Hotels warn GCT could stall tourism recovery

WESTERN BUREAU:

Jamaica’s tourism industry is still recovering from the worst series of shocks in its history, leaving the sector ill-prepared to absorb a proposed increase in the general consumption tax (GCT), Jamaica Hotel and Tourist Association (JHTA) President O’Brian Heron has argued.

Heron said many hotels remain under pressure from rising operating costs and growing competition from regional destinations as the industry continues its recovery.

Heron’s comments came after tourism industry representatives met with Finance Minister Fayval Williams and officials from the Ministry of Tourism last Thursday to discuss the Government’s proposal to increase the GCT applicable to the sector from 10 per cent to 15 per cent.

Both sides described the discussions as constructive and agreed to continue engaging through a collaborative process aimed at identifying solutions that support the Government’s fiscal objectives, while preserving the industry’s competitiveness.

Finance Minister Fayval Williams said she remained committed to maintaining dialogue with the industry.

“As we balance the range of considerations involved in meeting our fiscal responsibilities, I am committed to keeping the channels of dialogue with the industry fully open,” Williams said.

Asked why the JHTA remained opposed to the proposal despite the positive meeting, Heron said the timing of the proposed tax increase could not be worse for an industry still rebuilding from successive crises.

“The tourism industry has endured a succession of significant economic and operational shocks over the past several years,” Heron told The Gleaner. “The sector was first impacted by the COVID-19 pandemic, followed by Hurricane Beryl and, more recently, Hurricane Melissa. While recovery efforts have been substantial, a number of properties continue to navigate complex insurance claims and face the prospect of significantly higher insurance premiums once those claims are settled.”

Economic uncertainty

He said the challenges have been compounded by global economic uncertainty affecting travel demand; rising labour, utility and supply costs; and increasing competitive pressures from other Caribbean destinations, leaving tourism businesses under considerable strain as they seek to rebuild, reinvest and maintain Jamaica’s competitiveness.

The Gleaner has also learnt from tourism stakeholders that occupancy levels remain subdued, averaging approximately 27 per cent at smaller hotels and 44 per cent at larger properties. Against that backdrop, hotel operators argue that absorbing additional taxation at this stage would further erode already-thin margins.

Industry sources also indicated that roughly 5,648 hotel rooms, representing about 28 per cent of room stock affected by Hurricane Melissa, have yet to return to service, while about 14 hotels remain closed as reconstruction continues.

One western Jamaica hotelier, who requested not to be identified because of the ongoing discussions with the Government, said room rates for many overseas markets had been negotiated years in advance.

“You can’t simply go back to a tour operator in Europe or North America and say the tax has changed, so you now have to pay more. Those contracts are signed, the rates are fixed and, in many cases, deposits have already been collected.”

Another hotel executive pointed to the destination wedding market, noting that couples often reserve venues one to three years before their wedding date.

“Those packages were priced and contracted long ago. If the tax changes now, the hotel has to absorb that additional cost because the client has already signed a contract.”

janet.silvera@gleanerjm.com