As tourism gears up for a new tax, a concerned hotelier is calling for clarity ahead of the April 1 implementation deadline. With no legislation in sight and cabinet discussions still ongoing at press time, there are fears that the uncertainty will harm not just hotels but the entire sector and the wider economy.
“We have unanswered questions, and a lot of concerns,” says Sanovnik Destang, Executive Director of Bay Gardens Resorts. “We are not against the SLTA having its own source of revenue but the concern is the method in which it is being implemented. Right now we are at the waiting stage. If it is the government’s desire to implement this new tax by April then we need to expedite the legislation to provide more clarity to the market.”
Under pressure
The government announced in January that it would introduce an ‘accommodation fee’ for all overnight visitors, to take effect in April. Under the new head tax, accommodations with an ADR above US$120 will carry a fee of US$6 per guest per night, while those with a smaller ADR will levy a US$3 charge. Government has said that the new tax will be rolled out alongside a 3 per cent reduction in VAT for accommodation providers.
Destang says that the industry had proposed a simpler structure whereby all hotels would be subject to a flat percentage tax, applicable regardless of their room rates. He suggests that the two-tiered system is overly complex and disadvantages smaller hotels and resorts, saying: “A 3 per cent tourism tax to replace the 3 per cent drop in VAT on hotels was recommended. The current proposed tiered system is not a neutral position for all hotels. Hotels at the lower end of the spectrum are going to become a lot less competitive in the marketplace. Guests who stay at these hotels will be paying more whereas larger hotels will absorb the cost and keep their prices the same. There is such diversity in our product that this thing is not going to impact everyone the same.”
And with room rates in Saint Lucia rising, it’s likely that hotels at the lower end of the market will continue to be squeezed. “The new hotels coming onboard are higher end,” says Destang. “Saint Lucia is one of the more expensive destinations to get to and there will be pressure on the smaller hotels to drop their rates to be competitive. Lower priced hotels may have to foot the bill to remain competitive, particularly in the very price-sensitive UK market, and there is not a lot of wiggle room in their operating costs.”
With the tax looming, many issues are still on the table. There are questions over whether the VAT reduction will apply across the board, which hotel-provided services will be included, how hotels will charge and collect this new revenue, and its long-term impact on the sector.
In the meantime, the locally owned Bay Gardens Resorts chain is feeling the pressure as it takes bookings for April and beyond. “Some of our travel partners are very persistent and asking us to make firm commitments. That is difficult to do without formal legislation. We are not sure what to tell them,” says Destang. “It is a very stressful situation.”
Co-operation and collaboration
Destang doesn’t dispute the rationale behind the new tax, and believes that the SLTA deserves credit for its work in marketing the destination. But he remains concerned about the slow pace of legislative change, saying: “Nobody really likes tax but we understand why it is being done. We are willing to help implement it, but we need actual legislation to make it a reality. The idea behind it is sound. It is the best way to fund a tourism authority. We accept it as long as it can be implemented in a timely and sensible way.”
While the government has been meeting with industry throughout the process, Destang says engagement could be better and there will need to be greater transparency once the tax goes through. “If the hotel sector is now expected to fund the SLTA, we would hope there would be representation from those paying that tax. It is very important. People want to feel they have some sort of say. We need very close collaboration between the public sector and the private sector.”
The SLTA has said all proceeds from the accommodation fee will go towards destination marketing and promotion. Destang is hopeful that these efforts will be successful but wants to see a greater presence in the regional market and untapped European markets such as France, which he says contributes around 10,000 visitors a year without much spend. More digital and social media promotion is also necessary, according to the veteran hotelier. “We need a continued push on social media and digital media because that is where we see the real return on investment.”
But before the funds can be spent, they must be collected and the clock is ticking on how exactly that will happen. Destang says: “There is still a window. There is a very narrow window to get it right and that window is closing. If it takes much longer it will be a painful process.”
