Presentation for the General Session: “Tourism Innovation and Enterprise: Private-Public Partnerships Implications”
Caribbean Tourism Organization’s State of the Industry Conference, St. Thomas, U.S. Virgin Islands
Greetings!
In order to frame this presentation….. I would like to put our discussion about Private-Public Partnerships (PPP) into context.
As I prepared for this talk, I asked myself, As a region, is the Caribbean confronted with threats or challenges?
Is there really any need for the Public and Private Sector to cooperate?
In my opinion, there are a number of potential challenges, for example…
Global Warming
Much of the Caribbean’s income producing assets are coastal properties and by this of course I am referring to the numerous resorts, activities, restaurants that are often ocean front properties. If global warming is a reality, as ocean levels rise, the region may see increased flooding accompanied by more frequent and severe hurricanes.
However, chances are, long before we ever encounter real structural issues, we will encounter financial issues. Imagine if the risk levels continue to rise, insurance will become prohibitively expensive or not available, making risk mitigation and securing financing for developments difficult or impossible.
Energy Prices
The Caribbean region is heavily dependent on fossil fuels, not only for power generation, but since the Caribbean is very dependent on imported goods, increases in fuel prices will translate into higher freight costs thereby impacting prices for all imports including food.
The Caribbean faces some of the highest utility costs in the world, due to dependence on fossil fuels, monopoly power generation plants, lack of investment and inefficiency.
Global Competition
World Tourism Organization projections are that the Caribbean’s total share of world tourism, currently 2.1%, is projected to fall to 1.7% by 2030.
Global competition for tourists is on the rise, forcing the Caribbean to address product and service issues if it wishes to remain competitive.
The last issue, is an issue that is not often discussed in our forums but in my opinion is probably one of the biggest threats to Caribbean tourism not only in terms of impact but chronologically as well.
The Caribbean is one of the most heavily indebted regions in the world. Average Debt to GDP ratios in the Caribbean hovers around 70%. St Kitts and Nevis, Jamaica, Barbados and more countries have debt to GDP ratios well over 100%, prompting comparisons to Greece.
Many Caribbean countries are spending more money servicing debt than on key social programs. Some countries are spending as much as 40 to 50% of their annual budgets servicing debt. As politicians are faced with choices between tourism promotion or social programs, it is understandable how they might chose to fund their social needs even though reductions in tourism promotion will result in a slowing economy with reducing tax revenues, thereby creating a vicious downward spiral. Equally detrimental, the knee jerk reaction is to increase taxes on tourist travel or expenditures, further eroding our tourism economy.
PPP solution
Interestingly, one of the key solutions to economic stability comes from development of a comprehensive growth strategy. The best way to improve government’s budget is to improve the economy. One of the most effective ways to improve the economy is a PPP approach to tourism promotion.
Clearly there are fundamental challenges to Caribbean Tourism….
And looking at the landscape, Governments, CHTA and CTO are all operating in environments where human and financial resources are limited. Everyone is looking to do more with less money.
So the reality is that there has never been more need for structured public private partnership with the goal to leverage limited resources and to look for as much synergy as possible.
So what do we mean by PPP?
In my opinion, there are 2 types of PPP
1. Cooperation between Public sector/ Private business. These tend to be focused on infrastructural projects like airports, harbors, bridges, roads, and utility plants.
The other…
2. Cooperation between Public sector / Private sector where private sector is represented by trade organizations like CHTA or National Hotel associations.
In both cases, there are many examples of successes and failures. The fact is that while there are many reasons to cooperate, there are also conflicting objectives as well, as is the case with almost all relationships, personal and business.
For example, in the public/ private business scenario, there are numerous cases of cronyism where lucrative contracts were handed out by government as political favors. In which case, objectives are more about negotiating personal benefits rather than the greater interests of the community.
But even without corruption, there are natural competing interests. Business wants as much profit as possible for as little risk as possible. Government wants as much value for money with as little capital investment as possible.
Successful PPP depends on a number of factors such as alignment of goals, clarity of objectives, clear deliverables, transparency and accountability.
Benefits of Cooperation
But from a tourism perspective, our focus is on the benefits of Public sector/ Private sector Partnership.
The benefits are many including:
Leveraging areas of expertise and experience.
Leveraging limited human and financial resources.
Possibility to coordinate and streamline policies and reduce red tape
Synchronized timelines.
Improved efficiency productivity, and transparency.
Streamlined and coordinated marketing efforts
Coordinated educational development
Crisis management
Again, in this structure, while there are clear win/win benefits to cooperation, there are also naturally occurring competing interests.
Public sector tends to be more concerned with National pride and identity, policies and political credits/responsibility. The Metrics for success are often measurements of employment, opportunities for citizens and tax revenues.
While for the Private sector, metrics for success tends to be more concerned with risk management, return on investment, and ease and cost of doing business.
Neither perspective is wrong…just different.
So while there are often good valid reasons for cooperation, the metrics and deliverables are often conflicting.
However, properly structured, the risks can be eliminated and the benefits maximized.
Properly structured PPP:
So what does a properly structured PPP, look like… Basic ingredients.
1. The most critical ingredient, simplest and probably the hardest…..Trust and understanding. Trust, dialogue, transparency and accountability are the foundation of any solid relationship.!
2. Clearly define objectives outlining the benefits for the people, government, politician and private sector.
Clearly defined vision, goals and scope
Transparent Contributions
Clear Expectations with metrics how to measure success or failure
Clear plan of approach/agenda with timelines
A disciplined approach is required. The road to hell is paved with good intentions.
So in closing..if PPP is so beneficial, why is it so hard to realize?
Ego, suspicion, fear, greed, selfishness, but probably the most likely reason … complacency …. We always did it this way. Change is scary. It isn’t easy to ask people to operate outside their comfort zone.
CHTA/CTO
I believe that CHTA and CTO must be a role model for the Caribbean….
CHTA/CTO need to set the right example for the Caribbean –
Caribbean Tourism Development Company (CTDC) is a step in the right direction but needs work.
Different industry conferences
Different investment conferences
Different Sustainable development programs
2 educational foundations
Caribbean Week and Taste of the Caribbean are 10 Days apart
There are initiatives that can only come from CHTA/CTO …. Regional visa
In the end, we must find a way to work together, and in my opinion there is no better structure than PPP. As we speak about major change, it will require vision, cooperation but most importantly, it will require the courage. Change is never easy, but the Caribbean people need us to be bold…
