"MOVING UP-MARKET" - Repositioning St. Lucia's Tourism Product - December 3, 1999

Let me begin by thanking you for this singular opportunity to dialogue with such a distinguished cross section of St. Lucia's leading growth sector. I know that this is a time when our industry is going through major transitions and there are many areas of accomplishment as well as uncertainty. I hope this address, as well as the deliberations to follow, will provide a valuable forum for the exchange of views and ideas as well as the formulation of new strategies for the ongoing development of this fascinating, and sometimes frustrating industry.

It has become customary on occasions such as this, for the featured speaker to deliver a lofty statement and then depart, leaving the gathering to continue its private debate. However, in contemplating what the orientation of this speech might be, I thought this should be more of a conversation than an address. After all, how often does a Prime Minister have the benefit of meeting with all the prime movers of our local tourism industry in a single room. Consequently, I would like to make an initial delivery on some global tourism issues and then have the benefit of your reactions and comments. I trust that there will be time enough for useful exchange and that this approach will prove more meaningful to us both.

I am advised by your Executive Director that your membership would be particularly interested in Government's broader vision for the industry bearing in mind the pivotal role which it plays in the country's economic and social development. I believe this is relevant and that the timing is particularly appropriate. Obviously, the calendar agrees, poised as we are at the door of the year 2000, with all its problems, its promise and its potential.

But more importantly perhaps, it is appropriate because after an era of largely unplanned tourism growth it is time to reconsider our options and opportunities and chart a new, consistent development course for the future of our rapidly expanding industry.

I believe that despite our phenomenal growth, St. Lucia is not optimising its tourism potential. There are still many areas of the industry which are underdeveloped or unexplored. At the core of the industry, significant potential remains untapped in niche markets such as health, sports, special events, heritage, and eco-tourism. It is true that we are slowly building capacities in most of these areas and Government will continue to support healthy diversity within the sector. However, while Government will not frustrate investment in hotel plant, we must consider an integrated approach to creating a healthy diversity. We must also build capacity which is not dominated by the accommodation sub-sector.

Building diversity requires an integrated approach. As a small island, our spatial limitations and our scarce physical, human and financial resources require us to make intelligent choices. We must therefore decide where, when and how we are going to invest those resources for the long-term viability of the industry and the sustainability of the wider economy. We need only contemplate the magnitude of ongoing and proposed tourism developments to recognise how limited our spatial options really are. If we do not plan carefully, our landscape could quickly become overwhelmed and over exploited.

We might say these are issues of concentration and carrying capacity. And, it would be best if the industry itself consider these issues in conjunction with other stakeholders and relevant public authorities. Government does not wish its role as regulator to become overbearing. While we have a responsibility to the industry, we must also fulfil our responsibilities to other competing sectors. It would be best therefore if the industry develops a comprehensive approach in conjunction with its development partners.

The possibility of over concentration also presents strong arguments for diversifying the accommodation sub-sector into a healthy combination of large, medium and small facilities. This does not imply diluting the quality of the product but maintaining quality across a differentiated product. Small inns and guesthouses are particularly attractive to Caribbean and European visitors who tend to be more interested in individual exploration and genuine interaction. Government will continue to support quality improvements in this end of the market, which is typified by longer stay-overs and higher visitor expenditure. We welcome the valuable work that the SLHTA and the Tourist Board are already doing in this area and encourage the further exploration of this important market segment.

This brings logically to the issue of St. Lucia's position in the global tourism marketplace. For some time, St. Lucia's marketing thrust was largely reactive, responding to market demands and trying to preserve market share rather than setting market trends. Generally, we have been trying to capitalise on external perceptions of what St. Lucia and the Caribbean ought to be as a destination. This reactive stance has to a large extent defined rather than distinguished our product. I believe we need a combination of both responsiveness and trend-setting. In moving up-market, we must dare to be innovative.

