Not a new blog, but a new discovery

Thanks to Jeremy Deacon at Bermuda Blue, I’ve just spent more time than I should have looking at Tucker’s Farm’s blog which is a wonderful and slightly wacky blog on the joys of raising goats and making goat cheese in Bermuda.

More than that, it’s a reflection on life in Bermuda – and well worth the read.

 

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Sluggish tourism

Hamilton Princess

The Hamilton Princess’s new 1609 wing

The Bermuda Tourism Authority released its second quarter arrival statistics last week, which gave some indication of the health, or lack thereof, of Bermuda’s second economic pillar.

Tourism continues to attract a greater amount of attention in Bermuda than its limited economic weight would suggest it deserves. This is partly attributable to its historic legacy but more importantly because it remains a major employer, arguably generating more jobs – especially for people with a limited skill set – than international business.

And as some economic observers have noted, even a financially unsuccessful tourism sector is needed if Bermuda is to continue to attract and retain international business.

Bermuda has also embarked on still fairly novel experiment in tourism, by ceding much of the Government direction of tourism to the BTA. This experiment is still in its early stages, but the second quarter figures give some clues as to how the BTA is getting on.

The statistics are a little disappointing, especially given the continued US economic recovery:

Overall Q2 arrivals: Up five percent to 223,121

Year to date arrivals: Up four percent to 254,342

Q2 and YTD cruise arrivals: Up nine percent to 146,916

Q2 air arrivals: Down three percent to 72,838

YTD air arrivals: Down two percent to 103,804

So the overall increase was mainly driven by the rise in cruise arrivals, and the main reason they were up over 2013 was because a number of cruise arrivals were cancelled last year because of a fire on one cruise ship and because of the remedial work on the Heritage Wharf.

In other words, had 2013 been a “normal” cruise season, cruise arrivals in 2014 would probably be flat – and certainly not up as much as nine percent.

The figures are still welcome – but they do not suggest a great improvement in Bermuda’s tourism performance.

Worse, air arrivals are down. Again, there is a capacity reason for this – the number of hotel rooms available were down by eight percent in Q2 due to renovations, mainly to the Hamilton Princess. Available rooms were down 12 percent YTD, mainly for the same reason.

Occupancy rates for the hotels actually increased, but the number of rooms booked actually fell, which is worrying, although it may reflect the inability of people to book rooms at peak periods.

Because of the seasonal nature of Bermuda’s tourism industry, it has a couple of problems. In the offseason, most of Bermuda’s hotels have pretty poor occupancy rates (in the first quarter, occupancy rates reported by hotels were 40 percent; in 2013 they were around 30%).

On the other side of the coin, Bermuda does not have sufficient capacity in the peak period – during the Newport Race in June,   an insurance conference was being held at the same time, and people were complaining they couldn’t get a room.

Still, there is an expectation that the BTA would bring private sector energy and innovation to the sector and start to improve arrivals.

That’s not quite been the case, although the fact the BTA has still been recruiting its team and building its organization may have something to do with it.

The BTA also noted: “It should be noted that external factors such as inaccurate information about beach pollution, air route shifts, public transportation disruptions, reductions in international business and fewer hotel beds at higher rates all could impede Bermuda’s fledgling economic revitalisation.”

That may be so, but in the end, the BTA will be judged on how it overcomes hurdles and produces results.

There is some other good news. It looks like some of the projected hotel developments are gathering steam, and if casino legislation passes, and it likely will, this will also help, although not by as much as its keenest proponents might think.

The need for better service in our hotels remains vital as does the need for plant improvements. And it’s ironic that the biggest hiccup in tourism this week came in public transport at Dockyard – the one area that remains under direct Government control. So perhaps it is just as well that tourism is now in more autonomous hands.

http://www.gotobermuda.com/uploadedFiles/Bermuda_Tourism_Authority/Pages/BTA%20Metrics%20-%20Q2%202014.pdf

http://www.royalgazette.com/article/20140806/NEWS/140809873

 

 

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Turning around the economy

As he promised, former Bermuda resident Kevin Comeau has written a second part to his series on the causes of the Bermuda recession and why international companies have left or reduced jobs here.

He says that, in one of those strange economic twists, the surge in reinsurance company growth post-9/11 and Hurricane Katrina turbo-charged the economy but also made Bermuda too expensive for more cost-conscious international companies like captive managers and fund administrators who then started to reduce their presence.

