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

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Presentation on theme: "CARRIBEAN ASSOCIATION OF INDIGENOUS BANKS Sue Springer November 19 th 2008."— Presentation transcript:

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

2 Overview  The importance of Tourism Business  State of the Industry  Economic Analysis of major markets  Operating Costs  Ideas for working together to survive this challenge?

3 The Tourism Business  The Caribbean is a region that is the most highly dependant on tourism in the world  Despite 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

4 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

5 Economic Analysis - Canada  Higher oil prices & slowing 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.

6 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

7 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 for the 5 th 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.

8 Economic Analysis – UK Contd.  Real inflation including Fuel & Mortgage = 10.6% (per the Financial Times)  Household 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

9 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

10 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

11 Despite all of these increases HOTELS CANNOT INCREASE RATES AS WE LIVE IN A WORLD OF DISCOUNTS & /OR VALUE ADDED

12 A Discounted World  Due to the global economic tsunami that we all face  Discounting or value added is the name of the game  Jamaica hotels discounting rates by 30%  Free air fares being offered in some cases  Free flights for children  Half price for a companion flying  Tacticals being offered in the market place by everyone  The world is on sale!!!!

13 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

14 Ideas for working together to survive this challenge contd.  Globally Governments facilitating monies to bail out entities  Governments could create a guarantee system for hotels in trouble  Enterprise 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

15 Ideas for working together to survive this challenge contd. Reduced Cash Flow  Additional facilitation e.g. soft loan  Lower Overdraft interest rates  Temporary financing facility

16 Ideas for working together to survive this challenge contd. Reschedule Debt  Hotel funding in the original state historically a challenge  Length of repayment given in first phase too aggressive  Increase period of time for repayment of loans -10 yrs to 15yrs, 15yrs to 20yrs

17 Ideas for working together to survive this challenge contd. Expediency  All assistance to be confirmed within a 30 day period  Allows business to plan their next months business cycle  Assists with managing cash flow

18 Ideas for working together to survive this challenge contd.  Tourism is the primary industry in the Caribbean  Appears that there is a disconnect with the tourism industry  Possibility of a Tourism specialist to be on the staff in the banks  Lack of knowledge can cause conservatism

19 Ideas for working together to survive this challenge contd.  Some companies forced to go abroad for loans  Resistance to the industry due to instability  Often tourism is described as a high risk industry  Tourism is not an industry but a business  It is the main export for many of the Caribbean islands  History has proven that TOURISM recovers & bounces back after disasters – 9/11, SARS, Iraq War, Terrorism, Tsunami, Hurricanes, Recession

20 Help us to survive!  We will survive & bounce back after this economic tsunami  Help us to be one of your surviving customers

21 I thank you!

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