Wake-up My Bahamian People!

The Bahamas: A Perfect Financial Storm Brewing in Tourism Paradise

By Norman Trabulsy Jr.

The Bahamas is entering a period for which I see a Perfect Storm gathering, and this is unfortunate. A Perfect Storm comes about when a number of factors synergize to exacerbate what would otherwise be a mildly disruptive event. Although a number of other supporting realities strongly buttress my view, for the sake of brevity I will base my analysis and prediction of a Perfect Storm on the following.

Implementation of a value-added tax (VAT)

It does not take a Sherlock Holmes to figure out who owes hundreds of millions of dollars to the Bahamian government in uncollected property taxes. Value-added tax is being implemented because the government has failed in its job and been unable, or unwilling, to collect even half of the taxes it is owed. The VAT is a consumer-based and regressive tax, meaning that it hits the poorest the hardest.

The estimated revenue from the VAT assumes that the economy will remain roughly at its current level. I strongly suggest that the Bahamian economy will take a very hard hit for several years due to the high cost of VAT compliance, higher prices, fraud, and the overestimate of the tax revenues to be collected, causing the government to further tighten its belt, all contributing to a dangerous shrinking of the economy. This: before the risk of any hiccup in the tourism sector, which accounts for 80 percent of The Bahamas’ gross domestic product (GDP). It is rather naive to suggest that the tourism sector is immune to rising prices, when survey after survey show that the No. 1 complaint of tourists is high prices. Sun, sea and sand have a value, but there is a limit, and we are pushing it.

Legalization and proliferation of gambling web shops

In The Bahamas, a social epidemic of gambling appears to be a symptom of the larger desperation of being unable to make a decent living and provide for one’s family by holding an average job. But more on that later. I predict that the net effect of a proliferation gambling web shops will be a continued drain on the real economy and an increasing transfer of monies into the hands of web shop owners. The health of an economy is based on the amount of money that freely circulates within it. As more money leaves the real economy via the web shops, the net result is unarguable: a rapid and decisive transfer of wealth into the pockets of those who produce nothing.

A software designer for some of the web shops told me that, for every winner, there are 8,000 losers. Ponder these odds for a moment. I live on a small family island, and I have paid attention to this matter for nearly a decade. I cannot count the times Bahamians who do not gamble have said to me, “These web shops are going to take this country down.” Perhaps they say this because, like me, they have seen the dashed hopes, the unfinished houses, the children whose lunch moneys were squandered by their parents’ spinning, and the money leaving this small island on a weekly basis that could have gone to so many worthy causes and needs. The language should be more honest: gambling is not an industry, it is a Ponzi scheme, and it should be called what it is.

Downgrading of the credit worthiness of The Bahamas by Moody’s

Moody’s recently downgraded the credit worthiness of the Bahamas due to the unlikely probability that it will reduce its 50 percent debt-to-GDP ratio. We are unlikely to do this because for the past 10 years our country has only grown by six percent, and we continue to borrow more money. Moody’s rightfully wonders where the government will find the money to pay off its increasing debt. The prospects are bleak. I liken this situation to the following conversation. A friend comes to me and says, “You owe me $500 today.” I ask, “Why is that?” He answers, “Because 50 years ago your grandfather borrowed $500 from my grandfather and he said you would pay me the $500 your grandfather owed him.” Who doesn’t think this is absurd? Yet, what do the Progressive Liberal Party (PLP) and Free National Movement (FNM) do each year to the citizens of The Bahamas? How is this any less absurd than what our well-educated economists, politicians and lawyers are proposing to us today? When politicians take out these big loans, with interest, who winds up paying for them?

State of the global economy

Not enough honest people have spoken out about the implications of what the major players in the financial sector and government officials have been doing. Since the global financial crisis in 2008, the United States in particular, has pumped trillions of taxpayers dollars into the banks and financial institutions there and around the world, in an attempt to “save” the economy that was put in danger by, you guessed it, the banks and financial institutions. Soon the consequences of this policy will become yet more apparent in rising inflation, increasing inequality, and a greater impoverishment for most of humanity. Any prudent government would have, after assessing the crisis and its causes, broken up the largest of banks and nationalized those that had done the most harm to society.