But he also acknowledges that this trend was exacerbated by government policies, namely:

  1. “Term Limits;
  2. Large increases in taxes, particularly payroll taxes; and
  3. Government corruption (which tarnished the island’s international reputation and led to large government deficits and higher taxes).”

This is basically correct. I would argue that the sale of Bank of Bermuda to HSBC also added to the excessive amount of liquidity in Bermuda and much of that money was then invested in real estate which both created a bubble there and increased prices and costs for our customers.

And the Government does need to take some of the blame for the overheating of the economy as well. Rather than using the tools it had to slow growth to sustainable levels, it positively encouraged it and went on a spending binge which has left public finances in their current dire state.

If, as was discussed at the time, Government had issued a bond to suck up some of the HSBC liquidity, we would be in better shape today, simply because debt payments being made by Government would be going to Bermuda residents who in turn would spend or reinvest the money here.

Comeau says we now need to look at those causes and redress them in order to turn the economy around.

But simply fixing the mistakes is not enough now. Bermuda cannot assume that the value proposition that worked in 2003 will work now. The world has changed and Bermuda has to as well.

So it’s a two-stage process. The first is to fix the mistakes. So far term limits have been dropped and immigration policies relaxed.

There have been some efforts to reduce taxes in certain areas, but the Finance Ministry has shown a reluctance to actively reduce taxes across the board (either payroll tax or Customs duty) in order to kick start the economy. The natural fear is that tax revenues gained from economic growth will not offset the reduction in revenue caused by lowering the tax rate. But I think there has to be a magic number where the gains can be achieved.

On corruption, there was a hope that the new Government would end that perception. But they have so far failed to actively determine whether there was any validity to the perception that parts of the government under the previous administration were corrupt and there is now concern as a result of Jetgate that this government may not be squeaky clean. There is no evidence of this, but perception is a dangerous thing.

So what else can be done? The Bermuda Tourism Authority (BTA) and the Bermuda Business Development Agency (BDA) need time to start showing results and there need to be efforts to encourage new forms of business to Bermuda.

Service industries need to do a better job of encouraging new businesses (opening a new bank account or getting a new phone line remain exercises in extreme frustration) while there also needs to be some relaxation of the Employment Act, which is now acting as a deterrent to job creation, along with the costs of taxes and benefits.

A quick note on the PRC controversy: This is an example not of a bad policy, but of bad communications. There is a strong argument to be made for giving Bermuda status to PRCs. There are legitimate fears of displacement as well, especially for black Bermudians. And there are politicians who will exploit those fears to death. But no one is making the opposite argument with very much force – namely that this step will give security to a group of people who are already here and working and are committed to Bermuda. This step will send a message to the world that Bermuda welcomes and wants foreign direct investment which in turn will generate jobs and better incomes for Bermudians.

It’s not too late to make this case. The Government communications team needs to get on with it. And Michael Dunkley needs to get in front of this issue along with his strongest Cabinet Ministers and not leave it all up to Michael Fahy. More on this later.

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New Bermuda blog

Welcome to Ananda G Hill’s blog “The Soap Box” and thanks to Jonathan Starling at Catch a Fire for pointing it out – Bermuda bloggers must stick together!

If my experience is anything to go by, sustaining a blog when you are doing lots of other stuff, including earning a living, is the hard part, and it takes time and effort to do it well.

There’s a tendency to do things in bursts and then to go silent for a while, which reflects life, but is not a good way of building up a loyal readership, if that’s your goal.

Anyway, good luck! The more views and opinions there are about Bermuda, the better.

 

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The cause of the Bermuda recession

Former Bermuda resident Kevin Comeau has a good piece here on “the cause of Bermuda’s economic collapse” which makes a strong case for the fact that the loss of jobs in international business was the main contributing factor.

On the face of it, he is right. The loss of jobs in international business caused, mostly, the loss of jobs in other sectors. A few were lost because of the downturn in tourism that immediately followed the 2008 economic crisis, but given how tourism’s contribution to the economy had already shrunk, the impact there was less.

It could be argued that even if international business had not shed jobs, we would not see a great deal of office construction, but it is likely that residential, hotel and infrastructure construction would be stronger in a more buoyant economy. And the success of the Green family’s Waterloo building suggests there is still some appetite for new Grade A office space. But the tenants who went there almost all came from other offices in Hamilton, not as a result of new economic growth.

