The Tribune

• Bahamas ‘failing to convert proximity to affordability’

• The Cove chief says situation ‘very short-sighted’

• Tourism giving Eleuthera fuel rebates to Delta

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A senior tourism official yesterday said the Bahamas has failed to convert its US proximity into affordability with airline ticket taxes now exceeding the actual cost of a flight.

Kerry Fountain, the Bahamas Out Island Promotion Board’s executive director, questioned “what’s on the drawing board” to reduce the high access/airlift costs into this nation as he revealed that ticket taxes for his recent flight to Nassau from Fort Lauderdale were 13.4 percent higher than the actual ticket cost.

Taxes worth a combined $163.35 accounted for 53 percent of the total ticket price, and Mr Fountain told the Eleuthera Business Outlook conference: “I need to address this. I’ve heard it mentioned again yesterday on a sales call by some of the hotel partners, and that is the cost of getting to this island of Eleuthera. Some are paying $1,200 or whatever it is.

“The other day I was flying from Fort Lauderdale to Nassau. My ticket cost $144, but the taxes were $163.35. That’s more than the cost of the ticket. We always talk about, when we are writing a business plan for The Bahamas, about our proximity but what we have failed to do is translate or convert that proximity into affordability....

“The point of the matter is that because of the high cost of getting here the number one market for The Bahamas is Florida; Miami and Fort Lauderdale. You could jump on a Carnival cruise from Miami, Fort Lauderdale for $400. That’s almost equal to the cost of an airline ticket. Florida is our home court. We’ve given up that advantage. What are we doing? What is on the drawing board to reduce the high cost of ticket taxes to The Bahamas.”

Carlton Russell, the former senior Atlantis executive who is now The Cove’s managing director, said it was “very short-sighted” for The Bahamas to be at the mercy of high ticket taxes that raise costs to access the destination and potentially price some visitors out of the market.

“Sixty percent of that airline ticket is taxes,” he said. “What would be the outcome if we reduced that tax by 50 percent? What would that do for our destination?” Contrasting the impact from one dollar spent by a visitor to that taken in taxes, Mr Russell said: “The dollar that comes in circulates 11 times’ in the community before it goes back out.

“So does it make sense to get that dollar in taxes at the front end, which is one dollar, or that same dollar after it has circulated through the community 11 times? We need to look at tourism in a different state” of mind.

Dr Kenneth Romer, the Ministry of Tourism, Investments and Aviation’s deputy director-general, and acting director of aviation, told a panel discussion at the same conference that officials are “constantly advocating” for commercial airlines to reduce ticket prices and travel costs to The Bahamas.

However, he also pointed out that ticket prices are set by market forces of supply and demand, and The Bahamas remains a high-end destination that wealthy travellers are prepared to pay a premium to visit. “Airlines are businesses, and businesses are always driven by profit. Businesses are driven by demand,” Dr Romer replied.

“The Bahamas is, first of all, an expensive destination. You cannot compare The Bahamas to Mexico and others. Those persons who come to The Bahamas generally have the means to pay for the tickets. Airlines view us as a high-end, luxury destination.

“We are constantly advocating for our airlines to reduce the cost of travel. You’re going to have a certain amount of seats that are going to be affordable, but the majority of our seats are going to attract higher rates because we are almost a luxury, high-end destination. Whether or not you buy a ticket somebody’s going to buy it because demand exists for the destination. They’re going to drive demand to drive their profits.”

Mr Romer said that, notwithstanding high ticket prices, airlines were still arriving in Nassau “full” and added: “If they’re coming here (Eleuthera) or Nassau they have to book two weeks in advance.” However, he also disclosed the “rebate” or fuel subsidy that the Ministry of Tourism is providing to Delta Airlines to incentivise it to fly into North Eleuthera from its Atlanta hub.

This rebate is the equivalent of the difference between North Eleuthera’s fuel prices and those in Nassau, with the carrier receiving payment every quarter. “You might not know this, but we pay the difference for the fuel between the price of what is being offered in this island with the price of fuel being offered in Nassau. We incentivise for Delta to come to North Eleuthera,” Dr Romer revealed.

“This thing is too expensive to come. We offset the price of fuel in Nassau with what is being offered coming into Eleuthera. Tourism provides support to give them a rebate, give them back a rebate every quarter. We have to give a rebate to Delta alone just to continue bringing passengers into Eleuthera.”

Mr Fountain, giving a further insight into how The Bahamas subsidises airlift into the Family Islands, explained how the Bahamas Out Island Promotion Board had used levies from member hotels to finance a minimum revenue guarantee deal that enticed Delta to provide service to Exuma.

Revealing that this had cost $6m-$7m over eight years, he added that the Promotion Board was currently unable to offer such inducements for airlift to Eleuthera because there insufficient members on the island to finance it. “If I don’t have any members I cannot pay for any minimum revenue guarantee. That’s the number one benefit: Getting more people here, and getting them here more efficiently and affordably....

“We cannot just solely rely on government. Everybody has got to have skin in the game, and skin in the game comes with ka-ching.”