Document of

The World Bank F-tILE "COPY"FOR OFFICIAL USE ONLY

Report No. 2346-BB

STAFF APPRAISAL REPORT

BARBADOS

TOURISM PROJECT

March 28, 1979

Tourism Projects Department

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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BARBADOS

TOURISM PROJECT

CURRENCY EQUIVALENTS(since July 1975)

Currency Unit = Barbados Dollar (BDS$)BDS$2 = US$1BDS$1 = US$0.50BDS$1 million = US$500,000

WEIGHTS AND MEASURES

1 meter (m) 2 39.37 inches (in)1 square meter (i ) = 10.76 square feet1 cubic meter (m ) = 35.3 cubic feet1 kilometer (km) = 0.62 miles1 hectare (ha) = 2.47 acres

GLOSSARY OF ABBREVIATIONS

Apartel - Apartment HotelBDB - Barbados Development BankBTIC - Barbados Tourism Investment CorporationCARICOM - Caribbean Common MarketCDB - Caribbean Development BankIDB - Inter-American Development BankIDC - Industrial Development CorporationMinistry of - Ministry of Caribbean Affairs, External

Tourism Trade, Industry, Aviation and TourismOAS - Organization of American StatesVMC - Village Management Committee

GOVERNMENT OF BARBADOSFISCAL YEAR

April 1 to March 31

FOR OFFICIAL USE ONLY

BARBADOS

STAFF APPRAISAL REPORT

TOURISM PROJECT

Page No.

I. THE TOURISM SECTOR .................................. 1

A. Tourism Assets ................ .................. 1B. Tourism Flows ................................... 1C. Tourist Expenditures ..... ....................... 3D. The Hotel Industry ..... ......................... 3E. Transportation, Handicrafts and Other Services .. 4F. Organization and Planning of the Sector .... ..... 5G. Training ........................................ 7H. Social and Economic Aspects of Tourism ...... .... 7

II. THE PROJECT ............. ...... .. .... . ... 10

A. Project Background and Objectives . . .10B. Project Description ...... .... 11

C. Project Cost ...... . ...... 14D. Project Financial Plan . .17E. Project Implementation .19

III. MARKET DEVELOPMENT AND PROSPECTS .................... 21

A. Caribbean Region ................................ 21B. Barbados ....... ................................. 22C. Heywoods Village ................................ 23

IV. PROJECT ORGANIZATION AND MANAGEMENT ............. .... 24

A. Organization .................... 24B. Management ................... ................... 27

V. FINANCIAL ANALYSIS ............................... . 30

A. Barbados Tourism Investment Corporation ......... 30B. Hotel/Apartels and Concessions .................. 32

VI. ECONOMIC EVALUATION ...................... 36

A. Project Benefits and Costs ......... .. ........... 36B. Project Beneficiaries ......... .. ................ 37C. Balance of Payments Effect ....................... 38D. Project Risk ................ .. .................. 38

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Page No.

VII. SOCIAL ASPECTS ..................... 0fi.... .. 39

VIII. AGREEMENTS REACHED DURING NEGOTIATIONS ANDCONDITIONS TO BE FULFILLED .40

ANNEXES

I. STATISTICAL TABLES (1-3-2)

II. PRINCIPAL ASSUMPTIONS USED IN THEFINANCIAL AND ECONOMIC ANALYSIS

III. SOME TERMS AND CONDITIONS OF MODELLEASES BETWEEN THE BARBADOS TOURISM INVESTMENTCORPORATION AND HOTEL/APARTEL OPERATORS

IV. RELATED DOCUMENTS AND DATA AVAILABLEIN THE PROJECT FILE

MAPS

IBRD Nos. 14043, 14044 and 14045

The appraisal mission consisted of Messrs. P. Murgatroyd, L. Vera,

H. Hechtenberg, A. Mates, I.A. Menezes, E. Thompson (IFC) and Ms. Leung, who

visited Barbados in September-October 1978. While in the field, the mission

received assistance from Messrs. K. Awunyo (LEG) and G. Papadopoulos (LC2).

BARBADOS

TOURISM PROJECT

I. THE TOURISM SECTOR

A. Tourism Assets

1.01 The tourism assets of Barbados have long made it a popular holidaydestination. The most easterly of the Caribbean Islands, its 166 squaremiles of territory offer the visitor extended stretches of attractive beaches,beautiful water and a pleasant tropical climate with no pronounced rainyseason and tempered with constant sea breezes. The attraction of Barbadoscomes too from its social and political stability, its relative accessibilityand its diverse range of accommodations appealing to all income levels. Oneof its major assets is the old fashioned courtesy and friendliness of itspeople, which has led to a high level of repeat visitors.

B. Tourism Flows

1.02 Prior to the 1960s the tourist industry in Barbados catered largelyto small numbers of wealthy winter visitors. It was only in the early 1960s,with the widespread use of jet aircraft, that major growth in the sectoroccurred. Excluding cruise visitors, visitor arrivals 1/ rose at an averageannual rate of 17.4% between 1961 and 1970, gradually slowed to an averagegrowth of 10.2% annually from 1970 to 1974 (Annex I, Table 1), and, due tothe energy crisis and the worldwide economic recession, declined for thefirst time in 1975 to 222,000 from the 1974 peak of 231,000. In 1976, thenumber of visitors again increased and by 1977 reached a record level of269,000. During 1978, an estimated 315,000 visitors came to Barbados, anincrease of 17% over 1977 arrivals.

1.03 Visitor arrivals to Barbados have expanded faster than elsewherein the Caribbean and its share of arrivals has steadily increased. Averageannual growth from 1970-1977 was 8.1% for Barbados compared with 3.5% forthe Caribbean as a whole and consequently its share of total arrivals tothe Caribbean rose from 4.2% in 1970 to 5.7% in 1977 (Annex I, Table 2).

