FROM DAVID L. JOHNSON
DEPUTY DIRECTOR GENERAL
BAHAMAS MINISTRY OF TOURISM
GRAND BAHAMA BUSINESS OUTLOOK
WESTIN AT OUR LUCAYA BEACH & GOLF RESORT
MARCH 07, 2006
Good morning Ladies and Gentlemen,
I have been asked to provide a forecast or outlook for the tourism sector on
Grand Bahama Island going forward and especially over the next 12 months.
Before I do so, I believe it is very important that all stakeholders in
tourism obtain a true appreciation of the challenges we face in this
destination so as to also appreciate what we must do in order to ignite real
growth and return to a state of sustainability that we sorely need.
Grand Bahama Island enjoyed its best six consecutive months in performance
in over 12 years in the first half of 2004 before being ravished by two
consecutive hurricanes that resulted in the loss of one third of the
island’s hotel room capacity, which remains today. Last fall, hurricane
Wilma caused minimal disruptions in the tourism sector, except for West End
but inflicted more damages in the residential coastal areas on the western
sector than the two previous hurricanes.
Grand Bahama finished 2005 with overall tourist arrivals being down by 11.2%
with air arrivals down some 20% and sea arrivals down 5.8 %. Grand Bahama
rebounded in the last quarter of 2005 with air arrivals showing a 64%
increase over same period a year ago and sea posting a 107% increase
compared to 2004.
What is significant from a financial perspective is to note that even with
the loss of 1/3 rd in inventory for the second half of the year. Grand
Bahama generated hotel revenues in 2005 of $46. 8 million compared to $43.4
million in 2004 registering a 7.8 % increase with average room rates
increasing by 21.6 % from $90.60 to $110.22.
The foregoing goes to show that if we measure tourism success by hotel
financial performance, we will miss altogether what it does for our economy.
We begin to forget that far more persons not employed directly in the hotel
sector are impacted when tourism counts fall than those directly employed at
our resorts. My friends remember the loss of a single stopover visitor is a
potential loss of some $800 in the economy. So when we shut down 1000 rooms
and by extension lose the ability to attract almost 1/3rd more stopover
visitors, we are talking about a loss of some $120 million in income in this
economy and that is what we are experiencing today.
I wanted to share the foregoing bit of brief recent historical performance
measurements and comparisons so as to set an accurate backdrop from which we
can assess where we are and determine where we need to go. I will now share
some of my thoughts on the path forward to a true and full recovery that can
and would set this island on a path where it leads the region in growth over
the next 20 years.
Ladies and gentlemen, we need to recognize that we are operating with
several handicaps, one of which is our lack of critical mass and inability
to achieve the much needed economies of scale to compete effectively. I
don’t believe we should sit back and simply continue to rationalize our lack
of achievement by articulating what is “ailing us” but take swift measures
to fix it.
I must begin by telling you that Grand Bahama Island has one of the highest
airport turn around costs within our region and when compared to Nassau, our
cost is some $34 per pax more. What this means is that on a 50 seat aircraft
with average loads of 75%, GBI cost $1275 more to turn around the Dash
8-500. On a jet with 125 seat capacity with a 75% load factor, GBI costs
$3,187 more per turn or well over $1 million per year if they operated a
Now, so that you can appreciate how cost triggers diversion of traffic, I
would share the performance of two nearby airports one with higher costs and
one with lower costs, namely Miami and Ft. Lauderdale, sharing just one
months traffic to demonstrate this in action:
In July 2005 Miami’s air traffic grew only by 2 % from 1, 389, 298 pax to
1,423,313 pax. Ft. Lauderdale grew by almost 200% for the same month from
319,849 to 953,120. A significant number of the Ft. Lauderdale passengers
are persons who live in Dade County but choose to save money by using Ft.
Lauderdale for cheaper flights on the Southwests, Jetblues, Spirits and Air
Trans all of who avoid flying into high costs airports. If Miami did not
have the European and South American long haul network they would be out of
business today competing with Ft. Lauderdale for domestic flights. They
would be forced to drop their costs to at least Ft. Lauderdale’s levels to
regain their share of the pie.
In the same way, unless Grand Bahama begins to offer competitive airport
turn around costs, we will be hard pressed to stay in business, much less
pursue any growth strategies. The customer really don’t care to know and
will not research the reason for our high costs; it's none of their
business. They will simply choose other more attractive options as they view
them. Jetblue and Spirit refuse to operate flights to Miami for reasons
related to cost and in the same way will not consider serving GBI for the
same reason, in addition to several other considerations.
I must also share with you that we have in Grand Bahama, for far too long,
made poor decisions or allowed the wrong decisions to prevail regarding who
develops what in our tourism sector. It is time we stop allowing for or
ushering in investors or developers whose agenda is not a wining one for the
destination if we were to professionally vet them in advance. We must
realize that our business is a most competitive one. We must seek out those
with winning track records and not continue to become the recipient of
schemes that could never work. The Royal Oasis is but one example and we
have others in our midst today that require restructuring if they are to see
profits anytime soon.
