Hoteliers Predict Hard Times Ahead

“Layoffs” and “cutbacks” are what local hoteliers are promising if some of their requests to adjustments in the VAT regime are not met by this weekend. “We will become one of the most expensive destinations and our competitiveness in the world will go down,” says Sanovnik Destang, Assistant Managing Director of Bay Gardens resorts. But while hoteliers and some private sector groupings are speaking plainly on their position on the pending imposition of VAT, the issue here has over the past few months created more confusion in language and interpretation than was present at the tower of Babel. Value Added Tax (VAT) is set to take effect here in less than 48 hours, on Monday October 1 to be precise. Most citizens however appear to be none the wiser as to how it will affect them. But as if the confusion among ordinary folks was not bad enough, there seems to be misunderstandings even among business owners and such groupings as the Saint Lucia Hotel and Tourism Association. At a press conference held on Thursday morning to state their position on VAT, members of the head table spoke of hard times and hardship ahead in the next six months, expressing concerns about VAT on service charge and other issues. Saint Lucia is heavily dependent on tourism with the sector creating twelve thousands jobs in direct employment as of 2011 according to The World Travel and Tourism Council. That figure climbs to 30,000 when the impact on direct and indirect employment is accounted. Last week the National Workers Union (NWU) which represents hotel employees here issued a statement hinting at a shutting down of the sector if Government proceeded with the proposed “Vating” of service charge. However, in a statement issued on Wednesday Government said hotel workers would not be asked to pay VAT on their service charges. This week the SLHTA still appeared unclear on the issue and stated that in its present format VAT will lead to a reduction in revenue for the sector which will lead to a reduction in service charge passed onto workers. The SLHTA said it has been engaging the various offices involved in the implementation of VAT including the office of the Prime Minister in regard to the impact of the application of VAT to service charge on hospitality industry employees. In a measure that seemed to suggest that their calls were being met with deaf ears, the SLHTA press conference called for clarity on several matters. “I think that it is rather unfortunate that so many of the examples that are being used focus on the restaurant sector,” Destang said. “The restaurant sector is certainly important and you know obviously the impact of service charge on independent restaurants will lead to a reduction of revenue which will impact employees. About seventy percent of the service charge that is distributed to employees in a hotel environment is derived from room accommodation,” Destang explained. The other concern for hoteliers is that about sixty percent of their business is contractual. According to Destang many of the tour operators will unlikely pass on an additional tax to their customers who have already booked vacation packages a year in advance. “The hotel sector will have to absorb that cost. How does one absorb a few hundred thousand dollars a year in this economic environment?” Destang questioned. “I know a lot of hotel members have indicated that they will have no alternative than to reduce their employment level. “Our staff are facing heavy rotation schedules to meet the economic situation. The arrival figures seem to be fairly alright, but the true fact is that the spendable income of the average customer has gone down close to twenty-five percent over the last few years,” restaurateur Chef Bobo told reporters. “We have not made money, we have taken hits,” he revealed. “We cannot sustain business where we have gone from nine months seasonal to a point where we make money just two to three months,” he added, saying that the sector is also dependent on local business. Bobo says now everyone will think twice about going out to eat with an increased cost of up to sixteen percent. He too hinted at cut backs in employment levels. Danny Belizaire second vice president of the SLHTA also spoke Thursday. “It is clear to everyone and I think it has been admitted by the VAT office as well as Government on the whole that there is going to be inflation in Saint Lucia over the next six months. So what does that mean? It means that the spend on the average Saint Lucian is going to be less. It also means that persons who are going out for dinner at various restaurants will have less money to spend. Added to that the prices on their meals have just increased… that makes it very, very difficult for restaurants to survive,” Belizaire stated. The SLHTA is proposing a review of the VAT on service charge and that it be exempt as in most Caribbean countries. Also, that stand alone restaurants be given a reprieve over the next six months as has been given to the hotel sector. The hotel sector was given a VAT rate of 8 percent as opposed to 15 percent for the next six months. According to the SLHTA they have not received word from Government about their concerns which are many including the imposition of VAT on computers which they say should be exempt. They also want more information on the cruise sector which from their understanding will not be paying VAT. However local boat and tour operators will have to pay and cannot pass this onto cruise operators. Up until Friday the SLHTA was hopeful that Government would accede to their requests. “If not, then what?” I asked. Sanovnik Destang responds; “We just want this thing to be implemented properly but at the moment we just see too many gray areas that need to be ironed out. If no word (from Government) by Sunday many members may have no choice but to replace service charge with tipping which will be far less. According to the Bay Gardens Assistant Managing Director there seems to be too many misunderstandings surrounding the issue of VAT. “I cannot imagine if a reasonable person understands how it’s going to impact employees, understand how it’s going to impact business, that there would not be some change,” Destang stressed.