The largest banks, financial institutions, and here in The Bahamas even the web shops, have completely captured our politicians and the political process. Consider the phrases: Too Big To Fail and Too Big to Jail. Justice has become lopsided and no longer applies to the rich and powerful. This is the reality today throughout the world, and it is contrary to any concept of democracy. The people of The Bahamas said “No” on the referendum regarding web shops. Yet, what did our Prime Minister do? Who do the politicians really work for? Does democracy exist in The Bahamas, or anywhere? Answer honestly. Now, what are you going to do about it?

Increasing poverty rate in The Bahamas

The realities about poverty in The Bahamas are probably worse than the government statistics suggest. For an indicator of the real state of our economy and the hurdles that must be overcome to change our course, speak to any social service worker. They will tell you that they are seeing an increasingly depressed, despondent and hopeless people who come for assistance. Yet the government is cutting back on social services to balance the budget, so that there will be even less resources to help the rising numbers of people who need them. The economic considerations are in themselves sufficient cause for concern, but it is also reasonable to expect that, as the poverty rate increases, the crime rate will increase, and public safety, the quality of life and tourism will decline.

Increasing emphasis on the “financial services industry”

The so-called financial services industry is the second largest contributor to the GDP of The Bahamas, after tourism. It is not an industry but a scheme to attract people who don’t want to pay taxes in their own countries and need a place to hide their money. The Bahamas levies no income tax, no corporate tax, no inheritance tax, no capital gains tax, and it seems that property taxes are very low and not collectable. The money to run the government comes, for the most part, from the working people of The Bahamas. The rich pay a minuscule percentage of their incomes to live in paradise: sort of like going to Disney World for free.

If the tax policies here in The Bahamas actually created an incentive for investment, an improvement in the job market, and a healthy economy, wouldn’t there be better results after all these decades of such policies? Instead, our politicians, lawyers, bankers, the financial services representatives, all of them, have become beholden to big money. Who, in their right mind, can possibly say that things here and around the world are going well and that the future looks bright for most of the world’s people? The “financial services industry” produces little to improve the lives of ordinary people. There is no reason to give the rich a free ride in this country; the benefits of living here are too great to be given away for free. I say: make them pay their fair share. The Bahamian people need to stand up and call for these changes, because not one person in the government has the guts to tell it like it is.

Aspiration to join free-trade organizations

Generally speaking, free trade in today’s world is a way for transnational companies to subvert a county’s legal system and destroy its sovereignty. The result of almost every modern free-trade agreement has been the destruction of a country’s agricultural and manufacturing base and its replacement by highly subsidized foreign corporate ownership, gutting of environmental laws and crushing of organized labor. Any complaints and lawsuits must now be handled by an extra-judicial group of corporate lawyers with loyalties to big business. This idea of The Bahamas joining these free-trade agreements will only further the interests of those businessmen, lawyers and politicians who are pushing them. They will not help the tourist economy or manufacturing economy of The Bahamas or create more and better jobs for Bahamians. These issues must be known to the Bahamian people before our politicians sell this country out from under our feet.

Lack of leadership

Anyone old enough to remember, or who has gone to YouTube to hear, the words of Martin Luther King Jr. understands that we have no statesmen in this world today. Do not be duped by the words of the first African-American US President. He is not even worthy to stand in the shadows of MLK Jr. Listen to the words of our own politicians in The Bahamas: mere words, poisonous words, for they are meant to trick us into believing that they have our interests in mind. Nowhere in the world is there a leader with the integrity, honesty, courage and fortitude required to govern. Each and every one is beholden to the moneyed interests in the world today. I have heard the expression, “We get the government we deserve.” If this is true, I am saddened by where we are as a people. If we can rise up, and create a better society, it is time to do so. Let us get rid of the charlatans, the spineless, the greedy, the dishonest and egotistical excuses for public servants that we now have. This isn’t about one political party or another. Wake up people! I believe we are staring a Perfect Storm in the face. It is up to us to do something for ourselves to avoid the impending crisis.

Editor’s Notes: Norman Trabulsy Jr. is an expecting father, restauranteur, sailor, captain, carpenter and naturalist living in The Bahamas. His writing generally focuses on environmental issues concerning tropical marine ecosystems and economics.

Photographs one, four and nine by Thomas Hawk; two, five and fourteen by Albyan Toniazzi; three and ten by Susan; seven and thirteen by Bruce Tuten; eleven and twelve by Shutter Runner; six by Jordon Cooper, and eight from the IMF archives.