1.04 The relative accessibility of Barbados in comparison with othereastern Caribbean islands has been a contributing factor to its tourismgrowth although the airlines have had trouble meeting all high season demandfor flights to the island. Barbados' Grantley Adams International Airportcan accommodate all aircraft types. It is served by 12 scheduled airlinesand is only 4-1/2 to 5 hours by air from New York and Toronto, the twolargest tourist generating markets. Connections to US cities are via directflight to Miami, New York, Boston, San Juan and, recently, via CaribbeanAirways, Barbados' national airline, to Baltimore and Washington, D.C. In

1/ Visitor arrivals can be equated with tourists, as 99% of visitors toBarbados come on holiday.

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the winter as many as 24 direct weekly flights connect Barbados and the US.Some charter flights have been operating but account for no more than 10% ofUS visitors. The Canadian market is served through ten weekly flights toMontreal and Toronto and additional numerous charter flights which arearranged by tour operators, especially in the winter season. Europe isserved via 14 weekly flights to London, Luxembourg, Copenhagen and Zurich.A German charter airline also operates a weekly flight to Barbados.

1.05 Barbados also actively caters to cruise ship visitors. During theperiod 1963-1977, the number of cruise ship passengers to Barbados increasedat an average annual rate of 10% and in 1977 numbered 103,000. However, thegrowth of this traffic has been erratic and it is of less economic importancethan other tourism.

1.06 Canada and the United States are the chief tourist generatingmarkets for Barbados, accounting for 57% of total arrivals. Barbados is,however, attempting to diversify its market and has managed to increasethe proportion of UK, German and Venezuelan visitors to Barbados from 11% oftotal visitors in 1973 to about 16% in 1977. Caribbean Commonwealth countriesare the source of 18% of the 1977 visitor traffic and other countries accountfor 9% of total arrivals.

1.07 In 1977, US arrivals numbered about 70,000 and accounted for 26%of total visitors, compared to 34% in 1973 (Annex I, Table 3). In contrast,while the US continued to be the dominant tourist supplier to other Caribbeanislands, Canadian visitors to Barbados rose from about 18,000 in 1967 to arecord 84,000 in 1977 accounting for 31% of total traffic. The UK is a moreimportant market for Barbados than for other Caribbean islands. From 1967 to1977, UK visitors grew at an average rate of 10.3% annually, reaching about26,000 in 1977 and accounting for about 10% of the total traffic.

Seasonality

1,08 Seasonality is not an acute problem in Barbados. About one half ofBarbados tourists arrive during the "'high season" months of December to April.A secondary peak in July-August coincides with school vacations in the majortourist-generating markets (Annex I, Table 4). Canadian arrivals are largelyconcentrated in the winter months, US flows are heavy in winter and in themonths of July and August, and Caribbean, European and Venezuelan visitorsarrive mainly in the summer months.

Length of Stay

1.09 Between 1970 and 1977, average length of stay of tourists in Barbadoshas increased from 5 to 9 days (Annex I, Table 5) and is longer than the oneweek average for the Caribbean as a whole. This is largely because of theexpansion in self-catering fac:lities where the average stay is longer thanin conventional hotel accommodations. Also, Europeans and Canadians stay anaverage of 15 and 10 days respectively, compared to 7 days for US visitors.n 1977, the average stay ranged from 12 days in apartments, to 7.7 days inclass "A" hotels and 304 days in guest houses,

C. Tourist Expenditures

1.10 Official data on tourist expenditures in 1977 indicate that thosetourists who stayed in recognized accommodations spent an average of BDS$124per day in winter, BDS$84 in summer and BDS$102 on an annual basis. Visitorsstaying in luxury hotels spent an average BDS$240 per day in winter andBDS$160 in summer, and expenditures for those staying in Class I apartelswere BDS$182 and BDS$116 in winter and summer respectively. It is estimatedthat 55% of total expenditure is spent on food and lodging in the hotels andapartels, and the rest on transportation, shopping, entertainment and mealsoutside the hotels.

D. The Hotel Industry

1.11 In October 1978, there were 179 accommodation establishments withover 11,000 beds (Annex I, Table 6). Capacity is concentrated on the west andsouth coasts of the island with the west coast catering primarily to the upperincome market and the south coast to lower income tourists. Between 1968 and1978, accommodation capacity doubled. While much of the expansion in thesixties was in hotel rooms in response to the growth in US arrivals whopreferred full service accommodations, the emergence of the more cost-consciouscharter package tour Canadian market during the early seventies brought asurge in apartment-type establishments, which now account for almost 50% oftotal capacity, up from about 25% in 1968. During the 1968-1978 period, guesthouse bed capacity has decreased and the number of middle and lower classhotel beds has remained at roughly the same level.

1.12 Tourist accommodation in Barbados is diversified in type, size andcategory and appeals to all income levels (Annex I, Table 7). Barbados doesnot have large hotels, the largest hotel having less than 200 rooms. Only17% of establishments have more than 100 beds while 57% have 40 beds or less.Seventy-three percent of luxury hotel capacity and 57% of the highest classapartel rooms are foreign owned while seventy-one percent of lower classhotels and seventy-nine percent of lower class apartels are locally owned.Management of the five largest hotels, which account for approximately 60% oftotal luxury hotel capacity, is in foreign hands. The foreign role in owner-ship and management represents a possible focal point upon which anti-tourismfeelings could center.

1.13 The Government has effectively encouraged construction of accommoda-tion facilities through the Hotel Aids Act which provides income tax reliefand exemptions from certain custom duties for new hotels. In the light ofdevelopments during the past ten years, however, a revision of the Act is nowbeing prepared which would control the supply of new capacity by granting theMinister of Tourism discretionary powers in approving applications for theconstruction of new tourist facilities, and would encourage primarily middleand upper category hotel and apartel construction, which Government conductedstudies have shown to have a more favorable impact on foreign exchangeearnings and employment creation than do lower category hotels and apartels.

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Occupancy Rates

1.14 Estimated total arrivals to Barbados in 1978 indicate that theaverage occupancy rate may exceed the record level of 1974 (Annex I, Table 8)when bed occupancy reached a peak of 55.6%. Certain luxury establishmentsexpected bed occupancy in 1978 to be as high as 65%. Occupancy rates forfirst class accommodation indicate a need for expansion of capacity in thiscategory in the near future. Because of more effective international market-ing programs, the luxury hotel 1977 average annual bed occupancy rate of 61.3%was the highest of any category. Apartels averaged 53.4% and guest houseoccupancy rates averaged only 25.4%. Distinct hotel preferences among thedifferent nationalities visiting Barbados partially account for the variationin occupancy rates among the different types of accommodation.

