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Thought To Ponder

The collectivists have not abandoned their ultimate goal to subordinate the individual to the state.
Barry Goldwater

 Before You Buy The Cow, Buy The Pasture 
17 April 2009
Patrick A. Rahming

“Before you buy the cow, buy the pasture”. This piece of advice is given in a book on the management of personal finances, and is used to advise individuals to put their effort into creating investment income before seeking such cash-eating things as a large house or a boat. But the principle applies at all levels of economic activity, and provides the Bahamas with the most valuable advice for its present circumstance.

The various governments of the Bahamas have based their appeal to the electorate on their provision of infrastructural and social services, and every new national budget boasts that such things as education, health care and security are being provided with adequate funding. The money to pay for these items is assumed to come from a few sources: a variety of indirect taxes like customs duties, real property and corporate taxes, revenue from casino and other resort-related activities and the movement of money through one of the world’s top financial services systems. Statistics show that more than two thirds of that income comes from tourism activity. In other words, if social and infrastructural services are the cows, tourism is the largest part of the pasture on which they must feed.

It is therefore reasonable to assume that the various governments would place the highest priority on the care and protection of that pasture, on the revenue generated from tourism to pay for social services. It would also be reasonable to assume that the provision of those social and infrastructural services should be planned based upon the health of the tourism industry. That is, that the size of the herd must be dependent on the size of the pasture. And that during those periods when business is bad, we must reduce our spending on social services, or go into debt to supply them. Or we find our selves committing to spend money we don’t have.

The reality is that that is exactly what we do. We tell our citizens they will have their cows: their new roads, their public housing, free healthcare, schools and universities. Meanwhile we leave the health of the source of the funding – the pasture – to offshore advertising programs, with not even an agreed way to measure success. In fact, we buy more cows as the size of the pasture shrinks, conscious of the fact that the popularity we enjoy is largely based upon our promises of cows, regardless of whether they are paid for or not, or whether they will eventually die of starvation. But the pasture is on fire.

For almost two decades, we have watched the quality of our tourism business fall. First we recorded falling levels of spending, both by stopover visitors and by cruise ship passengers. Then we saw the disintegration of our attractions – Speed Week, Hobby Horse Hall, Fort Charlotte Sound and Light Show, local nightclubs, like the Cat and Fiddle, King and Knights, Drumbeat, the real Straw Market etc. -  and the consequent complaints by our customers that Nassau has become so un-interesting that one trip up Bay street completes a visit. The past two years have seen falling tourism arrivals, cleverly reported as rising numbers by the inclusion of cruising statistics, along with falling revenues. The pasture is ablaze, and the heat is threatening our future.
Meanwhile, we assure our citizens that the fire is just a temporary set-back, that the flames will soon die down on their own, and then the pasture will re-grow. While our neighbours are busy planting new seed, fertilizing and extending their pastures, we celebrate having recently won an award for Best Lit Pasture. Then we announce the purchase of another dozen cows.

The late Ray Charles once said that he could see more with his hands that his friends could see with their eyes. You see, the eyes are easily fooled. Statistics convince the eyes that despite the sound of thunder, the weather is fine. During the 1990’s, despite the fact that our neighbours increased their stop-over visitors by two and three hundred percent while the Bahamas increased by less than twelve percent, we celebrated having achieved record numbers, and continued to tell ourselves we were the number one destination in the region. By 2000 we had in fact dropped to number three. But our Tourism administrators explained that our new top market, cruising, had become more popular, without explaining that our product had become so un-appealing that the only business we could attract had become business where we were incidental to the primary traffic. Or that, even then, we were having to pay to attract that business.

So by the end of the 1990’s, the Bahamas’ ability to feed its cash-requiring cows had already been significantly reduced. Both governments saw this, and set out to convince us that they could generate new pasture through aggressive new overseas programs and high profile resort properties. Unfortunately, focus on those devices confirmed a lack of appreciation for the mechanics of the tourism industry.

