PHiIIPSBURG-Reacting to the Economic Report 1999-2000 issued by the Department of Economic Policy & Research (DEPR) last week, the Sint Maarten Hospitality and Trade Association said conclusions that the island was experiencing growth in 2000 compared to 1999 are not backed by the available data. Nor are they relevant for today's situation. Data relating to the first six month of this year show no reason to speak of growth.
Careful not to be accused of supporting gloom and doom thinking, the SHTA states that it insists on accurate and relevant analysis. Its reaction appears to be more in tune with the general concern about the economy voiced by business leaders on the island than the relatively optimistic analysis of DEPR.
Incorrect
The SHTA notes that DEPR's report mentions "regional developments in the industry have contracted by a whopping 18% in the Caribbean, whereas, stay over in St. Maarten has merely contracted by a modest 2.8%, again reflecting the resilience and demand for our industry."
Data obtained by SHTA from the Caribbean Tourism Statistical Report 1999-2000 prepared by the Caribbean Tourism Organization (CTO), however, lists an increase for regional land-based or stay-over tourism in 2000 versus 1999 of just over 4%, which is slightly over the average regional growth rate recorded between 1994-1999 of 3.8%.
St. Maarten, with a decline of 2.8% between 1999 and 2000 in terms of stay-over tourists on average, is outperformed by the rest of the region by 7%. Moreover, total air arrivals for St. Maarten between 1994 (647,721) and 1999 (522,887) show a 19.3% decrease, further compounded by the 2.8% decrease in 2000. The combined difference in air arrivals between the positive regional growth and the decline in St. Maarten's arrivals over the past 5 years actually makes up an astounding 40% accumulated lower performance for St. Maarten!
DEPR's conclusion that St. Maarten's land-based tourism is performing relatively better than the rest of the Caribbean is therefore simply incorrect, the SHTA states.
Profitability down
Hotel occupancies, provided by SHTA, are one of the indicators used in DEPR's report. Year 2000 occupancies (67.1%) are 7.8 points higher than 1999 occupancies (59.3%). These occupancies, however, are based on the performance of properties that were open for business.
In 2000 several hotel properties, including Maho Beach Resort and Caravanserai Beach Resort were not open for business at all. Properties open for business in 2000 to a large extent consisted of timeshare operations, which traditionally have much higher occupancies than hotels.
Over the first 6 months of 2001 timeshare for example averaged 33% higher, or 73.7% occupancy versus 40.7% for hotels. The present very low average occupancy in hotels can be attributed to a general lack of hotel room inventory on St. Maarten, strong regional and international competition, image related problems for the destination, as well as a general lack of marketing efforts.
A better indicator to compare industry performance periodically would be the number of room nights used, which per SHTA's internal report in 2000 is about 12.5% lower (548,507) compared to 1999 (626,666). The 16.8% drop in room tax revenue for 2000 (NAf. 20,842,600) compared to room tax revenue in 1999 (NAf. 32,25,760) is consistent with the decline in room nights. Its shows moreover that in addition to less nights, the average daily rate (ADR) achieved was lower, as the 16.8% drop in tax revenue was larger than the 12.5% drop in room nights.
With operational cost increasing or at best remaining flat, this shows that the profitability of the sector has deteriorated in 2000, which is greatly disconcerting to both present tourism operators and potential investors.
Tax income
Profitability is not just affected in the tourism sector, but throughout the general economy, it appears. Figures available to SHTA show a decline in profit tax income for St. Maarten from NAf. 33,048,000 in 1999 to NAf. 20,912,000 in 2000, a drop of 17.2%. Both 1998 and 1999 similarly have seen drops in collected profit tax of 19% and 28.4%, respectively, resulting in a combined drop in profit tax collected of over 50% in three (3) years!
The SHTA notes that DEPR explains the reduced government income in 2000 versus 1999 as caused by problems with assessments and/or collection of taxes and fees. But the SHTA observes that these problems are structural in nature, which can be asserted from the fact that only last year Government declared to have NAf. 500 million still outstanding in not collected taxes and fees. That's three (3) times the annual budget of the Island Government of St. Maarten!
The SHTA concludes that the assumption by DEPR that the 2000 performance of the government in terms of collection was relatively weaker than the 1999 performance as unsubstantiated.
Outdated data
DEPR calculated the Weighted Tourist Days for both 1999 and 2000 to adjust the economic impact of land-based versus cruise tourists. However, the SHTA points out, the used division between land-based visitation to the French and Dutch sides was presented in a 1997 CBS Tourism Expenditure Survey, at which time the island's product composition was completely different than the 2000 room inventory composition.
By November 1999 Dutch St. Maarten hotel and timeshare inventory dropped by over 50% initially, due to the impact of hurricane Lenny. Some properties actually did not reopen until 2001, whereas the French side hotels recovered much faster. By April 2000 almost the entire French side inventory was once again available, whereas over 25% of the rooms on the Dutch side would remain closed throughout the year 2000.
In view of the relative increase of rooms in French St. Martin versus Dutch St. Maarten, the 1997 CBS ratio of 59% cannot be used to calculate weighted tourist days for Dutch St. Maarten. Using a still high 50% ratio would already translate in weighted tourist days in 2000 being 3.8% lower than in 1999, versus a 7.5% increase calculated by DEPR.
Pointed questions
The SHTA next notes that the DEPR's Economic Report 1999-2000 mentions a 7.4% increase in Turnover Tax (ToT) revenues as an indicator of economic growth.
Also that it mentions that It has "factored out ToT rate fluctuations to keep a relative level to compare economic developments."
SHTA has requested raw data to substantiate this "factoring out of fluctuations." Did DEPR take into account that the rate of the ToT changed from 2% to 3% in May of 2000, increasing the ToT rate technically by 50% for 8 months of the year 2000?
Did it take into account that the list of originally ToT-exempted basic necessities was changed considerably between 1999 and 2000, thereby increasing revenue at the expense of the consumer? Increasing tax revenue by taxing people on basic necessities can hardly be called a sign of a growing economy, though.
Did DEPR take into account that the fiscal unit exemption was abolished in 2000, increasing tax revenues for government at the expense of the consumer and St. Maarten's competitive position in the region?
Increased loans and bank deposits are also listed by DEPR as positive indicators that "there is a lot of confidence in the economy." But, asks the SHTA, could increased requests for mortgages possibly be an indication that residents are forced to refinance or mortgage their personal assets, possibly to support operational losses in their businesses?
Could damage to uninsured homes have spurred personal loan-requests for home repairs after November 1999? Could increased resident deposits listed by DEPR possibly be a result of reduced confidence in our economy, resulting in delayed and abandoned investments, postponed high-end purchases and increased savings?
New study promised
The SHTA suggests that to answer some of the questions raised additional studies may have to be conducted and announces that it will present its Economic Recovery Action Plan, listing some 50 recommendations to enhance St. Maarten's socio-economic climate and stimulate sustainable growth as requested by Government this week.
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