Friday, June 22, 2007

If I were a Caribbean Tourism or Development Minister

Last week, in Washington, during the Conference on the Caribbean, “A 20/20 Vision” organized by Caricom, there was one session in which I felt that the possible effects of climate change for the Islands were hair-raisingly described in terms of a Titanic’s iceberg, and which would force the region to make the hard choices of whether investing in lifeboats (adaptation) or in let’s-have-fun-while-it-lasts farewell parties. To make the environmental challenge even more daunting most of the region has also to battle with scarcity of energy

Many years ago, in the Caribbean, I saw a bottle that though it contained a liquid of a quite dubious quality, with unashamed pride blasted out on the label a “Guaranteed 100% Artificial”, and ever since I have considered the aggressive framing of something that could be negative in overly positive terms as a marketing masterpiece; and I therefore immediately had visions of concepts such as a “Guaranteed 100% car free island”. Careful though, there are very clear and present dangers in having authorities fall into the temptation of imposing or overly supporting a vision.

Since the prices of environmental and energy limitations are in the short term most certainly below their long term cost, what the Caribbean needs is a framework that emits clearer and more sustainable signals to the market. In this respect, and as a professional experienced in strategic studies, such as of the tourism sector, I summarize below what I jolted down on a paper during the conference about what I would do if I were a Caribbean Tourist Minister

1. Given that there is an environmental (and energy) limit of how many rooms any island can sustain, I would at any cost avoid the temptations of building rooms just for building, and instead assure a system that maximizes the benefit per room obtained for the whole island. There are many ways of measuring island benefits per room but the clearest approximation must be the salaries that a room generates for the local people employed in the tourism sector.

2. To achieve the previous there is a need to impose a strict limit on the number of hotel rooms allowed on each island, and a mechanism that guarantees that those rooms that do not meet a specified and over time increasing island benefit target are closed down through legal expropriation procedure that guarantees of course the payment of reasonable indemnities.

3. Projects for the new rooms to substitute for those closed should be submitted for approval to a Committee with an ample societal representation and where the individual votes of its members are made public. The selection criteria for the approval is how well a project is able to demonstrate that it will be able to meet the current minimum level of island benefit, and thereafter how much it could help the rest of the tourism sector. All the approved projects would count with a minimum period before their results are competitively measured, for instance construction plus three years.

4. The owners of the physical installations are of course the prime beneficiaries of the investment returns but since the objective is to maximize island benefit per room, the Ministry also needs to support the efforts of the local tourism promoters in developing special market niches, by for instance encouraging and supervising a system of revenue sharing.

5. Given the room scarcity concept imposed, the marketing efforts, instead of a wide and general should be much more focused so as to obtain the best possible result, for each week of the year. Modern technology allows for this kind of micro-niche marketing and the government should support it. For instance selling a hotel to just one city in England during a specific month of the year, instead to the whole England all of the year, could help to create that added exclusivity value that maximizes the island benefit per room.

Friends, while trying to make our lives more liveable, let us also try to make them more sustainable… in fact that is also “Guaranteed, 100% fun”.

Thursday, June 1, 2006

A niche in crookedness?

(A letter not published by Financial Times)

Sir, in your series about reforming Europe you refer to Pisa’s medieval tower as a “spectacular example of a grand architectural project gone awry: beautiful, still in existence, but wrong nonetheless,” and you got it all wrong. It is just because the tower is leaning that it has turned into one of the most outstanding commercial successes. What would a straight tower have meant to Pisa?

I wish to make this point since when trying to pursue an “antidote to decline” in today’s difficult environment, trying to straighten out Italy in too many aspects might actually break it. There might very well be interesting little niches in crookedness to pursue, and, besides, without some of it, the world would be an unbearably boring place.

Extracted from Voice and Noise, June 2006

Dead and Useful

A friend, upon hearing that I was going to Samoa, reminded me that I could not miss the opportunity of visiting Robert Louis Stevenson’s grave. “Of course I won’t,” I said, but it got me thinking.

Would my friend have suggested seeing RLS’ grave, were he buried in London? Of course not! The fact that he is buried on an island without an excessive abundance of so-called big tourist sights presents a win-win situation in terms of development strategies. For instance, if Mick and Keith, on account of their Voodoo LP, were to be buried in Haiti, they still might provide a much-needed and useful boost to the island.