We have developed as a fairly typical Caribbean destination heavily dependent on our natural physical characteristics. This is not a bad start, but we need to augment that strategy for the future. Indeed, our unique and varied natural attributes have served us well. However, as you know, the market is constantly changing, and so are we. As the market becomes more competitive is it enough to be "simply beautiful"?

Consider that St. Lucia is much more than a picture-perfect palm fringed beach. This may be the stuff of postcards, but development has brought a change of pace as well as a change of face to our country. We must adjust our market image to bring consumer expectations in line with reality. We may still be beautiful but we are becoming less simple.

We must also diversify and enlighten consumer preference and consumer perceptions. We are a developing and diversifying economy faced with the reality of providing economic opportunity for a growing population. These are important features of our product: young, vibrant, diverse, evolving. In other words: not just a beach but a whole country; coming of age. We should invite our guests to be part of that process; not promise them an unchanging, untouched landscape.

We must therefore find ways to achieve both the wholesome development of the industry and the wholesome development of the country and its people. More precisely, integrated development strategies are needed which bridge the needs of the industry and the needs of the wider economy. It is imperative therefore, that we set the right development objectives for the country as a whole.

As a lead growth sector, Tourism has urgent and particular needs. As an interest group, the sector voices those needs with admirable determination. However, with your diversified membership comes the opportunity to internally arbitrate the conflicting needs of various sub-sectors. This is an important function of your organisation. You must use it as an asset to present to Government non-conflicting strategies for the development of Tourism, having taken account of the need for viability elsewhere in the economy. If we can do this, taking into account all its constituent parts, especially but not exclusively tourism, we can succeed in building the economy and the industry in ways that are mutually reinforcing and internally consistent.

In terms of rationalising internal strategies, we must consider what the hallmarks of wholesome tourism development should be. If I were to reduce the issue to one simple phrase, it would be "Sustainability with Equity". It is Government's view that balancing these two objectives is the only way to achieve both economic development and tourism development.

Put differently, many persons still have the notion that highly visible resorts are the ultimate manifestation of a successful industry. But while the accommodation sub-sector is certainly very important, it cannot be the whole picture. There must be a balance for example, between what that sub-sector consumes in terms of renewable and non-renewable resources, and what it contributes back into the economy. In order to sustain demands for water, food, power and infrastructure, there must be other viable sectors supporting and benefiting from tourism; a symbiotic relationship if you will, which is mutually beneficial; mutually reinforcing.

The impact of tourism on the transport, retail, agricultural, and manufacturing sectors averages around 20% of goods and services produced. This indicates significant integration and the reliance of Tourism on other sectors. We must therefore maintain lateral integration to spread the benefits. We must also encourage vertical integration to build the industry into a true economic sector with clusters of firms providing goods and services to each other. While competitiveness is extremely important, this government will not knowingly facilitate the over-concentration of economic power in the hands of a few.

Part of the logic of moving up-market is the need to preserve product quality. This cannot be achieved if industry margins are constantly driven down, reducing surpluses available for reinvestment. On this point, we have two major concerns. They are both related to my previous comments about a strong diversified sector.

Firstly, St. Lucia is highly dependent on external wholesalers. The trend is particularly worrisome in the North American Market where market power is highly concentrated. We have already had our own bitter experience in the airline sub-sector. A similar pattern persists in the cruise industry. These trends can force local operators into the position of price-takers.

If the debacle thwarting the WTO meetings in Seattle can teach us anything, it should inform us of the disastrous effects of displacing the small and the vulnerable in the pursuit of concentrated market power. We can probably expect the pervasive spirit of globalisation to usher further concentrations of market power within the tourism industry. Your organisation needs to work with Government and other social partners to anticipate and avert this eventuality. I would welcome your views on this matter.