Oct 13, 2014

News Junkie Post

Young Bahamian Entrepreneurs in the tourism industry ...and the revitalisation of The Bahamas as a competitive touristic destination

 

Negotiating With The Gatekeeper: Young Entrepreneurs And Tourism

By Noelle Khalila Nicolls
Tribune242
Nassau, The Bahamas



IF the movements made by a handful of young Bahamian professionals over the past year in tourism are any indication of the entrepreneurial thinking of their counterparts, then there is some hope for the future outlook of tourism in the Bahamas.

 

Entrepreneurs such as Alanna Rogers, Jamie Lewis, Adlai Kerr and Scott Turnquest, owners of tourism startups Tru Bahamian Food Tours, Islandz Tours, and BahamaGo, are breaking barriers in tourism by going head to head with established businesses in nontraditional areas of the business. Their starups are refreshing additions to the product offering, and reflect a break from the tunnel vision way of thinking about tourism in terms of traditional service jobs, foreign direct investment and hotels.

 

The tour business in the Bahamas is not an easy one to get into. Ancient companies such as Majestic Tours, the last of the original travel agents from the days of white-only operators, have an effective monopoly over the key supply chains of visitors. And yet, Majestic Tours only places 19 amongst the 22 sightseeing tours ranked on Trip Advisor for Nassau based activities.

 

In the top spot on the Trip Advisor listing is Tru Bahamian Food Tours, with Islandz Tours following closely behind in the number four spot. As far as Trip Advisor is concerned Majestic Tours is essentially a nobody, despite their relative operational size and level of business experience. Old school business minds with an analogue outlook would not understand the significance of such a ranking. They miss how the Internet acts as a great democratic equalizer in this digital world, particularly for those with Rocky-style ambition and fight.

 

These young entrepreneurs are attempting to solve long-standing problems that the industry has been incapable of solving. The Downtown Nassau Partnership has doled out big dollars to revitalise downtown, focusing in large part on upgrading infrastructure. Their efforts are all well and good, but the creation of new businesses that add value and enhance the downtown Nassau experience could do just as well in the revitalisation efforts.

 

That is what Tru Bahamian Food Tours and Islandz Tours have proven, with Islandz also operating in the merchandising side of the business, with authentic Bahamian souvenirs.

 

Innovation and the expansion of existing products and business services are critical for the revitalisation of the Bahamas as a destination, which is on the decline. Sometimes it seems as though leaders in the business sector are either comfortable or complacent. Either way, it is leading to a lack of improvement and modernisation in our tourism offerings.

 

As far as downtown goes, our city centre is a stale, dry place at night, notwithstanding the few bars and clubs that make an effort. Why haven’t existing businesses figured out a way to make downtown vibrant at night? Why haven’t entrepreneurs seen this need as an opportunity to create new businesses? When the Downtown Nassau Partnership ran its successful bar crawl promotion on the Heineken bus, I immediately wondered why a private group hadn’t made a successful business out of a Nassau at night bar hop.

 

Why haven’t downtown businesses figured out a way to bring more Bahamians downtown? Not all of them are convinced that central to downtown’s success is bringing the city back to life for Bahamians. In fact, there is a night spot off Bay Street that has a notorious reputation for being racist and discriminatory towards black Bahamians. During the recent Goombay Summer festival in Pompey Square, I heard a tourism official say, “It was good, except, not many tourists came out.” Meanwhile, the square was jam-packed with Bahamians, starved for outlets to enjoy downtown.

If businesses are supposed to solve problems, fill needs, serve markets, it seems we are going year to year without innovating solutions and creating products to plug the market gaps; without solving problems and keeping pace with the under-served and emerging markets.

 

The startup BahamaGo is doing just that. It is attempting to solve two critical problems that the Ministry of Tourism with its $80 million annual budget has been unable to do in its more than five decades. So far BahamaGo has had success, not because it has the financial resources to do so, but because it has financial accountability; it has the business motivation combined with passion and drive; and most importantly, it does not have an analogue mind.