Ladies and Gentlemen, we are in an era where fuel cost has reached a level
no one could have imagined. In Grand Bahama we have jet fuel today at some
$2.30 cents per gal which is almost three  time what it was some three
years ago. Air Tran’s costs have increased on Atlanta to Grand Bahama alone
by over $2 ˝ million. Air Tran and US Airways, our two most important jet
carriers today are faced with a combined increase in their flight costs to
GBI of some $10 million driven largely by fuel costs and compounded by our
much higher turn around charges that I share earlier.
Our best weapon is to seek out ways to lower our costs in the areas we can
even if it can be linked to volume. Today there is no incentive in GBI
International for an airline to add capacity in the hopes of lowering unit
costs, which is often the incentive in most locations. We must find ways to
compete…others are doing this.
I must state that this is not simply the airport operator, or government, or
the Port authority. Our airport costs are driven by a combination of well
above average cost driven by the airport facility, the handlers and yes,
high customs and immigration overtime charges that do not exist elsewhere in
our region because we treat flights before 9 AM and after 5 PM, as well as
Sat and Sundays as being out of the normal work week.
Ladies and gentlemen, our taxes on tickets to the USA from GBI is now $104
per person when the airfare is often no more than $100 and sometimes less.
Five years ago it was some $48 or so. It is $69 to Nassau. We must fix this
to get where we wish to go with successfully redeveloping our tourism
We are in an era when the appetite for real estate investment in The Bahamas
is at an all time high. The baby boomers today are driving the housing
market in warm weather destinations worldwide and our location makes us a
prime choice. The current and future tourism is and will not be the
traditional hotel chasing transient guests but rather residences built as
condominiums or condo hotels, time share resorts, second home single family
residences with marina, golf, spas and other resort type amenities.
Grand Bahama is well positioned to embrace this trend and is well on it’s
way with projects already announced and I predict will lead the way in
growth in this area in The Bahamas. We must, though, not view these
developments as opportunities for foreign investors only but rather begin to
participate in some of these developments ourselves as owners, since what it
takes in most cases is well within our reach. This is very important since
as a country we should not continue to assign the future of our number one
industry to non nationals whom we feel should bear the risk, then not feel
too happy when they reap the reward, while we stand on the side lines. I
will be spending a lot of time in my role in tourism promoting and
facilitating much more Bahamian ownership in our tourism sector, so you will
hear much more about this from me as we go forward.
Cruise Tourism has been consistently ˝ of Grand Bahama’s tourism arrivals
over the past 15 years and this has occurred with a “far less than ideal”
cruise port. We are encouraging the development of a state of the art new
passenger cruise facility for Grand Bahama that would, after its completion,
result in cruise arrivals swiftly reaching the $1.5 million mark from the
existing 400,000 we are achieving today. A new cruise port will inject
approximately $100 million per annum in tourist expenditures in this
Critical to the rejuvenation of our tourism sector in the short term is the
redevelopment of what we know today as The Royal Oasis Resort & Casino as
well as the adjacent Internal Bazaar. We have not been closer than we are
today and I know that the players we are engaging to take this on can
deliver. They have the market leverage and credibility and are financially
prepared to truly “redevelop” and reposition and not simply come with paint
and wall paper. We need much more than simply having the 1000 rooms back in
play, we need a new and vibrant spirit that a world class operator will
bring to this section of the island.
In tandem with the redevelopment of The Royal Oasis and International Bazaar
will be a focused effort to bring back night life, especially native
entertainment to Grand Bahama’s main stage. This is the mandate of my
Ministry of Tourism and we have already mobilized the team and are putting
in place the resources to cause this to happen.
Likewise with the further expansion and redevelopment of our golf facilities
we will use golf as a driver of business while focusing on other forms of
sports tourism, which Grand Bahama will become the natural home for in The
Islands of The Bahamas.
In closing and in summary, my outlook for Grand Bahama suggests the
We will get our arms around the airlift challenges with a collective effort
realizing that without it we will have no industry.
We will see a complete recovery in tourism arrivals and spend by winter
A new cruise port will break ground in 2006 and drive cruise tourism to
levels comparable to that of Nassau within four years.
We will embark on a period of new construction and rapid growth commencing
by late summer this year that will continue for the next 10 years.
We will reach the 4000 room capacity by winter t2007 and see it doubled by
The three geographical areas of Grand Bahama that is, the West End, a
reinvented Freeport/Lucaya and the East End will come into their own with
tourism appeal that is unique but complementary to each other.
Grand Bahama will attract a growing share of Bahamians who will move to this
island because of the superior economic opportunities and overall quality of
life it can offer. This will lead to the accomplishment of our goal of
creating greater economies and efficiencies and assist in making Grand
Bahama the world class destination it can be.