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CARRIBEAN ASSOCIATION OF INDIGENOUS BANKS Sue Springer November 19 th 2008.
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Transcript of CARRIBEAN ASSOCIATION OF INDIGENOUS BANKS Sue Springer November 19 th 2008.
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CARRIBEAN ASSOCIATION OF INDIGENOUS BANKS
Sue SpringerNovember 19th 2008
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Overview
The importance of Tourism BusinessState of the IndustryEconomic Analysis of major markets Operating CostsIdeas for working together to survive this challenge?
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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
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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
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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.
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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
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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.
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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
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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
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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
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Despite all of these increasesHOTELS CANNOT INCREASE RATES
AS WE LIVE IN A WORLD OF DISCOUNTS & /OR VALUE ADDED
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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!!!!
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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
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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
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Ideas for working together to survive this challenge contd.
Reduced Cash FlowAdditional facilitation e.g. soft loanLower Overdraft interest rates Temporary financing facility
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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
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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
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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
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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
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Help us to survive!
We will survive & bounce back after this economic tsunami
Help us to be one of your surviving customers
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I thank you!
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