 

The reality is most hotels in the Bahamas are in fact small hotels, strung amongst the Family Islands; they are using outdated hotel management tools with no access to the large online travel agencies (OTAs) such as Travelocity and Expedia. This lack of access to OTAs is a major challenge for small hotels, which cannot accept online bookings for their properties, and have no way of offering booking packages that pair airfare and accommodation.

 

Many hotels are using manual ledgers or telepathic room inventory management systems. BahamaGo is an niche OTA created by Bahamian entrepreneurs with technology and finance backgrounds who understand the specific demands and challenges of the local market and are centrally focused on meeting the local needs.

 

Unfortunately, BahamaGo is not only competing against the large OTAs, it is also competing against the Ministry of Tourism (MOT). The MOT is simultaneously pursuing a strategy to solve the same problem, investing big bucks to contract an international company. It is not that the MOT is oblivious to the problems; even though they often take a while, they do act. But it is their action that often undermines entrepreneurial opportunity. And in the long run, the bureaucracy often underserves the market.

 

Small startup businesses in the tourism sector quickly come to learn that the tourism market is not free and open; it has a gate keeper known as the MOT. Large developments, particularly that bring foreign direct investment, need not worry, because the political leadership which sets the tone in tourism always has time for that.

 

A business’ size, bank balance, credit history, experience and level of connections correlate to level of trust that is inherently granted by the gate keeper. The problem for small startups, particularly those put forward by young entrepreneurs, is obvious. They suffer the most having to navigate their own way around the bureaucratic gate keeper.

 

I don’t believe it is intentional, but the MOT is a large bureaucracy that in some instances undermines economic opportunities for small businesses and innovation in the tourism sector. Whereas business is about taking risks, the bureaucracy is about playing it safe (routine processes aimed at protecting the country’s resources and not screwing things up; utilizing public funds in low risk investments); the different modes of being naturally conflict with each other, particularly when it comes to dealing with small businesses.

 

A small business might offer a service that the MOT is willing to pay for, but the MOT will always defer to the company that is perceived to present fewer risks. From a public sector management point of view it makes sense, but we must acknowledge how and when it creates an unsupportive, even anti-competitive environment for small Bahamian businesses.

 

A group of artists and photographers were having a conversation online the other day about Bahamian photographers joining together to create an online stock images website. The discussion was lively and interesting, and when I made my contribution I threw a wrench in the mix. If the MOT operates a free stock images website in partnership with an international stock images company, how could a local company compete? Wouldn’t the MOT’s free service undermine the business efforts of the private group?

 

The MOT has its fingers in many pots, and it often has a possessive like sense of ownership over anything that it is involved in. This posture inevitably becomes the elephant in the room when a private business tries to enter the market.

 

For large players the point is not so relevant, but for young entrepreneurs and small businesses it is critical. At some point, there will have to be a negotiation, whether spoken or unspoken, or some sort of mediation, with the MOT, before the gates of opportunity are fully opened. In the meantime, these businesses are forced to work in spite of the MOT.

 

The events market is a classic area. The MOT is committed to events. However, when the MOT stages an event, it often undermines the capacity of a private business to operate or manage an event in the same market place. On the flip side, if a private individual or company has an event it will not be legitimized as a marketable event to the tourist market unless it has the stamp of approval of the gate keeper.

 

The People to People programme is another example. People to People is a signature MOT programme that pairs visitors with a volunteer Bahamian host to experience Bahamian life and culture. The People to People programme is a successful MOT programme. But, it could also be a great business. The MOT innovated a great product for an important niche sector, but might it not be the time for a Bahamian to pursue it as a private business venture?

 

We must ask the question, what is the MOT really about? Justifying its own existence – its $80 million budget – or supporting a local business market? Shouldn’t we encourage and celebrate the creation of businesses to service areas previously subsided by the MOT? In a thriving tourism market, shouldn’t the MOT theoretically become more and more specialized, because the needs of the market would create viable businesses opportunities that are filled by Bahamian businesses.

 

I am not certain our thinking has reached that level of consciousness. More than likely, if a Bahamian saw an opportunity to create a People to People like business, it would attract resistance from those in tourism responsible for People to People, particularly its founders. And if the MOT was so inclined, it could undermine the business efforts of the private individual.

 

In this respect I sympathise with the civil servants who work at the MOT, because their public service often means missing out on business opportunities. However, their experience in the MOT also creates for them a wealth of knowledge and networks that would be vital assets in business. Instead of normalising career service, I think civil servants should be encouraged to take their experience into the public sector, where they can step out and take on the risks of entrepreneurship.

