Monday, March 9, 2009

Seychelles Column - by Christopher Gill

The Seychelles Column by Christopher Gill

Seychelles Hits Economic Hardship

In the State of The Nation address, President Michel made the announcement that the Seychelles was facing economic hardship in 2009. He announced that Tourism Arrivals could fall by 25% in 2009. Already, the first three (3) months of the year have brought lowered arrivals by -15%. While this is not a pretty picture the President Michel has painted, there is more to these numbers which he has not mentioned and decided to be quiet and leave the remaining Truth in a closet of silence. The recent Seychelles Tourism (STB) Board meeting exposed a little of what was in the closet of silence.

-25% is Wishful, It Is likely To Be More like -40%

The assertion that we will have -25% less arrivals in 2009 is optimistic. President Michel and his low acumen advisors chose to hide the truth. A big mistake.

In The Back Room

The Seychelles Tourism Board is promoting Seychelles with inadequate financing to offset this downturn. The private sector, which is having its own problems battling with the downturn, has been asked to finance the marketing promotions where Government has left the bag hanging over their heads. Inadequate financing in marketing is a formula for a failed marketing program. This is not a time to fail.

Marketing tourism must be tied to a percentage of GST collected on room nights paid by every hotel, to make contributions fair, and sustainable over the long term. This is common practice for all economies that rely on tourism. It is unclear why Seychelles relies on the trade directly to foot the bill for marketing and not simply take a percentage of GST from room charges to foot the bill. This is the most logical self sustaining manner to cover marketing costs. To call on the industry every year to foot the bill for national promotion does not fit into any text book on marketing. Nor will shareholders understand it, if contributions become disproportionately burdensome to one company over another. Making the contributons partially tax deductible does not solve this problem as one has to have the cash flow in order to contribute.

In 2009 we will be trying to catch our tails. Already we have lost revenue from the first three (3) months which we will never be able to earn again. That money Mr. President, is gone forever, because our Tourism marketing program is being launched in Berlin three months late. So we are potentially down to a 7 month year already.

The Haut De Gamme Image

For many years now, the Seychelles destination marketing promotion campaign has been aimed at millionaires, sheikhs, the famous and high-net worth individuals. Put simply, this marketing image is very much out of fashion today, as the world undergoes a financial crisis not seen since the Great Depression. No longer is it chic to travel to far away island destinations. It is considered a splurge and an act of opulence. As Europe goes on strike on May 1st and onwards in the Summer, cars and buildings set on fire, it will not be very fashionable to holiday in some faraway destination costing thousands of Euros per night. The highly touted haut-de-gamme program is out!  

The current national slogan is: "Another World". To many potential holiday makers considering Seychelles for their next trip, they may just conclude it is "another world", as establishments are forced to out price themselves out of market according to the ongoing Government policies. In his State of The Nation speech, Michel recently asked for a new service charge to be added to hotel bills, which will invariably increase prices further. Service charge should be voluntary, not mandatory as to keep with world industry standards. Shedding the communist reaction to a dilemma does not always come so easy. Along with a service charge module, Michel could have opened up the discussion to encourage hotel staff to work double shift and earn double income, that is not communist in orientation. But he remained silent.  

To Michel's credit, he listened to the industry and has put off the increase in GST to 12% for tourism services in 2009. But the cost of living coupled with high interest rates at the banks, make tourism establishments generally uncompetitive on the world market. This explains the reoccurring low occupancy percentage Seychelles knows without much choice till now. Most recently, we have dropped to a low 40% and below which is unacceptable for a destination like Seychelles. We have a crisis in our tourism industry.

To overcome this hurdle of non competitiveness, the Government of Seychelles must rethink the haut-de-gamme image in 2009 and 2010, especially when most seats on inbound Air Seychelles are economy seats and not Business or First Class seats.  

To Survive Resorts Must Discount and Cut Costs

The name of the game in an economic downturn, is not preserving the high profile haut-de-gamme image at all cost, it is simply: survival. For the industry to survive it will have to discount and cut operational costs. Simply put, the tourism market that existed for Seychelles one or two years ago has been wiped out, it has disappeared.

Jj Spirit needs to wake up to this reality.

