THE possibility of electricity rates going up this month has triggered frustration in the island’s tourism sector which says it is already reeling from extremely high energy costs that are threatening to cripple its operations.
As a result, the sector is urging the Office of Utilities Regulation (OUR) to forego the annual inflation adjustment to non-fuel electricity rates, especially given that forward bookings have seen a significant decline because of the civil unrest in sections of Kingston last month.
Hoteliers and operators of attractions with whom the Observer spoke at the weekend all complained that their electricity bills have doubled over the past year.
“It’s killing us,” said Vanna Taylor, head of the Jamaica Association of Villas and Apartments. “It’s our single biggest expense. It is crippling, it really is.”
Pointing out that electricity costs vary depending on the product, Taylor said some stand-alone villas are receiving electricity bills of up to $40,000 per month, sometimes even in instances when the villas are not occupied.
“It’s still very, very expensive, just to run the pool and the basic things. Some small hotels are paying up to $1 million a month,” Taylor said.
“The OUR should forego any increase to JPS at this time; we just cannot afford it,” she said, adding that her concern was for householders as well.
Last Thursday, Spanish Ambassador to Jamaica Jesus Silva pointed out that the high price that local and foreign investors have to pay for electricity is hurting their ability to stay in business.
“The electricity factor is a very great hurdle to make investment in Jamaica profitable. It is a concern that the foreign investors have, and it is a concern also shared by some companies of the private sector,” Silva told the Observer after speaking to the issue at the Rotary Club of Kingston’s weekly luncheon at the Jamaica Pegasus Hotel in New Kingston.
He said that due to the high cost of electricity, Jamaica has become the second most expensive country in the Caribbean for Spanish hoteliers and that the problem is threatening their viability.
“There is only one country which is more expensive; Bahamas, which is only a little bit more expensive,” Silva said. “But apart from that they (investors) are paying something like 50 per cent more than in the Dominican Republic, which is an expensive country, and almost 100 per cent more than in Mexico,” he said.
Yesterday, Judy Schoenbein, area chairperson for the Jamaica Hotel and Tourist Association (JHTA) South Coast chapter agreed with Silva.
“You’re looking at small properties on the South Coast that have like 10 bedrooms with a swimming pool, some of them are up to $600,000 and $700,000 a month. Now how on earth are you going to be able to cover your operational costs with that kind of bill,” said Schoenbein, who is also a vice-president of the JHTA.
She gave an example of an attraction which, she said, operates six days a week from 9:00 am to 5:00 pm and is billed somewhere in the region of $420,000 per month for electricity.
The magnitude of the effect that energy charges is having on the sector was reflected in the figures provided by the Sandals/Beaches group, which said it has experienced an average increase of just over 50 per cent in utilities costs for the first four months of this year.
“In April alone, for instance, our utilities costs came out at $138 million, and electricity accounted for the lion’s share,” said Sandals executive David Davies.
He pointed out that the cost would have been higher had the resort chain not employed strict energy conservation measures.
“It’s really, really killing us,” said Sandals chairman Gordon ‘Butch’ Stewart, who called on Tourism Minister Ed Bartlett to get acquainted with the operations side of the tourism industry and ensure that the product is not prohibited from being upgraded by high overheads.
“My advice, for free, to Mr Bartlett is to get with the important part of the industry and see to it that hotels, once built, can be efficient, modern and profitable,” said Stewart, who is also chairman of this newspaper.
It is impossible, he said, for an older product to successfully compete against products elsewhere that are able to refurbish with relative ease.
Stewart said that he and his marketing team — which is now engaged in extensive Jamaica sales blitzes across Canada, the United States, United Kingdom and continental Europe in an effort to counter visitor fallout from the civil unrest — are willing to do anything to support Jamaica’s tourism marketing efforts, however “we cannot stand by and watch costs soar and not say anything about the mixed-up, messed up policies that are strangling tourism”.
The view that the electricity rates are too high and that the OUR should forego the inflation adjustment was also supported by Evelyn Smith, chairperson of the JHTA Negril Chapter; and Ian Dear, CEO of Island Entertainment Brands.
Said Smith: “Any increase to the sector right now on any of the cost inputs would be incredibly burdensome. We can’t bear it.”
Dear, who said that his electricity costs have “more than doubled in the last two years”, lamented that even though the businesses in his group practice energy conservation they are having difficulty making anything looking like a profit.
While he accepted that JPS needed to make a profit, he said that a guaranteed percentage return “puts too much pressure on everybody else”, especially when you have no choice but to use the JPS.