For all of its shortcomings, there is no question, the MOT has over the years plugged important market gaps with its own innovations, not only in marketing, but also product development. The civil servants who work for the MOT do mean well and they work hard to fulfil the mission of the organisation. In many respects the public/private sector relationship that exists in the tourism industry is something to be celebrated and modelled.

 

But we must not let our pride and good intentions make us blind to our own weaknesses or limitations. From some angles, the enviable relationship between the MOT and the private sector looks incestuous.

 

As the need for product expansion and innovation becomes more and more critical and young entrepreneurs mature, Bahamians are not going to just pass up emerging opportunities. They are going to take risks and start new businesses that defy the logic of the analogue mind. The MOT must examine its role and function in light of this approaching wave.

 

Fundamentally, the MOT has a delicate balance to strike: it must act like a business (for marketing is a core business strategy aimed at achieving business objectives), but it should not be in business. And if its service to the business community is justified in support of big business, then it should also be justified in support of small businesses.

 

I am encouraged by young Bahamian entrepreneurs and I know they will do what is necessary despite the MOT or the wider business environment. There is no question, tourism in the Bahamas is badly in need of product development and modernization and it is the innovators, the young entrepreneurs, small and niche businesses that are the hope for the future.

 

As for the MOT, it if wants to do right by the future, it needs to engage in self-examination and create a way forward that reshapes its relationship with innovators, startups and small businesses, who possess different needs to established and large businesses.

 

The MOT’s challenge is to value and support small and niche businesses; facilitate modernisation in the small business sector; encourage product development, especially through diversification into non-traditional areas of the business; recognize and nourish the talents of true innovators. Fundamentally, the MOT is called to be a facilitator not a gatekeeper; be a partner not a competitor; and to truly support the business of tourism, not merely justify its own existence.

 

• (Noelle Khalila Nicolls is The Tribune’s Features Editor. Follow her on Twitter @explorebahamas. For questions or comments, email nnicolls@tribunemedia.net).

 

September 23, 2013

 

Tribune 242

 

Bahamas Blog International

 

Bahamian tourism is “starving” in The Bahamas

Tourism 'Starving': The Shop Is Bare

By NEIL: HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net
Nassau, The bahamas

Bahamian tourism is “starving” because it has both failed to develop a unique product, a well-known architect believes, and not invested in creating key “attractions”.

 

Pat Rahming, of Pat Rahming & Associates, told Tribune Business that while the Bahamas had potential tourism product “coming out of its ears”, much of it was “locked away in a warehouse with three padlocks on it”.

 

And he explained that rather than focus on developing one-of-a-kind ‘attractions’, the Bahamas had instead concentrated the bulk of its tourism investments in the infrastructure that supported them - accommodation (hotels) and transportation.

 

Pointing to the “dilapidated” state of Nassau’s few land-based attractions, such as the forts and Water Tower, Mr Rahming likened Bahamian tourism to a shop with little inventory on its shelves.

 

Arguing that ‘attractions’ were the equivalent of tourism’s “cash register”, Mr Rahming said of these shortcomings: “That’s why we’re losing our shirts, and other people are eating our lunch.”

 

His thoughts offer a new perspective on why some believe the Bahamas’ tourism competitiveness is slip-sliding away, a perception reinforced by a Tribune Business report last week.

 

This newspaper reported that stopover visitors’ share of total foreign arrivals to the Bahamas had slipped from around 31-32 per cent pre-recession to around 24-25 per cent for the past four years. In raw terms, this means that high yielding stopover visitors (spending over $1,000 per head) have declined from one out of every three visitors to one out of every four.

 

Recalling how he arrived at his conclusions, Mr Rahming said he first began attending the annual American Parks and Attractions convention some 17-18 years ago.

 

Becoming a regular attendee every November, he explained: “The key was that I learned through that organisation that the business of tourism, the members of that organisation were the people that drove the business of tourism globally.

 

“At the various seminars and workshops, I came to understand why our business was floundering, what we were doing and perhaps ought not to be doing.”

 

Although he failed to convince Ministry of Tourism officials to accompany him to that convention, Mr Rahming said he learnt that all tourists - wherever they were in the world - were seeking unique Place-specific Experiences.