Even Arabs with oil selling at $32.00 per barrel, and loans secured for high rises based on peak oil prices of say $140.00, will not be able to afford the little villa on the beach so easily in 2009. Dubai is bankrupt from over extending itself. So even that destination strategy must be thought out again. They literally built a city out of sand, as the financial crisis winds blew, so went their dreams of biggest this and that. 

As the interest rates rise, the overdrafts accumulate, the bank payments are missed, many hotels in Seychelles will have to embark on discounting and cost cutting to survive, contrary to Government's past policies of maintaining an haut-de-gamme product at ridiculously high prices.

Finally a Change in Gear

The new STB board marketing section led by Alain St. Ange (which is a revolution in itself) has made a push in the right direction, with the national slogan for the next year "offer of a lifetime etc". St.Ange adds a practical no nonsense angle to marketing which was badly needed at STB. After all, the best marketing ideas must depart from a premise of common sense, and not bounce about in some red-hair floozie's brain and translate into millions of catalogues, posters being published, stored in a store room while the millions of dollars stack up in a CEO's private account. As the money builds up, we get stuck with Seychelles in black and white, and yes, too expensive for our markets to consider as a holiday option. 

In the end, a good value for money holiday, will do millions worth of good publicity to the destination, so Government of Seychelles must make the mental departure of treating discounting as a bad marketing concept. In fact, it is a world wide trend now, with 5 star hotel resorts at Sharm al Sheik, Egypt discounting rooms at resorts for euro 35.00 per night, they too must try to survive in this long winded downturn. 

Oh But Our Special Label 

While you want to consider the Seychelles product as something special, remember, to the owner, a Dollar is also something special these days, so decide what you want. 

I have discounted at my hotel since January. In March and April, we are full. That translates into 150-200 seats on Air Seychelles, if they did the same which I did. If not, Air Seychelles flies empty seated, hoping Air Mauritius does not cancel the 100 pre-sale seats it has. The 200 clients I have in two months means Air Seychelles could earn average Euro 160,000 from that business in turnover at Euro 800.00 a seat or lose that money if it holds out to earn Euro 240,000.00 at Euro 1,200.00 per seat. So take your choice Air Seychelles.  Earn a little less or earn nothing. In the meantime, our establishment regularly advises clients which flight offers the best value, so we do not lose a client.

I cannot afford to push the Kreol Spirit for Colonel David Savy, so he can engage fancy dinner parties with imported bands, dancers, food from Seychelles to Ile Coco-Mauritius on company expense to thank Air Mauritius for buying 100 seats on each flight, when an email with little bells and smiley could have done it.

The Comparative Advantage of Seychelles 

As discounting becomes the norm in Seychelles, it will give the destination a comparative advantage over other sun, sea and sand destinations, because we are such a special destination, inherently. In turn, that will translate into positive marketing by word of mouth and internet feedbacks. Friends love to tell friends about a great deal, they talk about it day after day.

Government Must Take Less 

For Government, discounting will translate into less receivables per head. So SPPF will have much less to squander and will have to start tightening their belts themselves, but if you act fast SPPF, you may survive 2009.

Start at Air Seychelles, and then take another look at your bloated ministries. Consider freezing salary payments and allowances to Ministers for 6 months, and tell them to drive their own cars and no more gun-toting security at night for their many homes. Set ministerial salaries at Sr.8,000.00 and National Assembly salaries to Sr.5,000.00. Sell off the fancy cars like we have been telling you for years now. Cut the fancy trips and let the girlfriends go home once and for all......let them live, let them go! Go to church on Sunday and ask the Lord forgiveness for your failure upon us, instead of trying to fabricate a fake opposition to stay in power.

The Worse Is Yet To Come

What Michel did not tell the Nation in his "SONA" was that the worse is yet to come. As usual, Michel hides the Truth in appeals for unity, togetherness and all the other puppy love antics you can expect from a secondary school pupil. No clear definition of unity, just a general appeal to "Koste". No foresight and warning to the People of what is ahead for us.

Well, People of Seychelles, the worse is yet to come. But this time, the SPPF have little to do with it. But that does not excuse them from not knowing or from not having a plan for Seychelles to survive the downturn ahead. There is no plan! I am working on one but SPPF will not like where they fit in this plan. But we have no choice. They must go where they must. Some of the persons named may not like what has to be done to save Seychelles, but they will not have much of a choice.