Tariffs and Profitability

1.15 Luxury hotel room tariffs, which vary between US$70 and US$136 perday for the 1978 winter season, are about twice those of other accommodations.Apartel daily tariffs range from US$40 to US$110 for the same period and over-lap with hotels in the lower price range. Summer rates are as much as 30-70%lower than winter rates (Annex I, Table 9). A comparison of prices of toursto different Caribbean destinations (Annex I, Table 10) indicates that Barbadoshas one of the widest ranges of accommodation prices in the area and that,although Barbados prices are quite competitive in the lower range, they areamong the most expensive in the upper range.

1.16 The Barbados hotel industry is one of the most profitable in theCaribbean region; a regional hotel survey indicated an average house profitof 19% of sales in Barbados compared to 13% for the region. Payroll costsaverage a relatively low 22% of sales, while overhead expenses amount to 30%.Profitability of hotels, however, varies considerably on the island. Ingeneral, well managed apartels achieve a house profit of 30-40% of sales,and luxury hotels a house profit of 20-25% of sales.

E. Transportation, Handicrafts and Other Services

1.17 Most of the areas of tourist interest in Barbados are easilyaccessible. A main highway runs along the coast around most of the islandand other roads lead into the interior. Barbados has some 2,000 taxis whichmainly serve the tourist industry. Recently, some taxi operators were per-mitted to purchase minibuses, particularly for use between the airport andcertain hotels, to cater to groups. In addition to taxi tours of the island,tourists may visit neighboring islands on air or sea excursions. Sportingactivities include deep sea fishing, sailing, scuba diving, golf and tennis.

1.18 Although production is limited to souvenir items made from straw,clay, wood, cloth and shells, tourists are buying local handicrafts inincreasing volumes. Production levels are increasing and quality is improv-ing with the assistance provided by the Handicraft Division of the Industrial

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Development Corporation (IDC). The Handicraft Division has a center whichproduces and markets handicrafts, and offers training programs. It currentlyhas five retail outlets which in 1978 had total sales of about BDS$300,000and profits of about BDS$48,000 or 16% of sales. Because of the additionalemployment opportunities in handicrafts, the IDC is taking further steps toassist the industry. It has drawn up a handicraft development plan that callsfor an increase and diversification of local craft skills, development of aneffective marketing system, improvement of the quality of products, findingnew local sources for raw materials, and the formation and development ofcraft cooperatives.

1.19 In addition to handicrafts, Barbados has some 20 duty-free shopsin Bridgetown and outlets elsewhere on the island which sell tourists manydifferent products. Although there are no specific data on the volume ofsales of duty-free goods, 1977 statistics indicate that total re-exports ofgoods, much of it representing visitor duty-free shopping, amounted to BDS$44million. It is estimated that about one third of total duty-free sales isretained in Barbados to cover wages, overhead and profits to shop owners.Duty-free shops employ an estimated 1,000 persons. Moreover, the Governmentbenefits from receipt of customs duties on goods consumed in Barbados and frominterest accrued on import duties withheld from importers until subsequentre-export of duty-free goods.

F. Organization and Planning of the Sector

1.20 Because of the importance of tourism to the economy of Barbados,major decisions relating to the tourism sector are taken by the Cabinet. Ofthe Government agencies involved in tourism on a day-to-day basis, the mostimportant is the Division of Aviation and Tourism located within the Ministryof Caribbean Affairs, External Trade, Industry, Aviation and Tourism (Ministryof Tourism). The Division is responsible for collecting statistics, monitor-ing the development of the sector, supervising studies, and administering theHotel Aids Act which provides incentives to investors.

1.21 Other agencies involved in tourism include the Board of Tourism, theBarbados Development Bank (BDB), the Ministry of Housing and Lands and theIDC. The Board of Tourism, established as a statutory body in 1958 to handlepromotion and marketing, includes members representing hotel owners, touroperators, airlines, taxi owners, retailers and the press. Board functions,in addition to promotion, include registration and classification of hotels,collection of information about the industry and promoting understanding amongthe local population of the importance of tourism to the island. The Ministryof Housing and Lands through its Town and Country Planning Department concernsitself with zoning regulations, while a Parks and Beaches Commission attemptsto preserve the parks and beaches of Barbados, advises on beach control andmaintenance and draws up and enforces regulations regarding the use of parksand beaches.

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1.22 The Government's sector planning capability has recently been aug-mented by the establishment of a Tourism Planning Committee which is chairedby the Minister of Tourism and whose members represent the Ministries ofTourism, Finance and Planning, Communications and Works, and Housing andLands, the BDB and the Board of Tourism. The Committee has responsibilityfor defining objectives for the sector and advising the Minister on the for-mulation of tourism policies and strategies. In contrast to the relativelyunplanned development of the sector in the past, the Government plans to guidefuture investment and growth to assure that the interests of Barbados arebetter served. The major objectives of the Government in this regard are:

(a) controlling the quantitative and qualitative growth of the sectorto maintain a socially acceptable balance between the number oftourists and the indigenous population and to optimize employmentand to minimize diverse environmental impact;

(b) increasing visitor arrivals and expenditures;

(c) increasing local ownership and management of the island's hotelsand other tourist facilities;

(d) establishing better linkages with agriculture and othersectors of the economy in order to decrease externalleakage of benefits; and

(e) using tourism investment to stimulate development of the northernpart of the island.

1.23 In collaboration with the Ministry of Tourism, the Organization ofAmerican States (OAS) prepared a preliminary five-year tourism developmentplan for the island in 1976/77. The plan, which has been informally endorsedby the Government, calls for the expansion of first class hotel accommodationand the upgrading of medium priced hotel and apartel facilities to furtherthe general objective of increasing visitor numbers and expenditures whilepreserving the physical environment. The emphasis is toward higher gradefacilities and away from mass tourism, and as a corollary, toward hotels andaway from self-catering tourism. Priority is placed on developing the Hey-woods Village project, the modest expansion of four existing hotels and theprovision or improvement of amenities such as public recreation centers andnational parks. The plan also suggests regulatory, planning and organiza-tional measures covering collection of statistics, zoning, conservation,marketing, handicraft production, licensing and financing.

