'Burning cash'

'Burning cash'

Hoteliers 'burning cash' as COVID-19 wears them down; debt to local banks skyrockets to in excess of $56 billion

BY DURRANT PATE
Observer Business Writer

Wednesday, September 23, 2020

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The Jamaica Hotel and Tourist Association (JHTA) is raising the alarm bells that hotels are burning cash to stay open, as the COVID-19 pandemic is wearing them down.

The situation is compounded by the fact that the debt by hotels to local banks has skyrocketed to a whopping $56 billion as at March this year. Immediate JHTA past president, Omar Robinson, admitted that hoteliers have been burning cash by keeping their properties open with occupancy levels as low as 10 per cent.

Speaking at the association's annual general meeting (AGM) last Friday, when he demitted the office of president after serving for four years, Robinson conceded, “the burn rate of cash during this period (COVID-19) is immense and underscores the appeal we have been making for the urgent help for working capital to support the sector.”

According to Robinson, “We (hoteliers) are very grateful to the Government for the reopening of the country since June 15, 2020, which has allowed some of our JHTA members to resume operations but make no mistake, hotels reopening and running at 10-30 per cent of occupancy cannot be interpreted as a return of these businesses to profitability.”

TOURISM BORE BRUNT OF COVID-19 ECONOMIC FALLOUT

While not discounting the challenges being faced by other sectors of the Jamaican economy, Robinson made the point that tourism, unlike manufacturing, is an intangible product. He argued that “tourism cannot store its inventory on the shelves to sell at a later date and revenues lost today can never be recouped tomorrow. So right away, this puts tourism on a different footing to other sectors of the economy.”

He highlighted that no other sector of the Jamaican economy experienced a complete and total lockdown of its productive capacity with many other sectors dependent on the hotel sector good health and growth for their survival.

In his last major assignment as JHTA president, Robinson told the AGM that a major consequence of the closure of the industry at the end of March was the non-payment of accounts receivables by major tour operators and other tourism operators, who declared bankruptcy or a force majeure, as in the case of one of the world's largest tour operator.

“This was compounded by the significant sums, which were refunded due to cancellations for future stays by prospective visitors, who prepaid for their hotels and on-island experiences, Robinson stated adding that “this resulted in a major cash flow problem for the affected tourism businesses”.

The JHTA past president, who is the general manager of Round Hill Hotel in Montego Bay, St James, added that the financial blow taken by the tourism industry and those sectors that supply goods and services to the industry has been of significant magnitude.

HOTELIERS' PLEA FOR HELP FROM BANKERS, JPS

Given the negative blows received by hoteliers from the global pandemic, hoteliers have engaged banks and lending institutions to obtain moratoria on existing loans with Robinson arguing that “special commendation must be given to these financial institutions for extending moratoria to the industry”.

In addition, meetings were held with the Jamaica Public Service in an effort to get the demand charges on electricity bills removed or reduced during the closure. However, to date there has not been agreement to this request.

In spite of this, the JHTA continues to explore workable private and public sector options for its membership including a potential capital market solution, further moratoria on mortgage and loan payments from all lending institutions and low interest loans.

NEW JHTA EXECUTIVE

Clifton Reader, managing director of Moon Palace Jamaica, was elected unopposed as the new JHTA president at the AGM. The other members of the new executive, which will serve from 2020/2021, are Robin Russell of Deja Hotel, Montego Bay, as first vice-president and Vana Taylor of Sunflower Villas, Ocho Rios, as second vice-president.

The top tier executive list is completed by Christopher Jarrett of Altamont Court Hotels, Kingston as third vice-president and Frank Sondern, RIU Hotels, as fourth vice-president.

Reader was recognised as “Hotelier of the Year” in 2011 and is a career hotelier spanning over three decades at various local and international hotels including stints as general manager of Sunset Jamaica Grande Resort and Spa, Beaches Negril Resort Spa and Beaches Sandy Bay.


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