But these are minor quibbles – Comeau’s main argument is on the money. He also makes the crucial point that the cause of the job losses was not the global economic crisis, but problems in Bermuda. This is because most of those jobs still exist – they’re just not here any more.

Comeau promises a further article with more detail on why the jobs were moved from here, and that’s the more interesting and controversial question. I’m looking forward to Part II. Like “The Godfather”, this may be one of those times when the sequel is better than the original.

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ABIR’s big contribution

reinsurance

This Willis Re graph shows property catastrophe pricing trends since 1990.

1,516 employees in Bermuda.

$886.8 million spent in Bermuda.

Those are the two standout numbers form the Association of Bermuda Insurers and Reinsurers’ annual report, and there’s good news and not so good news associated with them.

The good news is that the $886 million figure is an increase of almost $70 million from a year earlier – no small potatoes these days.

The not so good news is that the 1,516 employees are 73 fewer than a year earlier. However, ABIR points out that this is partly due to its own membership changes. When the 17 members who reported in 2013 are compared directly to the same members in 2012, the decline is much smaller – six.

Among Bermudian employees, there were 992 in 2013, down 86 from 2012. Again, when apples are compared with apples, the decline is only 16. So that’s not good, but not catastrophic.

The other number worth noting is this one: “In 2013, 24 employees left Bermuda to work for their companies outside of Bermuda, of which 20 were Executive/Senior/or Middle Management positions. In 2012, 32 employees left Bermuda to work for their companies outside of the country.”

That’s a sign that the trend is slowing, but it’s disappointing that it has not been reversed. Keep in mind it’s senior executives who spend the big money.

But Mike McGavick, Chair of the ABIR Board, and CEO of XL Group, has some positive things to say about this: “The Government’s action to ease business travel restrictions, lengthen work permits and foster long term residence opportunities will bear fruit over time in employee location decisions.

“For every employee we bring to Bermuda, more jobs for Bermudians are created. The trend towards consolidation and the soft market conditions, however, will continue to affect our local employment.”

The latter point is important.

The reinsurance industry is going through a once-every-few-decades soft market, with rates declining rapidly. ILS has contributed something to this, but the bottom line is that this is not a hiring market, so giving insurers more reasons to base executives here will be offset to some extent. But not taking these measures means things would be worse.

One further point: ABIR members are a big chunk of the re/insurance market in Bermuda, not the whole shooting match. So their contribution is only a part of the insurance industry’s contribution.

Final, final point. Ask yourself what Bermuda would look like without that $880 million a year and 1,500 foreign exchange earning jobs.  Very scary.

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Murder on the roads

There have been two more road deaths this weekend, bringing the number this year to eight, or  more than one a month.

Jeremy Deacon at Bermuda Blue  raised this issue earlier this month, pointing out that if there had been six murders (to that date), there would have been a public uproar, yet people accept road deaths as just one of those things. Update: Here’s Jeremy’s latest on this.

Dr Joe Froncioni has made some eminently sensible, research-based recommendations on this which no government has seen fit to take up.

Froncioni is the man who helped to push through mandatory seat belt wearing which has reduced deaths and serious injuries in car collisions (they are almost never “accidents”)dramatically.  No one has done more to make our roads safer than him. No one has received so little recognition either.

His proposals, for roadside sobriety rests, random road checks and zero tolerance for drink driving would go a long way to ending the deaths and crippling injuries. He has also pushed against the hospital and medical establishment to make emergency room physicians record and report when people injured in collisions have been drinking or abusing an illegal substance.

Will these most recent deaths be enough to wake up the powers that be? Let’s hope so.

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Mighty Cleveland

Cleveland County have won an Eastern Counties game for the first time in 33 years – which will be an encouragement to underdogs and whipping boys everywhere, including fellow Counties strivers Mighty Flatts Victoria.

By upending St David’s, the fellas from Harris Bay can now go on to defend their title – the match winner become the title holder by default in one of the many quirks of County games – and there’s no reason to think that they can’t beat Bailey’s Bay and Flatts as well.

This is an especially poignant achievement for Allan Douglas Jr, whose wicketkeeper father kept the Cleveland flame alive for many years while they endured ritual beatings from the two big clubs in the competition.

Although they had a bit of help from their guest players, this victory belongs to Devil’s Hole and its denizens.

But a tip of the hat goes to coach Clay Smith, who beat big brother Wendell with this win. It does make you wonder why St George’s doesn’t bring those two guys back home to restore some of the lustre to a club which is a shadow of its once powerhouse self.

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