But that’s not all. We all know that “location, location, location” is the mantra for any real-estate affair, and this burial site alternative has the potential to create its own location value, since many Mick and Keith fans could find merit in having their own graves located next to them. As most of the gravesites for these graveyards could be negotiated on a pre-burial basis, and as the state of the clientele permits overcrowding the venues with little added risk, the business opportunities are immense. This goes not only for the initial ticket offering (nothing to do with offerings) but also for the secondary market where scalpers (nothing to do with scalping) should be able to enjoy a strong and renewable support level, provided mainly by visiting family members.

The constraints are few, and the potential huge. You need not locate Mick and Keith in the same spot—you could rotate them from graveyard to graveyard, giving a fresh meaning to a Farewell Tour. Flexibility in product design could also allow marketing the graveyard as timeshare units, providing the possibility for an exchange of a week or two, perhaps even with Eleanor Rigby’s Resort-yard.

But, of course, it’s not only about rock and roll. Just think of all the very powerful and attractive burial arrangements you could achieve by mixing yesterday’s and tomorrow’s lovers, friends, or foes. Personally I find the foe niche especially interesting, since it would give a much more profound and proactive significance to the whole concept of a peaceful rest.

P.S. I finally went to visit RLS’ grave in Samoa and although I never made it up to the mountaintop, I must confess that it was much more than a grave. His former residence houses a splendid museum where, guided by a classy and knowledgeable local girl, we were shown interesting glimpses of the five final years of this famous Scottish author. I submit that this little detail does not invalidate the general dead-and-useful proposal.

Extracted from Voice and Noise, June 2006

Thursday, April 10, 2003

The Contest!

My apologies to the Florentines, but their beautiful city is like the Magic Kingdom of the Renaissance. The inexhaustible flow of tourists, hotels, prices, and lines for attractions, fast or slow meals, and souvenirs, all makes one question, between Medici and Disney, just who copied the model of whom. In my opinion, not only are the gelatos of Florence richer, but also, with the possible exception of Goofy, Michelangelo’s David and the frescos of Fra Angélico are far superior to Mickey, Pluto, and the rest.

What an inheritance the Medicis left to their city! The Florentine economy will always be easy to manage, since the only thing that their Paperon de Paperoni (Scrooge McDuck) has to do is fix admissions prices. The one little cloud on the horizon could be the quantity of English, Venezuelan, German, and other immigrants who try to take advantage of the infrastructure. What would Machiavelli have thought about entering the European Union?

We know that despite all its possibilities, Venezuela, in a local saying, still has not managed to connect the foot to the ball when it comes to developing its tourism industry. This will never be resolved by naming ministers who spend their time conducting publicity campaigns, or visiting Orlando and Florence. We are not proposing that other Medicis substitute for those who govern us—we can discuss this on another day. But in the meantime, we could emulate the experts.

In Florence 500 years ago, the contest system was used to assure that the best artistic proposals were utilized to adorn the city. So let’s organize a grand contest.

It will be a grand contest to choose a grand team and a grand plan for the strategic development and management of the tourism sector for the next 30 years, with an estimate of costs and results.

A qualified panel of judges should choose the best three proposals, and the proposals should be publicly debated on television. The losers will receive an important prize, and the winners will be commissioned to execute their proposal during thirty years, with a significant fixed, indexed and guaranteed annual budget.

Since televised public contests enjoy high ratings, this contest could also be a way to build pontes novos, new bridges, in our divided society.

The Santa María del Fiore Cathedral took more than 100 years to construct, and for a long time everyone thought its dome would be impossible to build. And so, friends, let’s not lose the hope of finding a local genius like Brunelleschi for our Helicoide (a local 45-year-old monstrous white elephant).

From El Universal, Caracas, April 10, 2003

Friday, October 29, 1999

Vanity tourism

I received an e-mail saying: “Take this one! Attached is one article published by ABCNews.com which states that without a doubt, Venezuelans are by a long shot the vainest people in the world.” The index reveals that 65% of Venezuelan women and 47% of Venezuelan men say that they “think about what they look like all the time.” In Germany, for contrast, virtually no one confesses to this habit.

From the tone of the e-mail, I suppose that the sender considered the high ranking achieved by Venezuela in this index as being unfavorable, and I also suppose that he would like me to share some degree of guilt. Well, I DON’T! Intuitively, I am pleased to be part of a country in which my compatriots are worried about their appearance instead of rubbing shoulders with those ranked among those who “never think about how they look.” The fact that our society holds dear to the heart a feeling of vanity over and above levels in other countries certainly differentiates us from the rest and perhaps we should analyze this fact within the context of comparative advantages.