For money (the lack of it) is a great equalizer of all men. When there is no money, in pocket, a fat cat can feel very, very humble and his brain can squeeze him into a two piece bikini! See cartoons coming. 

Zone Leader Says It Cannot Get Worse  

Zone Leader says it cannot get worse. Of course, as Zone leader sits in his zone, waiting for SPPF to do some magic, while he is getting hungry. Zone Leader no longer worries about whether or not he will get a bottle or Red Label or a Bottle of Black Label from headquarters. He now worries if the stores will run out of rice and this will prevent him from being able to make it home one night.

A hungry man is an angry man. We see this all over the internet now when we click "Seychelles". But Zone Leader is wrong will get worse. Much worse. Read on Zone Leader! 

Why It Will Now Get Worse

We have just past through dire days of the financial crisis on Wall Street that was announced with the Masters of the Universe for Atheists ,Lehman Brothers, bankruptcy. As President Obama moved into the White House, he tabled and passed a bailout bill of about $ 1 Trillion for the US banks. Well, in Europe, a similar problem conceived out of bloated mortgages, bad debts, bogus hedge funds, dead beat debtors, like SPPF, and its problem has now amounted now to a $24 Trillion problem that is about to implode any day now. The daily reports of banks failing is a sign of the imminent implosion. Gordon Brown giving a pep talk to joint session of the US Congress and Senate is a sign. There will be many more to follow, each collapsing state will sound off on CNN weekly now.

Just as Michel was hoping we will have only a - 25% downturn, now our tourism markets are about to go belly up. Try -40% Mr. President. As banks collapse, money supply tightens. As there is no money to go around, the first thing people do is cancel trips to paradise for a little sand castle therapy. So wake up SPPF, come up with an Emergency Plan to save the Seychelles economy.

It can be done. But your thinking must change overnight. What St. Ange has proposed is a small start to generate more business so SPPF can have more money to spend. But how will SPPF spend that money? Will you implement more budgetary cuts or will you continue to send MNA's on drinking trips to Rodrigues in Pearl Class? Will the weekly shopping trips to Dubai be stopped or will they continue? Will we continue to waste money like it flows from the ground SPPF? What about all those ill-transferred islands?

Do you not think it is time that these islands be returned to the People of Seychelles, SPPF, so we can benefit from them, instead of just a small group from your royal family having the time of their lives. The villa going up on Felicite or Zil Pasyon are a disgrace SPPF. Once the government changes in the next election, these property transactions must be rendered null and void, because the master lease was never offered out on tender.

Head Spirit Says, "What Can I do"?

For starters, instead of running about town telling everyone to "Koste", start walking the talk. Come up with a serious plan. Create a master plan which includes constitutional amendments for a Government of National Reconstruction, with SPPF (after failing) accepting a junior partner position in the Government. Announce the Plan, then call all parties to the round table. Do not think for a moment that SPPF can viably remain as a Senior partner in Government. We need you to step aside sly-SPPF because, the Paris Club, does not trust you, the ADB in spite of having Peter Sinon there, barking your whims and wills, does not trust you. Hell, it looks like the whole world does not trust you SPPF. So that is why they deal with you with a 10 foot pole called IMF quarterly meetings. So make the deal to step aside, but remember, you have to get Boss and family to give back some of that $2.4Billion, whatever is left, after wasting it in the financial crisis.

Engage the Opposition in the Plan. Wavel Ramkalawan is the Leader of Opposition, so you must deal with him, in spite of his faults. But you must also include all other players outside of his realm of support to mantain peace and foster cooperation. Be polite, he might be your President next year. Don't go beating him up on the head and sending him to ICU, now SPPF. If Ramkalawan does not want to deal with you, then be humble SPPF, after all you are failures. But do what is necessary for Seychelles to survive, not yourselves. The gesture to meet is good, but there are no parameters. So try again Head Spirit, try again. If you need help, ask Bishop Denis Wiehe to intervene. But do not give up Head Spirt. Your moment in our history is being defined now. Tomorrow you will be but a breath of light passing wind. 

I have more advice to our President in this year of "Koste"- but for now, I will allow him time to think these points over. Take your time.....but don't take too long. The people are eating down our supply of rice.

May God Bless All Freedom Loving Seychellois and our Beloved Seychelles!

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