1.24 In the private sector, the Barbados Hotel Association, which wasformed in 1957, represents hoteliers in matters of mutual interest, mostnotably tax policies and wage negotiations. It also takes on various promo-tional activities such as exhibitions and conferences, and works in closecooperation with the Board of Tourism in the public relations and promotionareas. Taxi and restaurant owners also have their own associations toprotect and promote their interests.

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1.25 The Barbados Development Bank was established in 1969 and lends toseveral sectors including tourism which, as of March 1977, accounted fortwo-thirds of its total loan portfolio of about BDS$9 million. In the yearending March 1977, the BDB made new loans totaling BDS$4.9 million to thetourism sector, mostly for construction or refurbishing of small hotels,apartels or apartments. Loans of not more than BDS$950,000 are presentlymade for periods of up to 15 years at an interest rate of 10-1/2%.

1.26 The staffing of and overall coordination between the variousorganizations and institutions is adequate, especially when considering thesmall scale and informal contacts on the island. The Government has prepareda statement expressing its general intentions relating to the proposed revi-sion of the Hotel Aids Act, and its tourism development plans.

G. Training

1.27 Basic training in tourism in Barbados is conducted both throughon-the-job training and through a hotel school operating under the Ministryof Education. The hotel school was started in the mid-sixties primarily asa vocational school for low-level employees. It was expanded in 1973/74 toinclude training of supervisory and middle-management staff. It now trainscooks, waiters, maids, bartenders, receptionists, cashiers and other frontoffice staff, food service and catering staff and middle-level hotel manage-ment personnel.

1.28 The school is turning out more graduates than needed because of lowstaff turnover, the growing tendency towards building apartments and apartelsrather than hotels, and the emphasis of the schools is too much on skills thatare not currently required by the sector. The Government is weighing severaloptions to improve the situation. Among other things, it plans to strengthenthe management and raise the status of the school, place less emphasis on''new entrants," concentrate on upgrading existing staff and gear the numberof graduates to available employment opportunities. These changes whenimplemented should enhance the school's usefulness. During negotiations itwas agreed that the Government will provide a timetable by December 31, 1979for implementing the above measures.

H. Social and Economic Aspects of Tourism

1.29 Barbados is a medium-income developing country with a per capitaGNP of US$1,760 in 1977. The island's major natural resources include soiland climatic conditions which favor the cultivation of sugarcane and tourism.The quality of the country's human resources is unusually high for the regionand adult literacy is estimated at 99%. A poor economic performance in themid-1970s is attributable to the world recession which led to a decline intourism and investment. Economic growth picked up in 1976 (to about 5%)

although the fall in international sugar prices in that year slowed down therecovery, illustrating the economy's vulnerability to external disturbances.In spite of substantial improvements in the employment situation from theend of 1975, unemployment is still serious in Barbados, amounting to 12.5%of the labor force in mid-1978; reduced emigration may further aggravate thisproblem over the next few years. Employment in agriculture has fallen byover 60% since 1960 due largely to the increasing mechanization of sugarcanecultivation. The industrial sector, including construction, retained about aquarter of the labor force, while employment in services (including tourismand government) increased from 46% in 1960 to nearly 66% in 1976.

1.30 Total direct employment in all hotels and restaurants is estimatedat 6,000 in the low season and 7,000 in the high season. In addition, atleast an equal number of people are employed in other activities that servethe tourist industry, such as duty-free shops, handicrafts, transportationand water sports. Therefore, the tourism sector employs an estimated totalof between 13,000 and 14,000 persons or about 15% of the total labor force.Earnings within the tourism industry of over BDS$400 per month for wageearners and over BDS$800 for salaried employees are higher than averageearnings in manufacturing. Among ten main sectors, the hotel industry ranksfirst as regards the level of female wages and third for male wages and secondand fourth for salaried female and male employees respectively. Women consti-tute 45% of the work force in hotels and restaurants. The percentage of womenamong total employees is higher among professional (49%), clerical (68%), andskilled groups (49%) than among unskilled labor groups (30%).

1.31 The ratio of number of persons employed to rooms is consistentlyhigher (i) for hotels than for apartels, apartments or guest houses, (ii) forhigher class hotels, and (iii) for all accommodation with 30 or more rooms.Since hotel accommodation has not increased as rapidly as other accommodationfacilities in recent years, total employment in the sector has increased at aslower pace than has the number of rooms.

1.32 Tourism is the key sector of the Barbadian economy. It contributesapproximately 10% of GDP, but this portion increases to 30% when tourism-generated services are included. Foreign exchange earnings are also heavilydependent upon tourism. Gross receipts from tourism increased from US$40.5million in 1970 to US$111 million in 1977, an increase of 15.5% annually. By1978 earnings from tourism amounted to an estimated 44% of total exports ofgoods and non-factor services. There is ample room for increasing the con-tribution of tourism to the Barbadian economy, although there is also concernregarding excessive reliance on this single sector. The Ministry of Tourismhas estimated that there is scope for at least doubling the number of hotelbeds on the island from the present capacity of around 11,000 beds. The northand east coasts of the island are virtually undeveloped and even on the moreheavily developed west and north coasts there is space for some expansion.The sector's contribution could also be increased by capturing a larger pro-portion of the high income tourist market and reinforcing the linkages of thesector with the rest of the economy.

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1.33 While the attitude of the Barbadian people toward tourists remainsfriendly and positive, the Government is becoming increasingly concerned aboutregulating the quantitative and qualitative growth of the sector to maintaina socially acceptable balance between the total number of tourists and thelocal population, minimize the negative environmental impact of tourismdevelopment, and optimize benefits to the economy from future development.