Tourism revenue is earned from two sources: services and infrastructure. The services are those businesses that contribute to the delivery of the unique experience that makes the destination successful, grouped around the quintessential tourism service, Tours (tours, attractions and entertainment). Infrastructure includes the businesses needed to support the hosting of large numbers of people, including accommodations, transportation and the hospitality infrastructure. In a successful tourist destination, the income from the services provides the destination with two thirds of its income. It is worth noting that from the other third, the infrastructure income, much of the revenue does not benefit the destination, since the major providers – the hotel chains, the airlines and the travel networks – are foreign owned, and their income must be repatriated. It is therefore clear that to benefit from tourism, the services must be developed and harvested, and that a focus on large, internationally-owned chain-driven properties and second homes is counter productive.

The herd is growing, while the pasture is shrinking. And most of the remaining pasture is owned by absentee landlords. Even for Mr. Charles, it would be clear that it is time for urgent concern. The two key questions at this point are: How did we get like this? And what do we do about it?

The immediate cause of the decline is pretty straight-forward. The state of our product is inadequate for competing in the global (or even regional) tourism market. For example, in Nassau we have allowed every experience that has the potential to set us apart in the marketplace, everything that gives us a unique identity, to crumble, rot or to go out of business. From nightclubs to straw markets to sea gardens to special events. This because of our commitment to spending our tourism development dollars overseas, rather than investing in the health of the local plant. In fact, for the past fifty years the Bahamas has pursued a policy of overseas advertising as its strategy for developing tourism business. Sir Stafford Sands started that policy, and every government since has blindly continued its use. The fact is that while they have continued that blind adherence to yesteryear’s technique, the world has changed.

Fifty years ago vacation choices were made largely on the basis of available cash and time, and therefore such issues as proximity, good hotels and cost were important. Advertising that offered an exotic experience to people with time on their hands were effective, and until the invention of the credit card and the development of fast airplanes and the internet it provided a constantly growing business. For the past two decades, however, destinations have had to convince a much wider range of customers that the experience they have to offer is both powerful and unique. The device with which they have worked is called Destination Branding.

So the reason for the decline in our tourism business is that we are poorly branded. And we are poorly branded because we have both ignored our latent brand (a small country of Africans with British trappings in a tropical island setting) and encouraged offshore advertising agencies to imply other, non-existing branding.  Here is a comment from the book “Destination Branding” edited by Nigel Morgan, Annette Prichard and Roger Pride, as it discusses global competition in tourism:

“…..despite this aggressive marketplace, how many country advertisements do you see which portray blue seas, cloudless skies and endless golden beaches with less than memorable tag lines? What does differentiate one Caribbean or Mediterranean island from its nearest neighbour? Rarely sun and sand. In the marketplace what persuades potential tourists to visit (and revisit) one place instead of another is whether they have empathy with the destination and its values. The battle for customers in tomorrow’s destination marketplace will be fought not over price, but over hearts and minds – and this is where we move into the realm of branding.”

We have not even entered the battle for hearts and minds, and therefore the war is not going well at all. That is where we are. That, to answer the first question, is how we got to those dire statistics.

Now to the second question: What do we do about it?

Recovery from our present condition requires two serious policy changes by government. The first is to change our business development strategy from overseas advertising to brand management. The second is a commitment to providing both the education and the resources to develop an attractions infrastructure, starting with the refurbishment of the existing stock, then the encouragement  of the kind of new attractions that reinforce the new brand proposition.

The change of policy to brand management requires a 3-stage set of commitments. The first is a look in the mirror. We cannot begin a conversation about branding without a clear picture of how we are presently perceived in the marketplace. And this self-search must be intense. It must also result in a document with which to approach future planning. The second stage must be a commitment to a future perception. We must decide how we want to be perceived ten years from now, with the understanding that that “brand” would connect with a significant part of the available global market. And finally, we must commit to a long-term provision of resources to carry out the tasks necessary to move from step one to step two. These are behind-the-scene actions, which, unfortunately, will show little or no impact on tourism activity initially. They are, however, the most important economic commitments possible.