The dedication of persons like Osmel Sousa to the Miss Venezuela beauty contest has elevated our country to the apex of world perception of the beauty of Venezuelan women. By using the word “perception,” I do not intend to question the objective beauty of our women (God forbid, I have four of them at home!). I wish to make a point of the importance of the general perception per se. This, by the way, renders even the less pretty Venezuelans beautiful.

Any country culturally geared toward taking care of physical appearance for centuries, that has managed to develop methods and formulas that have been time-tested and proven to the world by live TV transmissions of Miss World, Miss Universe, and similar mega events, has in its hands a tool to attract tourism that other countries would give one arm and half the other to have.

And so I promptly pushed the “reply” icon on my computer and sent off the following message:
“Thanks for having sent me the Vanity Index. I think there must be certain mistakes in the Index since I believe that the figures for Venezuela are too low. In Venezuela, I would say that 100% of the population worries about how they look.”

“While we talk about appearances, you should see the results we have achieved with a treatment supervised by the stylist school of Caracas which includes massages in the turbulent waters of the Caroní river and scrubbing with powerful and mystic Orinoco algae, while listening to the sensual rhythm of the beating of the herons’ wings and drinking a skin reconstituent malt-based beverage.

And all this under the indiscrete tropical moon, for only US $1,680 per day!

Extracted from “Vanity and the nation’s economy” published in The Daily Journal, Caracas, October 29, 1999

Friday, May 28, 1999

Margarita as the El Dorado of golden Years of tourism

In tourism, as in so many other activities, the correct identification of a market segment and the true specialization in attending to this market is of utmost importance. One prime example of this is Playa El Yaque in Margarita. With the help of Mother Nature, this site was identified as a prime spot to develop one particular market, windsurfing. While the rest of the island’s generic tourism sector, which only with a few exceptions lacks any character at all, is suffering through a severe recession, entrepreneurs and hotel operators in Playa El Yaque have found the going much smoother.

I am convinced that one of the principle challenges of our society today is that of creating new and productive jobs for our younger generations, by choosing the right productive sector and designing strategies that will allow us to develop and take advantage of our competitive advantages.

For Margarita, the industry of rendering services for the elderly presents an interesting option. Whether in tourism, recreation or general care, those living through their "golden years" demand so many services that they represent a real El Dorado, in terms of job creation.

What can Margarita do to explore and capitalize on this opportunity in the name of Venezuela? A lot, I think. Margarita has the people, has good communications and has the perfect natural setting, with calm beaches, absence of hurricanes and a minimum of 280 days of sun per year. Additionally it has the Centro Medico Nueva Esparta (CMNE) and that in my opinion is the ideal place to use as a flagship for the promotion of this new sector.

The CMNE is a hospital with modern and impressive installations located on a hill in La Asuncion, near the Castillo of Santa Rosa. The property currently belongs to Fogade who must soon define what the infrastructure will be used for and who will ultimately own it.

Should CMNE with the help of specialized firms and universities, both foreign and local, be able to truly specialize in the care of the elderly, including medical services, equipment, development of post-graduate courses, nursing schools, recreation and other activities and necessities, I suspect that local authorities will have a very powerful tool with which to attract the required international investment, technology and know-how.

In this respect the value of CMNE would also increase if an annex originally designed to be a Spa was to be finished, thereby making more specialized rooms available. For this purpose perhaps one could use financing packages put together by multilateral agencies and that I believe are already earmarked for tourism infrastructure.

Nothing I have proposed in this article has been said with the intention of suggesting that the other hospitals and clinics on the island of Margarita are not capable of offering similar or better service than the CMNE. Also none of the above implies that CMNE, "photographed" from another angle, cannot continue to provide valuable support, as an excellent general hospital, to local and international tourists and, of course, to the local population as a whole.

Although CMNE could signify in itself a powerful tool in developing the sector, it is no less true that other institutional efforts are required. One of the peculiarities of tourism for the elderly is that it should not be adventure tourism and requires above average confidence in the quality of the services rendered. One should therefore contemplate the creation of a Regulatory Board with sufficient authority to oversee and intervene in matters of tariffs and quality of the services offered.