1.34 While limitations on quantitative growth will probably become moreimportant in the future, the qualitative aspects of tourism development andthe benefits and linkages that can be developed between tourism and othersectors of the economy are of greater importance at this juncture. In con-trast to the past, the Government has now decided that it should play a moreactive role in future tourism development. It has already concluded that:

(a) catering to the higher income segment of the tourist market wouldincrease the earnings of the sector;

(b) developing hotels of more than 30 rooms has a greater impact onemployment than developing other types of accommodation;

(c) use of land must be better controlled, so that only certain typesof facilities can be built in various parts of the island;

(d) existing facilities need to be upgraded and marketed more effec-tively;

(e) future expansion should be determined after careful considerationof occupancy rates of existing facilities;

(f) active measures are needed to foster stronger linkages with othersectors; and

(g) selective Government investments in the tourism sector could helpachieve these objectives.

1.35 The Government has collaborated on the preparation of, and informallyendorsed, the OAS Tourism Development Plan which places high priority on theHeywoods Village proposal. Also, as previously mentioned, the Hotel Aids Actof 1967 is being revised to provide the Government with both guidelines andnecessary powers. Hotels with less than 24 rooms are no longer eligible forhotel credit from the BDB. Restrictions have been placed on the import ofmeats, vegetables and other products that are produced and available locally.Agricultural, fishery and handicraft projects are being developed that willcater specifically to the tourist population. Although all beaches are public,the Government is taking additional specific steps to ensure that the publichas easy access to the beaches as well as other recreational areas on theisland. The Board of Tourism conducts regular seminars for the local popula-tion on the benefits of tourism on the island. It has also initiated a verysuccessful program entitled "Evening on Us" under which tourists are invitedto the homes of local residents on occasion for a "soiree."

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1.36 Given the acute awareness of both the Government and the relativelywell educated population as to the importance and benefits of tourism, andgiven the efforts to regulate and guide development of the sector, it appearslikely that the anticipated expansion of tourism can be carried out in a waythat will not be harmful to the social or physical environment of the island.

II. THE PROJECT

A. Project Background and Objectives

2.01 In accordance with its tourism sector objectives (para. 1.22), theGovernment, with the assistance of consultants, has prepared an innovative308-room hotel village project comprising a cluster of seven hotels andapartels which would have individual Barbadian management and would preservethe individuality of decor and intimacy of small hotels. The hotels togethercould also support the investment required for the kind of amenities andfacilities now enjoyed only by large luxury hotels, including a meeting hall,common recreational facilities, bulk purchasing and an international marketingprogram.

2.02 The proposed project would be located at Heywoods, the site of anold plantation in St. Peter's Parish just north of Speightstown and near thenorthern end of the west coast of the island some 12 miles from the capitalof Bridgetown (Map 14043). Speightstown is an old settlement which for manyyears was the only harbor from which sugar, molasses and rum were shipped, butits commercial and economic importance declined with the construction. of harborfacilities at Bridgetown. While remaining the second largest urban nucleusin Barbados, Speightstown now has a population of only about 2,500 and isessentially a rural and fishing community. The town has some fine architec-turally and historically valuable properties that are of interest to tourists.

2.03 The Government plans a revitalization of Speightstown, so that itcan become an important center serving the northern part of the island. Withthis in mind, the Government has engaged consultants to prepare a developmentplan for the town and is planning several projects, including the tourismvillage at Heywoods, that should have a significant impact on the area.

2.04 The Heywoods Estate is fronted by a mile-long beach of good qualitysand, with the sea offering excellent opportunities for swimming and watersports. Given its tourism potential, the Government took an option on about28 acres of land of the estate in 1976. The purchase of the land was com-pleted in December 1978.

2.05 The Heywoods Village project would add a new dimension to Barbados'tourism product, increase room capacity and further several specific objec-tives. It would increase local ownership of tourism facilities, particularlyof those catering to the upper end of the market. It would encourage purchas-ing linkages with agriculture and fisheries. It would provide more employment

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opportunities per room than much of the recent expansion of other types ofaccommodation on the island. The project would increase management opportuni-ties of tourism facilities for Barbadians, particularly of those catering tothe upper end of the market, and serve as a vehicle for the financial partici-pation of Barbadians with limited funds for investment, many of whom alreadyhave substantial managerial experience in foreign owned hotels. It woulddemonstrate the advantages of grouping small hotels where operators sharecommon services and facilities. The project would help to stimulate thegrowth of economic activities in the northern part of the island and wouldset examples for future tourism development with respect to protecting thephysical environment and public access to it, while making optimal economicuse of a prime tourism location.

B. Project Description

2.06 The project would consist of the following major elements:

(a) the construction, furnishing and equipping of five HeywoodsVillage hotels and two apartels totaling 308 guest rooms;

(b) the construction, furnishing and equipping of common buildingsand other facilities for the Heywoods Village, including anadministration building, shopping area, central restaurant,discotheque, meeting hall, beach market, internal roads, parking,public access to the beach, landscaping, utilities includingsolar water heating, laundry, small sports center, centralswimming pool, nine-hole golf course, tennis courts and main-tenance facilities;

(c) the construction of a bypass road around Speightstown and theHeywoods Village which would divert traffic from the presentroad through the town and along the beach;.

(d) a marketing program for the Heywoods Village;

(e) technical expertise for central management of the village; and

(f) project administration.

Buildings and Facilities

2.07 The five hotels and two apartels have been planned in the form of afairly dense "village" roughly parallel to the beach alongside a landscapedfootpath in a north-south alignment (Map 14044). Each building will have aview of the sea. Of the hotels, three would have 32 guest rooms each andtwo would have 48 guest rooms each. The two apartels would each have 58apartments. Room plans have been designed to provide convenient space com-mensurate with the intended market for the village. The hotels would includea reception office, lobby, bar, lounge, restaurant and a manager's apartment.

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Apartels would have rooms large enough to provide for additional sittingspace and would have a kitchenette. No restaurant would be provided in theapartels.

2.08 An administration and shopping arcade would be located in thecenter of the village and would house the central administration offices, asick bay, a small supermarket, car and cycle rental office, five shops and abeauty parlor.