The second commitment is to the creation of an environment rich with opportunities to share the uniqueness of the Bahamas through the development of attractions. (An attraction is any device that packages a unique experience and offers it for a profit, from a book to a restaurant to a theme park.) This also requires several steps, but more importantly, it requires a commitment to a real partnership between government and the private sector.

It requires that the government create the kind of legislative environment that encourages the private sector to create attractions businesses. In return, the private sector must relearn the rudiments of the tourism business, as requiring more than just retail. It requires that the government create an administrative structure that assures the proper maintenance of public-owned attractions properties, and provides opportunities for private-sector participation in their attractions experiences.

It requires that government use its influence to make funding agencies more responsive to attractions-based business proposals, while the funding agencies themselves develop financial products that support the attractions and entertainment businesses, as a foundation of our economy.

However the most important part of this commitment is the requirement for a very different attitude by government towards cultural expression. Rather than an activity for which government is proud to find funding or public opportunities for exposure because of its social benefit, cultural activity must be acknowledged as the primary product in the business that drives (or should drive) our economy. Facilities and training to support cultural activity must therefore be seen as what it is – an investment in our National business. Skimping on that investment reduces the possibility of growth for that business. Rather than seeing how little we can spend on cultural activity, we should be spending as much as possible on business development.

These two commitments are necessary to recreate a reliable source of income to fund the lifestyle we have promised our children.

Finally, it is necessary to discuss our strategies for cooperation with our regional friends. Recent indications are that we have committed to joint action for the development of tourism in the region. While there is obvious benefit in regional cooperation, there are boundaries to that conversation that must be respected. Those boundaries are defined by the difference between services and infrastructure. As noted above, the services in the tourism business are related to the tours that give access to the story of the Bahamian people as unique experiences. Our friends might help us promote the region, develop infrastructure like air and sea transportation and formulate policies for external relationships. But they can not help us develop the branding needed to compete globally. In that arena, they are our competition. For example, while we have been concerned about regional cooperation, we have been replaced in the marketplace as the place to play golf by the Dominican Republic, as the quintessential tropical paradise by Jamaica and as the place where European culture has found superb African expression by Cuba. When it comes to the telling of the Bahamian story, we must look after our own business.

Tourism is the pasture that feeds the cash-hungry requests for social services and infrastructure. That pasture is afire, and burning bright, lit by neglect, arrogance and obsolete policies. If our children are to inherit an estate that provides food for the herd, we must rethink our approach to our National business. We must immediately put out the fire, expand the pasture and provide the care and attention it needs to generate new growth. Then, perhaps, it will be time to look for more cows.

April 1, 2008

To contact the author via his web site click here...

The views expressed are those of the author, and not necessarily those of the Nassau Institute (which has no corporate view), or its Advisers or Directors.

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Comments

Antoine Brooks - 4 July 2009 20:18
Before you buy the cow...Call the fire engine!!!
Call the fire engine, tell them to come run quick, the pasture is on fire and the government ain't doing...Rahming is a genuis! & Gov't should not only assist but take the lead. That's what has been the problem with successive governments. No VISION! "Effective leadership is putting first things first." (-Stephen Covey) We branded ourselves as an offshore finiancial center and that's why we have so many offshore banks. What branding does is creates a niche. Rahming ideas on amusement parks (I always thought we could play off our history with pirates and use the Forts as an reinactment of some sort of battle. This is done in America with the Civil War and is very successful) and various cultural experiences are right on. This is where the private sector comes in but leadership (Government) should point us that direction and put in place the programs and incentives to encourage the private sector (entreprenuers) to make it happen!
gordon rodland - 3 May 2009 10:31
Before you buy the cow . . .
Pat Rahming's got it right except that you cannot rely on Govt to do it. Product branding is the job of the private sector. Govt should assist only in providing encouragement, less regulation/more freedom and possibly guarantees for private funding, including sale of the pasture (e.g. Crown land - if that is what the private sector needs).
Nicolette Bethel - 19 April 2009 21:29
Great article
I'll be linking to it soon.

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