 

This, he told Tribune Business, could be delivered through a variety of products - place, history, mythology and lifestyle. New York and Miami were lifestyle destinations; London was a historical destination; Athens was steeped in ancient mythology; and unique places included the likes of Niagara Falls and the Grand Canyon.

 

Downtown Nassau was once, Mr Rahming said, the place-specific destination that Spanish Wells, Hope Town and Green Turtle Cay were now. Yet the fundamental flaw was that the Bahamas still had to properly define its tourism product (Place-specific experience).

 

Noting that the Bahamas represented Christopher Columbus’s first port of call in the Western Hemisphere in 1492, Mr Rahming told Tribune Business: “Someone looking for a warm weather destination, sun, sand and sea, has half the world available to him, but the guy looking for the spot where contemporary civilisation started has only one choice.

 

“We are the genesis of all contemporary Americans, the Bahamas. Isn’t that incredible? This is why it becomes so important to the business of tourism. We have product coming out of our ears, but it’s all locked away with three padlocks on it.”

 

In contrast, Mr Rahming said the Dominican Republic had chosen in 1991 to focus on Columbus as an attraction, changing the focus of its tourism product.

 

It had also concentrated on golf, these two moves explaining why its stopover visitor numbers had increased by 109.8 per cent in the nine years up to 2000. Cuba’s growth over the same period was 318.4 per cent, yet the Bahamas’ growth remained in low double digits.

 

Unlike New Orleans with its ‘Voodo’ aura, Mr Rahming said the Bahamas had never exploited its ‘Obeah’ mythology. “This is one of the few places you can go where there isn’t a church tour,” he added.

 

And, while aspects of the Bahamian diet and lifestyle were unique, this nation paid “so little attention to it” as part of the tourism product.

 

“The position is that we have product coming out of our ears, but we are losing business because we have no product,” Mr Rahming told Tribune Business. “This is why we are losing our shirts, people are eating our lunch.”

 

This, he added, was exacerbated by the Bahamas misunderstanding where the tourism ‘Point of Sale’ or cash register was located. It was not located in hotels, transportation or hospitality, which were supporting infrastructure, but attractions.

 

Mr Rahming said there were five types of attraction - traditional tours; retail (the Straw Market); events (the Super Bowl); infrastructure; and resorts.

 

He described the latter as “the most misunderstood in our neck of the woods”. Bahamians generally believed resorts were a hotel with a few facilities, but Mr Rahming argued it was the other way around - a resort was an attraction with accommodation as the supporting facility.

 

Pointing to Atlantis as a water-based theme park attraction, Mr Rahming told Tribune Business: “Atlantis is an attraction, but it has accommodation.

 

“They understand that, and you never hear an Atlantis executive call Atlantis a hotel. But you’ll hear us call it a hotel because we don’t understand.”

 

The result of this misunderstanding, Mr Rahming said, was that “the only investment for the tourism business is on accommodation, and this isn’t helping us.

 

“If you look at New Providence, you will see all our attractions are in trouble. We have few tours, and by any definition of tourism we have very few land-based attractions. What we have are dilapidated or in bad shape,” he told Tribune Business.

 

“That’s the product we are selling. We have the Ministry of Tourism going out to bring customers in, but we have very little inventory on the shelves, and what is on the shelves is not selling. That’s why our lunch is being eaten by other people.”

 

Focusing on Freeport, Mr Rahming said the strategy of concentrating on casino and hotel operators was entirely misplaced. “In their case there is absolutely nothing on the shelf, nothing whatsoever,” he told Tribune Business.

 

“We have product coming out of our ears. This destination, the Bahamas, is the most gifted community on the planet, 350,000 people. You put us against any other community in the world, we have more champions per capita. Why are we starving?

 

“It’s about the fact the shop is open and there’s very little on the shelf. You can’t make money without stuff on the shelf.”

 

Going back to the retail analogy, Mr Rahming said the industry’s ‘first rule’ was that if there was something to sell, it had to be easy to buy. The second was that if you were selling something the competition could sell, price would inevitably drive sales.

 

This was the situation Bahamian tourism now found itself in, a price-driven competition, due to the absence of a unique product and associated attractions.

 

June 03, 2013

 

Tribune 242

 

Bahamas Blog International