Taxation and Operating Costs for the Caribbean Hotel Sector

20• Inefficient planning process for building permits.• Lack of available inputs: food and beverage on island.• Inconsistent supply of building materials on island.• High Indirect taxation: the new VAT is viewed by the hoteliers as excessive.• Evident movement from hotels to condo development because of operating costs such as: taxation,VAT, and property taxes.• Hotel sector in need of major capital investment: plant and equipment too old.• Construction costs: Construction costs for three star properties are with the range of US dollars$100,000.00 per room, including public areas. It is estimated that refurbishment of rooms cost asmuch as a new building. For a 5 star resort, the average inclusive construction cost is US$150,000.00dollars per room.5.3.2 JamaicaIn Jamaica data was collected from six (6) hotels, and interviews conducted with nine (9) hoteliers. The hotelindustry in Jamaica is well established and most of the hotels where interviews were conducted have beenoperating for over 25 years. Only one hotel confirmed 100% of their customer base as the visiting tourist. Theothers had an average of 4% local trade while the smallest hotel reported an even split of 50/50 between localsand foreign visitors. The smallest hotel operated 21 rooms and enjoyed a profit margin of 25%, while the largestoperated 488 rooms and enjoyed a profit margin of 28%. All of the hoteliers interviewed in Jamaica reportedbook values for their businesses of over five million United States dollars, and all had easy access to financing.However 75% of the hoteliers confirmed that the high current interest rates at the Jamaican financialinstitutions were a deterrent.The hoteliers interviewed in Jamaica identified the following as critical issues for their competitiveness:• High electricity costs: based on the new increases from the new utility company; hotelierscommented that the price was too high for the service being provided.• High water and sewerage costs.• Shortage of qualified chefs.• Inefficient planning process for building permits.• High indirect taxation: the new regime of VAT is perceived by all the hoteliers as too excessive.• Competitive environment: the entry into the market by Spanish hotel companies is causing someconcerns within the Hotel sector.• Construction Costs: The Jamaican Hotel and Tourism Association currently uses an estimate of US$100,000 per room.• Pilferage was identified as being extremely high by some hoteliers, but no data was presented tosupport that claim.5.3.3 St. LuciaIn St. Lucia data was collected from thirteen (13) hotels and interviews were conducted with three (3) hoteliers.The hotel sector in St. Lucia is relatively young compared to Barbados and Jamaica, and most of the hotelshave been operating within the last 12 years. In general the main operating costs in the hotel sector are:salaries, food and beverage and utilities. Wages in the hotel sector are higher than those in agriculture andconstruction, and competitive with those in manufacturing and retail. Food and beverage costs varyaccording to the rate of import duties.Taxation & Operating Costs for the Caribbean Hotel Sector