2.09 The beach market has been designed as a flexible structure to beused by hotel/apartel guests, day visitors and the general public. Theprimary purposes, however, would be to provide space for the production,display and sale of local handicrafts, and space for a beach bar which wouldserve both tourists and the local population.

2.10 Laundry and maintenance facilities would be incorporated into ageneral service area for the whole village, and would include space formaintenance staff and security guards and a waste collection yard.

2.11 Facilities to be provided under the project for the recreation andentertainment of tourists and the local population would include:

(a) a small building with a floor area of about 700 sq ft to be builtnear the main entrance to the village at the edge of the golfcourse to serve as a small sports and equipment hire center;

(b) retention of the basic structure of the former Heywoods House (aplantation house) with its coral stone outbuildings as part of thecentral facilities housing a bar, restaurant and discotheque;

(c) a meeting hall to provide an area within the village suitable forentertainment purposes or for holding meetings and seminars. Themain seating hall, with a capacity of 206 seats, would include aprojection room, small stage and dressing rooms. The hall wouldalso serve the local population since no such facility is currentlyavailable near Speightstown;

(d) five tennis courts, including one exhibition court with openseating to accommodate up to 200 spectators, a small pro-shop, aswimming pool with changing rooms and shuffle board courts; and

(e) an attractively designed nine-hole par-3 golf course which willoccupy an otherwise less useful and less attractive part of thesite.

Infrastructure

2.12 Infrastructure would include a 22 ft. wide main access road intothe Heywoods Village from a bypass road (para. 2.20) to be built around thevillage. From this main access road, smaller cul-de-sac streets would provide

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vehicular access to the hotels and common buildings. A network of footpathswould be built connecting the various buildings and recreational facilities.About 200 car parking spaces would be provided within the village and 110additional spaces would be located at the southern and northern ends of thebeach for the use of the local population. An external lighting system wouldbe installed in all public areas for safety purposes and to enhance the over-all appearance of the village at night.

2.13 Safe, good quality water is available in sufficient quantity fromtwo existing nearby well sites. The Barbados water supply system operated bythe Ministry of Communications and Works, would serve the village using anew 12" diameter main to bring in water. Distribution within the site wouldbe by means of a 6" diameter incoming supply line and a 4" diameter ringmain. The water supply to each hotel/apartel, to concessions and to commonfacilities would be metered separately.

2.14 A sewerage system would be constructed for the village and wouldinclude 6" diameter gravity drains, 4 pumping stations and a sewage treatmentplant located at the end of the site. In view of the limited availability ofland, the sewage treatment plant would use an activited sludge process. Itwould be designed for a final effluent having 30 mg/l suspended solids anda 5 day biochemical oxygen demand of 20 mg/l at 20 C. The effluent would bedischarged into drainage wells located about 2,000 ft. inland. The wellswould be drilled to a sufficient depth to assure that they would reach belowthe fresh water lens. There is no danger of polluting the water supplysources as all water well fields are well identified and protected.

2.15 Storm water would be drained through a system of concrete box drainsand would be discharged through outfalls into the sea. Since the site is low,the outfall points would be within reach of the waves and would require regularclearing of sand from the drains.

2.16 Electric power would be supplied by the Barbados Light and PowerCompany from its distribution network. Entry of the high voltage supply(11 kv) would be made at two locations and an underground system of PVC ductsin the form of a ring would be provided for the high voltage cables. Companyowned transformers would be installed in transformer rooms provided under theproject. Buildings and other facilities would be metered separately. Toprovide power for essential services during a power failure, a 190 kva standbygenerator would be installed.

2.17 Telephone service would be provided by the Barbados TelephoneCompany from an existing exchange located about one mile south of Speightstown.Individual Private Automatic Branch Exchange (PABX) systems would be used foreach hotel/apartel and for the central administration. Through an internaldistribution system, one extension per room plus other extensions for supportservices would be installed. Telex facilities would be provided to thecentral office.

2.18 Solid waste from hotels and public areas would be collected dailyby electric carts and transported to the service complex. After sorting, all

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organic matter would be shredded and reused for landscaping purposes. Otherwaste would be stored in bulk storage bins and removed to a designated dumpor sanitary landfill area by a commercial operator. This practice is usedby other hotels, is approved by the Sanitation Department of the Ministry ofHealth, and works satisfactorily.

2.19 To conserve fuel resources and to take advantage of Barbados' sunnyclimate, solar energy would be used to meet the hot water requirements of thevillage facilities. Four solar heating "banks" mounted on simple structuresover parts of the car parking lots, with storage tanks at ground level along-side, would be provided. Each solar heating bank would supply two or morebuildings. A separate booster system would be installed for the laundry withsolar panels located on the roof. Auxiliary electric heating elements withinthe storage tanks would be used to help meet peak demands or during consecu-tive cloudy days. It is estimated that about 75% of village hot water needscould be supplied by solar energy.

Other Components

2.20 The existing Highway 1B, which is a major thoroughfare passingthrough the center of Speightstown, follows the coastline in a south-northdirection and separates the Heywoods Village site from the beach (Map 14045).To alleviate traffic congestion in Speightstown and allow for a natural andsafe integration of the Heywoods Village with the beach, through traffic mustbe diverted. Under the project, a 1.8 mile bypass road would run along theeastern boundary of Speightstown and Heywoods Village and would rejoin theexisting Highway 1B at the northern end of Heywoods Beach. The existingroad along most of the beach would be removed, thus allowing the beach to bewidened and improved. The remaining parts of the existing highway on theproject site would become cul-de-sac and would continue to provide directpublic access to the beach. The present road at the southern end of the sitewould be upgraded and would connect the existing highway with the bypass.The bypass would have a 24 ft. wide carriageway in accordance with Governmentstandards. As the land is generally fairly low-lying, particularly near thethe Heywoods Village, appropriate drainage would be provided.

2.21 The project also includes a three and a half year marketing andpromotional program for the village, technical expertise for central manage-ment of the village during the pre-opening period and the first two yearsof operation, other pre-opening expense and working capital for the centralcorporation and a project implementation unit.

