By NATARIO McKENZIE
Tribune Business Reporter
nmckenzie@tribunemedia.net
A senior tourism executive yesterday said acquisition costs for stopover visitors to Grand Bahama were on pace to drop to 30 per cent of sales value by year’s end.
David Johnson, chief executive of the Bahamas Tourism Development Corporation, said this would place the island’s tourism sector in a better position to generate sufficient cash flow to sustain operations without having to rely so heavily on government subsidies.
He told Tribune Business that while Grand Bahama has seen a 33 per cent increase in stopover arrivals over the past year, the island remains a high-cost destination, receiving multi-million dollar government subsidies for its tourism sector.
Addressing the Grand Bahama Business Outlook conference, Mr Johnson said: “The acquisition cost for a stopover visitor today, this season, is significantly less than it was a year ago, and substantially less than the record high cost in 2012.
“That could not be sustained. We have done some work with the Tourism Board, and we are projecting that by the end of this year, at the pace we are going, acquisition cost should begin to reach the 30 per cent of sales value level.
“When that happens we would then be in an environment where the industry can begin to sustain itself. That’s about six to eight months away, but we are moving very swiftly in that direction.”
Mr Johnson further explained: “Let’s say our budget is $100 million and we bring in 100,000 visitors; then our cost is $10,000 a visitor. Your acquisition cost in the industry shouldn’t be much more than 15-20 per cent.
“In 2012 the acquisition cost was almost as much as the visitors were paying, it was like over 100 per cent. That’s just Freeport. We are moving now towards a viable situation that is around 30 per cent acquisition cost. It’s above average but you don’t ever want to go beyond 30 per cent. You want to aim for about 20 per cent and I think we are getting into that zone where it begins to make sense, where the industry is generating sufficient cash flow to sustain its own operations without having to ask for government subsidies.”
Mr Johnson said Grand Bahama’s high cost status should not be worn as a badge of honour. “That is something that we have to tackle; we can’t just accept it,” he added.
“The high energy and labour cost is a deterrent to the pace of growth we wish to see, and must be addressed sooner rather than later.
“Our airport and fuel costs in Grand Bahama are hurting our competitiveness because airfares are too high. We have to tackle it in order to grow our stopover arrivals. If we can trim those costs while upgrading our service levels, the customer will pay a premium for our service.”
Mr Johnson said the decision by the US to restore diplomatic relations with Cuba would present challenges but also opportunities.
To mitigate the impact on the cruise business, for instance, Mr Johnson said this nation should pursue long-term partnerships with the cruise suppliers now to ensure their ongoing and expanded commitment to the Bahamas going forward.
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