Secondly, the implications for the local market are particularly dire if economic power is similarly concentrated around a few powerful operators who are price setters. The temptation to squeeze profitability out of ancillary suppliers can be addictive. To some extent, we know that the commission wars have already begun. They are unhealthy and unsustainable. Once again, this is a serious issue for your organisation particularly for allied services. We need to discuss this and jointly consider how the economic evolution of the industry should rightly proceed.

As mentioned before, it is a strategic imperative that St. Lucia maintains a diversity of business interests clustered around the tourism industry. In this sense, we cannot dispense with healthy competition; but our industry cannot be a closed circuit or a zero-sum game where the advancement of a few comes at the expense of the many. Certainly, at the national level, the industry must be placed on a footing where we can be price setters, commanding market space based on a level of quality and service which final customers demand and are willing to pay for. In this way, we will be able to maintain equity within an industry which attracts and sustains commitment from a wide range of economic actors who have a vested interest in its sustainability.

If we are to reposition the industry up-market we should define a market position that is sustainable. This may not necessarily mean more luxury resorts. It could mean developing the highest culinary standards around our own indigenous cuisine. This would strengthen links with agriculture and agro-industry. Going up-market could also mean raising the current standard and variety of cultural experiences and entertainment available to our guests. These can be world standard. This implies a role for hotels themselves in establishing and supporting adequate entertainment infrastructure around the sub-sector, budgeting for professional management and improving levels of remuneration to local and regional artistes.

It is also about building other avenues to high quality St. Lucian hospitality, as is being done with the development of small locally owned hotels. Here personalised service, a tranquil environment and the genuine St. Lucian experience are the wholesome attributes we have to offer the discerning guest. Moreover, these are things that our local population must also cherish and seek to preserve.

Particularly on the issue of preserving the environment, there is an education and a re-validation task in which Government and the Tourism sector will have to join hands. In this respect, the Nature Heritage Tourism programme is on the right track; developing small indigenous entrepreneurs in local communities while preserving the natural attributes of our country.

Going up-market is also about dealing with down-market problems such as crime, drugs, poverty and environmental degradation. In our small society, these problems cannot be conveniently contained or ignored. If so, they rapidly become tourism problems. That is why this government has adopted a low tolerance for these issues and continues to devote considerable energy and public resources to poverty reduction, employment training and crime prevention. Public resources alone are insufficient to sustain this battle and Government requires the moral and financial support of your sector if we are to succeed. The timely remittance of taxes and other dues is therefore non-negotiable and you can expect equal vigilance on our part regarding collection.

Beyond routine collection, the industry and government must also consider the issue of an independent financing mechanism for marketing. A mere few months ago Government had to borrow some $4 million to service debt accrued in marketing St. Lucia. Now, a similar amount is needed to cover other outstanding liabilities. As you will agree, the sector consumes a substantial quantity of public goods which must also be financed from existing revenue streams. This situation is not sustainable, and as Minister of Finance, I wish to challenge you to explore with us, the Ministry of Tourism and the St. Lucia Tourist Board, modalities for addressing this funding deficiency.

The final issue I will place on the agenda is that of Human Resource Development. The recent surge in hotel investment has exposed how limited our industry is in this regard. Competition among hotels for top-grade staff promotes upward mobility in the market, and this is a good thing. However, the industry cannot progress if poaching becomes the norm. Since Government also has an employment objective to fulfil, it is in our interest to collaborate on human resource development issues at all levels. The establishment of centres of excellence in this field could be a great catalyst to the industry and more specifically to our product.

I promised not to be too long, and I hope you will be charitable in judging my attempt at brevity. As you are probably aware, this is a complex industry; these are complex issues and there is much to be explored and much to be achieved. Government does not presume to have all the answers. Indeed, we defer in that matter to you, the practitioners. We do have a responsibility however, to pursue and establish consensus on vital economic issues. Let me assure you, that to this Government, Tourism is a vital economic issue and we take our responsibility very seriously.

In closing, let me thank you for being so patient. I encourage your views and comments. Finally, I wish you, your employees and companies the very best of the season and beyond.

I thank you.

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