C. Project Cost

2.22 The total cost of the project is estimated at US$17.2 millionequivalent (including duties and taxes estimated at US$0.7 million equivalent)with a foreign exchange component of US$10.9 million. The estimated costs andforeign exchange components are summarized in Tables 1 and 2 with detailsprovided in Annex I, Table 11.

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2.23 Cost estimates for civil works, furniture, fixtures and equipmentfor the Heywoods Village are based on actual, recent costs of constructing andequipping hotels and apartels in Barbados, and on preliminary architecturaland engineering studies prepared by the consultants, Robertson Ward Associates.Cost estimates for the bypass road are based on engineering studies carriedout by the Ministry of Communications and Works.

2.24 Base costs of civil works were estimated in September 1978 pricesand updated to March 1979. The average construction cost per square foot ofgross floor area of project structures varies from about US$19 for common and

Table 1: ESTIMATED COST PER PROJECT COMPONENT

% ofTotal % of

BDS$ (million) US$ (millions) Base ForeignLocal Foreign Total Local Foreign Total Cost Exchange

Hotels & apartels 3.40 8.51 11.91 1.70 4.25 5.95 48 71Common buildings 0.56 1.52 2.08 0.28 0.76 1.04 8 73Sport buildings 0.04 0.10 0.14 0.02 0.05 0.07 1 71Sport facilities 0.24 0.44 0.68 0.12 0.22 0.34 3 65Infrastructure 1.19 2.11 3.30 0.60 1.05 1.65 13 64Solar water heating 0.21 0.68 0.89 0.11 0.34 0.45 4 76Bypass road 0.74 1.13 1.87 0.36 0.58 0.94 8 60Marketing & technical

assistance 0.57 1.72 2.29 0.29 0.86 1.15 9 75Project administration 0.49 0.16 0.65 0.24 0.08 0.32 3 25Preopening expense& working capital 0.74 -- 0.74 0.37 -- 0.37 3 --

Total base cost 8.18 16.37 24.55 4.09 8.19 12.28 100 67

Contingencies:Physical (10%) 0.79 1.62 2.41 0.39 0.81 1.20 67Price (22%) 1.63 3.74 5.37 0.82 1.87 2.69 70

Subtotal 2.42 5.36 7.78 1.21 2.68 3.89 69

Land acquisition 2.07 -- 2.07 1.03 -- 1.03 --

TOTAL PROJECT COST 12.67 21.73 34.40 6.33 10.87 17.20 63

(including taxesand duties ofUS$0.7 million)

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Table 2: ESTIMATED COST BY CATEGORY OF EXPENDITURE

% of

BDS$ (million) US$ (millions) ForeignLocal Foreign Total Local Foreign Total Exchange

1. Civil worksa. Hotel & other bldgs. 2.81 6.55 9.36 1.40 3.28 4.68 70b. Sport facilities 0.19 0.30 0.49 0.10 0.15 0.25 60c. Infrastructure &

landscape 1.04 1.56 2.60 0.51 0.78 1.29 60d. Solar water heating 0.11 0.16 0.27 0.06 0.08 0.14 60e. Bypass road 0.71 1.06 1.77 0.36 0.53 0.89 60

Subtotal (1) 4.86 9.63 14.49 2.43 4.82 7.25 66

2. Furniture & fixtures 0.55 1.29 1.84 0.28 0.64 0.92 703. Equipment 0.39 2.20 2.59 0.19 1.10 1.29 854. Professional services 0.58 1.37 1.95 0.29 0.69 0.98 70

Subtotal (1 to 4) 6.38 14.49 20.87 3.19 7.25 10.44 70

5. Marketing & technical

assistance 0.57 1.72 2.29 0.29 0.86 1.15 756. Project administration 0.49 0.16 0.65 0.24 0.08 0.32 257. Preopening expenses

& working capital 0.74 -- 0.74 0.37 -- 0.37 --

Total base cost(1 to 7) 8.18 16.37 24.55 4.09 8.19 12.28 67

8. Contingencies

Physical (10%) 0.79 1.62 2.41 0.39 0.81 1.20 67Price (22%) 1.63 3.74 5.37 0.82 1.87 2.69 70

Subtotal (8) 2.42 5.36 7.78 1.21 2.68 3.89 69

9. Land acquisition 2.07 -- 2.07 1.03 -- 1.03 --

TOTAL PROJECT COST

(1 to 9) 12.67 21.73 34.40 6.33 10.87 17.20 63

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sport buildings to about US$27 for hotels and apartels. Furniture and fix-ture costs have been estimated at about 22% of the value of construction.The average total cost per hotel/apartel room in constant prices is aboutUS$44,500. Cost of internationally recruited specialists for the technicalassistance included in the technical assistance expenditures component is esti-mated at an average of US$5,560 per man-month for a total of 75 man-months.

2.25 Directly imported building materials, equipment, furniture andfixtures would be exempt from customs duties and have been costed accordingly.However, some of the building materials to be used and fuel and vehicles fortransport would be acquired by contractors on the open market and would besubject to duties and taxes that are estimated at US$0.7 million equivalent.

2.26 For physical cost increases, 10% has been added to the base cost ofconstruction, furniture, fixtures and equipment of the project buildings and toprofessional services, and 15% to the base cost of infrastructure. Estimatedprice increases are based upon the application of annual percentage rates ofprice escalation (Annex I, Table 12). Total contingencies amount to US$3.9million, equal to about 32% of the base cost estimate.

D. Project Financial Plan

2.27 The financial plan (Table 3 and Annex I, Table 13) provides for:

(a) a Government contribution of US$6.0 million equivalent, representingabout 35% of the total project cost of US$17.2 million;

(b) a CDB loan of US$3.2 million equivalent, representing about 19% oftotal project cost, for financing 80% of the investment cost of:

(i) civil works and equipment for village infrastructure, sportfacilities and landscaping;

(ii) all furniture and fixtures; and

(iii) project administration.

(c) an IBRD loan of US$8.0 million equivalent, representing about 46%of total project cost, for financing the foreign exchange componentof:

(i) civil works and equipment of all buildings and the solar waterheating system;

(ii) civil works of the bypass road;

(iii) professional services; and

(iv) marketing and technical assistance expenditures.

