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WHAT MATTERS MOST: How Govt hurt Almond


Clyde Mascoll

WHAT MATTERS MOST: How Govt hurt Almond

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THE STATE OF ALMOND BEACH VILLAGE is indicative of how the international and local business environments have combined to be responsible for its demise.
To appreciate this reality, it is important to speak to the business model. Almond uses an all-inclusive model which means that the focus is on managing costs.
All businesses seek to maximize profits. This can be done in two basic ways –  maximize revenue or minimize cost. The all-inclusive model puts the emphasis on managing cost.
Of course, while the distinction is being made, it makes sense that the two approaches may be jointly pursued.
But to do so, the business must be able to set its own price.
In reality, price-fixing in the tourism sector is largely determined by those who control the overseas market.
For the most part, tour operators and travel agents exercise a lot of control over price-setting, especially at the lower end of the market.
Since revenue comprises both price and quantity and is indeed the product of the two, it means that if the price is given to the hotelier, then the focus is on quantity (numbers of visitors).
Ironically, the tour operators have control over price because they also control the numbers.
The hotelier’s influence over the price-setting is determined by the quality of the product he is offering to the market. This simple point is oftentimes not fully appreciated by those responsible for the product.
It is evident that if the quality of the product is allowed to fall, the bargaining strength of the local hotelier is compromised. Failure to maintain or, better still, upgrade the quality of the product is eventually a basis for reducing revenue both by way of lower price and reduced demand for a lesser quality product.
Certainly, Almond was aware of declining revenue. So what was the response of the entity on the cost side? Almond, like all other private sector enterprises, was asked to maintain employment levels and it responded to the call of then Prime Minister David Thompson, who played a critical role in the sale of the property to Barbados Shipping & Trading.
Furthermore, if the employment numbers are correct, then Almond Beach appeared adequately staffed to deliver quality service, given an employee-room ratio of more than two. This major cost was not reduced in light of its corporate responsibility.
For the Minister of Tourism to say that Government does not intend to put resources into Almond, likening it to GEMS, was a major piece of shortsightedness. But recall that the chief executive officer of Almond Resorts Inc., Ralph Taylor, was removed as president of the Barbados Tourism Authority.
Business costs
 
The harsh comments, including those of Minister Denis Kellman from the north, were made without reference to the Government’s poor fiscal policy and its effects on energy cost, utility bills and food and beverages prices, to name a few.
Over the last four years, Government policies have contributed significantly to rising business costs which must carry their share of the blame in any fair assessment of Almond’s demise.
This is more so when it is acknowledged that several other local hotel properties are experiencing the dramatic rise in the cost of business and are showing signs of wear and tear. Time will tell!
Government’s policy to increase the value added tax rate cannot escape blame. Government’s policy on energy pricing cannot escape blame. Government’s policy on increasing taxation and its unimaginative economic management in general cannot escape blame.
Therefore, the demise of Almond Beach must be seen in the context of a domestic business environment which cried for help in the aftermath of 2008, only to find that the Government itself needed the most help because of its fiscal ignorance.
It is clear, even among the most politically prejudiced of us, that it is not only the challenging international environment of the last four years, but also the absolute failure of the Government to be in a position to adequately assist businesses and households that has the country in its current desperate economic condition.         
Almond was profitable prior to 2008. Almond did not lay off workers in spite of declining revenue. Almond therefore accumulated debt. The quality of the product was obviously affected by lack of finance to refurbish and upgrade the plant, though it kept staff to deliver quality services to the guests.
Almond died at the altar!
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy.

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