If Margarita were to have a CMNE specialized in tending to the elderly as well as a dedicated and qualified Regulatory Board, there would be many opportunities for projects that today are outright impossible without a minimum of institutional support. In my particular case, for example, due to my close connections with Nordic countries, I could very well be interested in developing a small resort designed to cater to the elderly of this particular market, including specialized baths, few stair cases or physical obstacles, nearby flowered areas, etc.

The island’s Governor, Irene Saez, is without discussion a person with many of the qualifications necessary to take over the vital role of Ambassador of the Island of Margarita to the world. It would be a great shame to miss this opportunity simply because we have not provided the necessary tools that would enable us to be truly competitive in an increasingly complicated market.

How I would like to see IRENE take a flashy promotional video on her next trip abroad, packed with images that show how we have successfully joined forces to make Margarita the world’s foremost place to spend some of those golden years and among these, some images of the renamed Hospital SANTA ROSA.

Published in the Daily Journal, Caracas, May 28, 1999

Friday, May 14, 1999

Adventure tourism

Nag, nag, nag about not being able to develop our tourism as we should … but perhaps there’s still hope. On this marvelous island, where the ingenuity and genes of its native and assimilated population are put to work full-time to confront all adversities with spunk and élan, new promotional strategies for increasing tourism are being designed.

As a sales tax was recently introduced in this previously unspoiled paradise, the merchants, instead of despairing, have instead taken it as an opportunity to offer all those tourists, who are so burdened with taxes in their homelands, the possibility of participating in the exhilarating experience of evading taxes. Just a variant of adventure tourism! To that effect some Tax-Evasion-Certificates are currently being designed, and there is great optimism that these will be able to compete successfully with any of the dried and lacquered fish sold in other souvenir shops around the Caribbean. The local authorities, not wanting to be left behind, are also studying the possibility of raffling one citation by their taxmen among every five thousand tourists. Clearly it should be the highlight of a trip for a Hans from Hamburg to be able to frame and hang a citation in his living room from which he escaped by taking the plane one hour before he was to appear in tax court. It sure must beat a couple of hours of those boring videos that friends abhor.

The same goes for corruption and, just to prove they have nothing against videos per-se, a local production company is setting up arrangements so that tourists can fall into the local nets of the slightly overweight transit police who have bugged everyone on the island for generations, and thereafter work themselves out of the mess­, on camera. Clearly a video of one bribing the authorities must beat any African antelope head on the walls, no matter how wide its horns.

Extracted from the Daily Journal, Caracas, May 14 1999 and republished in Voice and Noise

Not much added value to the tax on Margarita Island

If there is anything that has to do with economics that has been proven with absolute clarity over the last few decades is the unsurpassable capacity of the Venezuelan State to misspend its resources. In this sense, an recipe for getting ourselves out of this inherited economic disaster that begins with the transfer of additional resources to the government is utterly incomprehensible to me, and I am a fierce enemy of all new taxation, even more so when we are talking about the Value Added Tax (IVA) that does not provide even the slightest redistribution of income.

However, in the case of the Island of Margarita, I refuse to spend much of my energy in protesting the recently decreed VAT. My reasons? As the say in local argot, what’s one more stripe for a tiger?

In Venezuela today, tourism is the only sector that promises the potential of creating so many externally competitive and productive jobs. The Dominican Republic’s income from tourism during last year was in the neighborhood of US$ 2.5 billion. There is no question that today we should be rallying the entire country around a National Plan for Tourism, centered principally in Margarita.

But no! In September of last year, instead of investing in a submarine cable to Margarita from the mainland so as to be able to supply the island with cheap energy (a public service of utmost importance to tourism), the latter divested in tourism when it blithely sent the US$ 60 million obtained from the privatization of its power company to the National Treasury. Margarita’s hotels often spend more for power than they do in covering its payroll.

A real plan to promote tourism on the island would focus everyone on finding solutions for getting water to the island’s population and hotels cheaply and securely. This could, for example, be done either by installing a new pipeline under the sea from the mainland financed by multilateral entities or by offering to supply free or cheap gas which would permit the fueling of desalination plants that would not be ruinously expensive. Today, all we see are plans to install gas lines so as to be able to sell gas to the island at international prices.

Anyone that had a real interest in promoting tourism on Margarita would not allow the Bolivar to overvalue to the point that the only tourism promoted is the international tourism of Venezuelans.

