbados

Despite all of these increasesHOTELS CANNOT INCREASE RATES

AS WE LIVE IN A WORLD OF DISCOUNTS & /OR VALUE ADDED

A Discounted WorldDue to the global economic tsunami that we all faceDiscounting or value added is the name of the gameJamaica hotels discounting rates by 30%Free air fares being offered in some casesFree flights for childrenHalf price for a companion flying Tacticals being offered in the market place by

everyoneThe world is on sale!!!!

Ideas for working together to survive this challenge?

Moratorium on loan principal - hotels to only pay interest or even to capitalise the interest depending on the level of debt – Limited period 1 yr to 18 months

Hotels unable to service the loan will close & what do we do with these properties

Redundancies equal possible challenges re personal loans

100 staff with an average loan of $30,000 = $3M to be written off

Ideas for working together to survive this challenge contd.Globally Governments facilitating monies to bail out

entitiesGovernments could create a guarantee system for

hotels in troubleEnterprise Growth Fund in Barbados – set up with

funds for 9/11, small hotels initiative, environmental retrofit project ect.

EGF – create an equity position in the business

Ideas for working together to survive this challenge contd.

Reduced Cash FlowAdditional facilitation e.g. soft loanLower Overdraft interest rates Temporary financing facility

Ideas for working together to survive this challenge contd.

Reschedule DebtHotel funding in the original state historically a

challenge Length of repayment given in first phase too

aggressiveIncrease period of time for repayment of loans

-10 yrs to 15yrs, 15yrs to 20yrs

Ideas for working together to survive this challenge contd.ExpediencyAll assistance to be confirmed within a 30 day periodAllows business to plan their next months business

cycleAssists with managing cash flow

Ideas for working together to survive this challenge contd.

Tourism is the primary industry in the CaribbeanAppears that there is a disconnect with the tourism

industryPossibility of a Tourism specialist to be on the staff in

the banksLack of knowledge can cause conservatism

Ideas for working together to survive this challenge contd.Some companies forced to go abroad for loansResistance to the industry due to instability Often tourism is described as a high risk industryTourism is not an industry but a businessIt is the main export for many of the Caribbean

islandsHistory has proven that TOURISM recovers &

bounces back after disasters – 9/11, SARS, Iraq War, Terrorism, Tsunami, Hurricanes, Recession

Help us to survive!

We will survive & bounce back after this economic tsunami

Help us to be one of your surviving customers

I thank you!