Aruba entering a new stage of COVID-19 crisis.

By Fernando Latorraca

We are approaching the reopening of economic activity, internal first and tourism soon after.

Please do not think that these two waves will automatically end the economic crisis.

If we do not take the necessary and rational steps, the coming months can be worse than the previous ones.

The critical situation of Aruba’s tourism industry finds some relief in the Salary Subsidy Program.

I would say that HORECA, which has been closed since mid-March, received a vital subsidy, a tool to avoid massive bankruptcies during the next 2/3 months, if the labor laws are not modified.

It’s important to say that SVB did a great and efficient job handling the subsidy. Congratulations!

I think we all agree that the subsidy was important, but not without criticism, it cannot be the only financial tool use in our recovery, if we want the Aruba tourism industry to survive in 2021.

The reopening of the border and the beginning of tourist arrivals will not, in any way, be the end of the crisis. It will be just a stage on the long road to recovery.

We also all agree (ATA, AHATA, AAA), that the arrival of tourists will be very gradual, starting at a very low levels, never before seen in Aruba.

Estimates of what this gradual growth would be like depend much more on guessing than on the extrapolation of variables that may make it more reliable.

We still do not know many things, because there was never a similar situation.

  • What will the behavior of potential tourists be, when deciding to travel abroad?
  • Would a NY resident be the same as someone from California or Canada?
  • How many of these tourists wait to see what happens to the first travelers BEFORE they decide?
  • The economy was hard hit worldwide. The middle class, an important part of our visitors’ body, is particularly affected.
  • What is the real situation of the Airlines, which will fly to their most profitable destinations, and ignore the rest, to survive.
  • We know that seats available will be 33% less, at best, due to health protocols, and empty middle seats.
  • How are we going to face the price war among competitors in world and regional tourism?

The list of unanswered questions could go on, but with these we already have enough.

Whichever measure we use to estimate the flow of tourists, at least until the end of the year, it will undoubtedly be low. I will not be mistaken when I say what my estimate is, because it would be subjective and would not amount to much.

This is not the time to make unreliable predictions.

What we should do is prepare for the worst and hope for the best.

The problems that we will face after the opening and for a long time are, inevitably, the following:

Tourism infrastructure in Aruba is deigned to receive 1.1 million people yearly.

This includes, buildings, equipment, airport, etc, and workers.

But now and for the next 8 to 12 months, things will slow down radically.

We will receive, in the best scenario, between 10 and 50% of the previous number of people.

We must be more efficient than ever, and we must redefine the matrix production of each section of the Industry (Hotels, tour operators, car rental companies, F&B, etc.)

Being more efficient means adapting our processes, supplies, the use of capital, and labor.

In this situation, being more efficient does not mean higher profits. It is just the difference between surviving or folding. Live or die.

To achieve this crucial greater efficiency, we need imagination, courage and new rules, adapted to the new reality: THE NEW NORMAL!

We all also accept that there is a ‘before’ and ‘after’ COVID-19 world, that “nothing will be the same”, and that we must learn to live with this New Normal.

QUESTION

Is it possible to live with the New Normal applying the old thinking?

No, It’s impossible.

What should we change?

In first place, tourism will continue to be the main pillar of Aruba’s economy but it should share the space with other economic activities. We must modify the productive matrix of Aruba, and that will take time and major investments.

As for the Aruba tourism matrix, it is evident that we suffer from an oversupply in infrastructure and the number of services available given the number of tourists. This has been especially so in recent years, with innumerable permits granted for condominiums, restaurants, bars, jewelers, etc.

Aruba must redirect private investment to other sectors. No more new hotels, apartments, malls, restaurants, shops, kiosks, etc.

No more! Not only because it is economically inefficient, but because Aruba, and nature, become saturated. It is OK not to allow UTVs in Arikok Park. But, on the other hand, we have new buildings on bird sanctuaries, we need more and more water and electricity which generate pollution, saturate our beaches and pollute the ocean.

The “rules of the game” must be adapted to the New Normal.

Rental contracts must be reviewed. Aruba cannot guarantee, as until just a few months ago, a flow of tourists and tourism income, like previously.

Why not tie rental contracts in the tourism industry to hotel occupancy? Nothing is worth as much as it was worth before. We all must adjust prices and income downwards.

The labor markets

We will not be able to continue living with a system designed for a past era. We must facilitate and speed up labor mobility and the termination of employment contracts, which will happen anyway.

Create a social containment system for those who lose their jobs, because whether we want to or not, at least in the medium term, many private jobs will be lost.

Since no company, neither tourist, nor other, can maintain the same number of employees, working at 50% capacity with 100% personnel.  

There is a lot of work to do on this topic. And you must start now. GOA and the private sector must face this new reality. The New Normal.

Workers who continue to work and tourism entrepreneurs could contribute to a fund for the unemployed, for example by taxing tips.

TIPS: An important income for many people, which should be “legalized,” distributed under a more dynamic and efficient control to avoid informal work.

Develop tax controls on many businesses that do not issue or declare invoices for sales, avoiding taxes.

Surely there are more points to tackle, and people with more knowledge and skills to do so.

If we assume that we will live in the NEW NORMAL, under the old structures and rules, we will be inevitably walking into failure

 

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May 18, 2020
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