Aruba Hotel & Tourism Association President & CEO Rob Smith delivers an informative address at the recent General Assembly

Rob Smith at AHATARob Smith, AHATA’s President & CEO welcomed Members of Parliament, the AHATA Chairman Ewald Biemans, Members of the AHATA Board of Directors, the Aruba Tourism Authority Director Myrna Jansen and her staff and many other valued members of AHATA and coalition partners from ATIA, ATSA as well as the Chamber of Commerce, and friends of the Aruba tourism industry to the Spring general assembly which unfolded at the Renaissance Convention Center.

Smith reported that over the past months he has been gathering input and preparing to address the assembly’s main theme which is as promised at November’s General Assembly, the creation of a public / private Marketing Fund, a plan which has been in the pipeline, in one form or the other, for at least 10 years.

In assuming his new role at AHATA, he explained, he went through his predecessors’ files, economic studies and strategic visions. He read growth projections and studies that warned of future challenges that Aruba as a destination and the industry would face as it grew. Some of the materials read by Smith dated back to 1983, and they are borderline prophetic and accurate, predictions the challenges the island is facing today.

At the same time, Smith explains it was disheartening that despite the accuracy of the projections, the depth and precision of the plans, and the sheer amount of work accomplished, that none of the proposals were ever brought to completion.

As a destination, he concluded, Aruba has essentially been having the same conversation for 25 years.

Concerned with the future of tourism on the island, Smith quoted the results of a study, shared with him by developer Eduardo’s De Veer who quoted interesting findings by Meta Corp in conjunction with Central Bureau of Statistics Aruba. The study showed that Gross National Product growth was tied more to revpar than to occupied rooms. The study illustrated that in years of supply growth without demand growth, discounting shrank revpar and despite an increase in rooms occupied Gross National Product stayed neutral to down. The moral of the study is that demand grows revpar and revpar grows Gross National Product. Naturally, advertising is what grows demand, Smith stated.

Based on the fact that 85% of those employed in Aruba are in or tied to tourism – a number that is the 3rd highest in the world, and based on the fact that 75 cents of every dollar starts or flows through the local tourism Industry – a number that is the 6th highest in the world, tourism, the source of our daily bread, obviously needs to be protected.

Aruba, Smith stated, has always been a model for private and public cooperation and in his view it is time to formalize the relationship between the tow in the form of a Super Marketing Fund

The groundwork for the fund proposed is in place, he stated, through the work of a 2006 task force comprised of Jorge Pesquera, Jaap Beaujon and Bill Carson. Instead of the never-implemented privatizing ATA Smith proposed to the General Assembly to privatize the island’s advertising funding, following the Curacao model in this case, and just like Curacao dedicate portions of the room tax to co-branded destination advertising by the private sector.

Smith reported that he is planning to request legislation that would provide for 2 points, or in other words 1/3 of the room tax collected would be placed directly in the Central Bank by the hotels.

Instead of funneling it through the Government books, it would be placed directly into a Marketing Fund. This would generate $6,3 million US, with which the private sector, namely the AHATA Accommodations Partners, will add an additional 1% increase to the AHATA fee – representing a 33% increase from 2% to 3%.

Smith declared that 80% of this amount would be placed in the Central Bank Superfund which will total another $5.25 million US. AHATA restaurants will contribute a 1% fee, totaling approximately 500K US and the Activities, Attractions & Transfers businesses will join with a 1%, amounting to 450K US; Car Rentals, the Airport and all other players will increase the amount in its totality to a whopping $12,6 million US, which can be directed towards pure advertising.

While AHATA will still support existing infrastructure and payroll, the ATA will do its share to support infrastructure payroll and promotion, and in that way the island will enjoy DOUBLE the advertising budget, and eliminate cash flow issues in the process, taking advertising dollars out of the political process without the need to change ATA’s structure.

According to Smith’s plan, a Governance Structure would be set up with a 50 / 50 seats at the table made up of the Director of ATA + 3 members appointed by the Minister of Tourism, and the CEO of AHATA + 3 members appointed by The Board of Director of AHATA.

Any deadlocks could be settled by a board of mediation made up of the Head of the Central Bank and two independent other members; one selected by each side and approved by the other in advance.

As a matter of fact, Smith revealed that high level meetings between the Government and AHATA have already taken place with general acceptance of a need for a revised structure of funding, achieved.

A Draft State Ordinance has already been drawn up and merely needs to be amended with recent changes. On his part, an AHATA Board of Directors resolution was passed in August 07’ to change the AHATA fee from 2% to 3% on 1/1/09, conditionally based on Government acceptance and participation.

Moreover, an Extra Ordinary General Manager meeting was held in September 07’ where the AHATA Board of Director resolution received the same conditional approval. All along, a review by the Director of ATA and initial talks of integration structure, have been held.

In describing the next step Smith promised further development meetings with ATA and the finalization of Operational Structure & Governance as well as formal presentation to the Council of Ministers, which will be hopefully followed by the Parliament approval and the January 1st 2009 implementation.

Another issue on Smith’ mind was the labor situation on the island. According to Smith the convergence of growth, the aging population & the new LTU immigration policy, jointly combine for a Perfect Storm on the Horizon. With 575 + open positions at the hotels only, 900 + construction positions open, 867 + tourism related positions open and 24 + projects either ongoing or in the pipeline within the next 12 months, a projected 5000 tourism related openings are a reality in the work market, in the next 3 years.

Smith voiced his concern that because of the LTU immigration law, 7000 permitted associates who will be concluding three years of employment on the island in 2009, will be forced to leave creating a shortfall of 13,000in tourism related labor force here.

Smith warned against the adverse effect of the labor shortage as corporate standards are compromised due to lack of staff and the increased OT leads to a drop in productivity while the already high percentage of “AO,” absenteeism increases further due to excessive burden on existing staff. Smith also predicts inflation from employment competition, and warns against associates adjusting their lifestyles based on overtime and secondary income. He laments associate being recruited out of tourism by the construction industry and regrets the fact that less qualified people are being hired for jobs above their skill set, what he nicknames ‘warm body syndrome.” Smith went on to caution against staff loosing passion for the industry, and the decline of customer satisfaction and even worse, customer defection, to other destination, compounded by an increase of social Issues with Turn Key Kids, being neglected by busy parents.

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April 10, 2008
Rona Coster