Jan van Nes gave an interesting talk at UA, on the morning on June 4th, 2019, when AF&BA, Aruba F&B Association, the former AGA, presented its Impact Study of the F&B industry in Aruba.
After introducing the study, its methodology and thanking the individuals who worked on the material, he went on the debunk some myths about F&B, then continued to make important points. I wish you would read it all, but if you drop out, we understand the desire to live in a bubble.
MYTH: The F&B niche is a fun filled, easy business, one will get rich soon: Wrong. We see many outlets open and close for a reason. If you do open, you must have a TWO YEAR cash reserve to tide you over, until you perhaps turn a corner.
Profit margins in the F&B biz are small, and cost of business high. In a nutshell: F&B Cost, 35%; Cost of labor, 35%; Rent and Utilities/ Gas, 12%; Advertising, 4%; Administrative and Other 6%. And we have not even considered accounting, legal fees, maintenance and contingency, to round up 100% cost.
Then GOA steps in, no wonder many establishments close their doors once GOA claims its share and demands the prompt settlement of obligation.
Margins in the F&B biz are shrinking and most operators do well 6 months a year and have to make ends meet the other 6 months.
Raise prices? Aruba already fluctuates between the 4th & 6th most expensive island in the Caribbean, according to the Travel Index.
And the cost INCREASED this year, and was partially passed on to the consumer:
GOA’s taxes increased from 3.5% to 6% and SOON, they will have to be changed to hide the tax from the consumers, and accommodate the upcoming sugar levy. Menus which were just printed will have to be reprinted. That’s an expense. And when BBO is replaced by a TBA tax, that exercise including ads, and signs, will have to be repeated.
Bear in mind: The F&B biz does not understand the reasoning behind the mandatory lack of transparency in including the tax in the price, and banning the mention that tax is included with the total invoice. It is inconsiderate of the industry, and GOA should abandon the idea until the next so-call fiscal phase. Most importantly, GOA must include the private sector in this discussion. Several letters spelling out the negative consequences have been sent to GOA, and resulted in a postponement. AF&BA urges the MinFec to reconsider, this will be an accounting nightmare, to try to figure out GOA’s share from total sales, manually.
The ban on plastic bags, a good idea, increased the cost of take-our containers EIGHT times, which will be passed on to the consumer or absorbed by the biz. Mind you, we cannot pass all increases to the consumer! Remember, Aruba is already expensive!
Sin taxes: As a result of recent increases the beverage of choice is now water, most times. Soon, a Rum & Coke will become a luxury drink, and consumers will not point their finger at GOA but at “greedy” F&B operator.
Minimum wage? We were sitting at a tripartite meeting one day, and the following the MinLabor unilaterally increased the minimum wage. Not many employees in the F&B sector make minimum wage, most of them go home with substantial salaries, twice, triple and more, yet it was unacceptable to spring a decision of that kind without warning.
Other than that the industry faces red tape in almost every step of the way, and obtaining restaurant permits, work permits for functions Arubans have no interest in filling, cooks, dishwashers, bartenders, is impossible. The process is becoming more tedious and more challenging and even fifth or tenth permit are denied with no proper suggestion as to how to replace the ladies and gentlemen required to run the additional businesses coming on line. And it will not get any better. Our youth has no desire to work evenings, weekends, or holidays! It is everybody’s dream to land a GOA Job, and be set for life.
Consequently, our business climate does not entice real investments…. what it entices is a tidal wave of food trucks, carts, private lunch deliveries, home cooking, and we ask ourselves if these operations pay their fair share as we do.
Based on several letters to the MinPres last year, we were promised a multi ministerial task force to sit down with AGA/ AHATA to see how these challenges may be solved. But, we remain skeptical about that promise in view of the installation of the tripartite caucus where decisions were taken ignoring the entire private sector. Commitments made by the MinPres in regards to BBO/BAVP/BAZV in Parliament were ignored, when the decision by the MinFec differed. Dialogue is key, and we would like to see more of it.
With more rooms added to our inventory (O condominium/ Acqua, Embassy Suites/ Hyatt’s Place Airport Hotel) and others in the pipe-line, we wonder how long will our Bubali water plant be able to handle the current and new developments, how will we clean the additional rooms, how will we cook and serve, how will we fill the vacancies of worker for evening, weekend and holiday shirts. Our service level as monitored by ATA dropped from Excellent to Very Good, but Fair that should not be acceptable is realistic in many places.
I don’t want to sound like a kill-joy, at the end of an excellent presentation of the Economic Impact of the F&B Industry in Aruba, however, AGA/ AF&BA want to ensure that the follow up study, reflects improved conditions. However, it will take two to tango and we hope the Private and Public sector together can convert the current red tape hell into red carpet paradise. We ask this on behalf of the 7,000 employees who derive their daily bread from the F&B sector.
Thank you UA for an educational effort.