Anyone that had a real interest in promoting tourism on Margarita would have offered fuel at marginal cost to all international flights that come from more that 1,000 kilometers away, that carry 100 tourists that will stay for over one week. In Europe, for every 100 units paid for gasoline by the consumer, only 10 goes to the producer of the same. I am sure that each barrel “given as a gift to tourism” would be economically more beneficial to the country than its direct sale.

More investment in Margarita would create more jobs. Instead, mediocre advisors recommend the application of the VAT for Margarita in the name of anti-national national solidarity and based on minor issues that only promote equality downwards. Even some representatives of the private sector applaud the application of another tax.

For Heaven’s sake, let us create some added value on the island before we think of taxing it!

Published in the Daily Journal, Caracas, May 14, 1999

Thursday, September 11, 1997

A good lesson on how not to win at tourism

Tourism on our beautiful Island of Margarita has been harshly battered over the last few months. As always, there are many factors that contribute to this situation, but I would like to specifically shed light on three of them since these have a common denominator, i.e. the fact that the problems could have been solved by more coherent official intervention.

The first factor refers to the administration of hotels by the official entities responsible for the management of assets recuperated during the recent financial sector crisis. The concentration of the supply side of the equation in the hands of a few players without apparently requiring a minimum return on occupied rooms has totally altered the structure of the hotel industry on the Island. As a result, Margarita has today abandoned the possibility of applying a sophisticated marketing strategy so aptly illustrated by the slogan “The Best Kept Secret in The Caribbean”. Instead, it has been introduced to the world of cheap package tourism based on three elements, low rates, lower rates and lowest rates.

In an oil based nation such as Venezuela, in which the local currency tends to revalue making it difficult, if not impossible, to compete, this strategy is outright dense. This is occurring today; we have had a relatively stable exchange rate for the last year while local inflation burns underneath. There are islands in the Caribbean with less attractive infrastructure and landscapes that are applying tariff structures five or ten times higher that those actually in force in Margarita.

Having seen the immense dedication Pro-Competencia gave the Pepsi-Coca Cola fiasco, a case of obvious magnitude and importance but in which the dispute was between a few shareholders, it surprises me no end that they have not found it necessary to intervene in the hotel market in Margarita. The subtle control the government exerts over such a high percentage of hotel rooms definitely affects free competition. The sheer fact that it has placed rooms on the market at rates that barely cover variable costs without requiring either returns or recovery of capital investment, raises the possibility of an anti-dumping suit.

The government could easily have avoided this sad situation should it have insured that the management contracts were awarded to various hotel operators and, among other things, required a return on each room occupancy. The fact is that the market has been seriously damaged and as a result the State has less possibilities of recuperating its investments.

The second problem which could have been avoided by opportune and intelligent intervention by the government, was caused by the cancellation of Viasa’s flights to Margarita. Routine flights between Europe and Margarita fed hotel room demand and allowed tourists to travel directly and to then pick and choose among hotels at their whim.

Charter flights, even though very welcome, have the disadvantage of transferring the act of selecting hotel accommodation in the country of origin. In this sense, the foreign tour operator is in a win-win situation as far as tariff negotiations is concerned. In other words, the lion’s share of the package paid by the tourist is allocated to the air-fare while little is left to cover the hotel room.

It is inconceivable that, knowing the vital importance of these flights to Margarita, the government did not insure the immediate entry of other carriers to substitute Viasa’s canceled flights from Europe to Margarita. This can only be explained in terms of indolence and/or incapacity.

The last issue on which I wish to offer some comment is that of energy supply to the Island. There is not doubt that lack of regular supply of electricity seriously affects the tourism industry anywhere. I’m sure that, should the primary objective of privatization of the energy sector in Margarita have been to allocate the latter to the bidder who promised the best service instead of trying to maximize income for the Venezuelan Investment Fund and for the central government, the Island would today have an abundant supply of energy.

In this sense, it is surprising that resources were not made available to Edelca to finance the installation of an additional transmission line to the Island which would, like in effect Zulia and other equally as remote locations already do, allow Margarita access to Venezuela’s vast availability of hydroelectric power.

I don’t understand what is holding them back from recuperating the tourism industry in our beloved Margarita. It seems that the entire official sector has dedicated all its energy to the debate on casinos and bingos. When will they realize that the development of tourism is not merely a game!
Published in the Daily Journal, Caracas, September 11, 1997