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Table 3: FINANCIAL PLAN

Government CDB IBRDCategory of Barbados Loan Loan Total

Civil Works 1.72 1.24 3.89 6.85

Furniture and fixtures 0.15 0.73 -- 0.88

Equipment 0.17 0.20 0.89 1.26

Professional services 0.24 -- 0.68 0.92

Marketing and technical assistance 0.23 -- 0.86 1.09

Project administration 0.05 0.26 0.31

Preopening expenses 0.59 -- -- 0.59

Contingencies 1.12 0.77 1.68 3.57

Land acquisition 1.03 -- -- 1.03

Subtotal 5.30 3.20 8.00 16.50

Taxes and duties on above categories 0.70 -- -- 0.70

TOTAL 6.00 3.20 8.00 17.20

2.28 CDB would provide parallel cofinancing for clearly identifiablecomponents of the project (para 2.27) which can be readily grouped for pro-curement purposes. In accordance with its regular policies, the CDB loanwould be repayable at 8% interest for a period over 15 years including a3-year grace period. CDB Board approval for its participation in the co-financing of the loan will be a condition of effectiveness.

2.29 IBRD and CDB funds would be lent to the Government of Barbados.The loan funds required to implement the Heywoods Village project would bepassed on to the Ministry of Tourism, while the funds for the bypass roadwould be channelled to the Ministry of Communications and Works.

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E. Project Implementation

Project Execution

2.30 Responsibility for executing the project would rest with the Ministryof Tourism. It plans to delegate responsibility for the bypass road to theMinistry of Communications and Works. Both Ministries have the requisiteexperience and competence to execute their respective responsibilities forthe project. A Project Implementation Unit is being set up within theMinistry of Tourism to ensure proper supervision of design and constructionand to coordinate between the Ministries. The Project Unit would have amanager, an engineer, an accountant, a procurement officer and other supportstaff. An airport project, which the Ministry of Tourism is currently in theprocess of implementing, is expected to be completed by mid-1979, and theMinistry plans to transfer several of the staff including the already desig-nated manager from this project to the Project Implementation Unit. Assur-ances were obtained during negotiations that the unit's key staff will beappointed by June 30, 1979 whose qualifications and experience and terms andconditions of employment would be satisfactory to the Bank.

2.31 Inappropriate development of about 100 acres of undeveloped landadjacent to the project site could have a negative impact on the project.Accordingly, assurances were obtained during negotiations that the Govern-ment will ensure that any future development of this adjacent land will becontrolled in a manner consistent with sound town and country planning con-cepts with due regard to the requirements of the project. Under the LandDevelopment Duty Act the private owners of this land will be subject to taxeson possible windfall gains which may result from the project.

Procurement

2.32 Contracts for civil works and the procurement of equipment would be

awarded on the basis of international competitive bidding in accordance withBank guidelines. However, equipment which cannot be grouped into packagesof at least US$50,000 equivalent, and civil works contracts of less thanUS$100,000 equivalent, would be procured on the basis of local bidding pro-cedures which are acceptable to the Bank. A maximum of US$200,000 in theaggregate for equipment and a maximum of US$500,000 (excluding force accountexpenditures) in the aggregate for civil works would be procured in thismanner. In the case of procurement under international competitive biddingprocedures, domestic manufacturers tendering under international procedureswould receive a margin of preference of 15% of the c.i.f. cost or the applic-able customs duty, whichever is lower, and regional preferences for othermembers of the Caribbean Common Market (CARICOM) would be limited to 15%of the c.i.f. price of nonregional goods or the difference in the amount oftariffs, payable by CARICOM and non-CARICOM suppliers, whichever is lower.

2.33 Consultants would be employed for the preparation of design andbidding documents and for supervision of construction of the Heywoods Villagecomponents and the contractor-executed part of the bypass road. In total,

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professional services for final design and supervision would amount to 250man-months. The Ministry of Communications and Works would design and con-

struct the part of the bypass road to be executed by force account.

2.34 The construction of an 0.8 mile section of the bypass road whichgoes around the project site would be carried out on force account. The roadmust be constructed and traffic diverted to it from the existing road throughthe project site by early 1980, if construction of other project facilitiesis to take place as scheduled. The construction of this portion of the bypassroad, on which some work has already been done and which can be used in thenew construction, would be undertaken by the Ministry of Communications andWorks. Quantities for work are difficult to establish and competitive biddingwould be unsuitable and unattractive to contractors. The Ministry has pres-ently adequate force account capacity and equipment at its disposal to executethis work effectively. The value of works to be carried out by force accountis estimated at about US$540,000 equivalent for road construction. Assuranceswere obtained during negotiations that as soon as the bypass road around theproject site is completed, the existing road through the site will be closedand the traffic permanently diverted to the bypass road.

Disbursements

2.35 Disbursements of the proposed IBRD loan of US$8.0 million equivalentwould finance the following estimated foreign exchange expenditures:

(a) 70% of total expenditures of civil works on buildings and solarwater heating systems;

(b) 60% of total expenditures of civil works on the bypass road;

(c) 100% of foreign expenditures for imported and 85% of expendituresfor locally procured equipment for buildings and solar waterheating;

(d) 70% of total expenditures for professional services; and

(e) 100% of foreign expenditures for marketing and technical assistanceexpenses.

2.36 Disbursements would be made against standard documentation exceptfor civil works for the construction of the bypass road to be carried out byforce account, which would be made against statements of expenditure, docu-mentation for which would not be submitted to the Bank but retained by theProject Unit for review during project supervision missions. These statementsof expenditure would be supported by quarterly progress reports duly certifiedby the Project Unit. Assurances were obtained that annual accounts for theProject iJnit will be,audited by independent auditors acceptable to the Bankand will be furnished to the Bank.

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2.37 The IBRD loan would be disbursed over a period of 5.5 years throughDecember 31, 1984 (Annex I, Table 15). Construction is scheduled to be com-pleted by March 31, 1982 with technical assistance and marketing expenditurescontinuing until June 30, 1984. In order not to delay implementation of theproject, retroactive financing of up to US$200,000 is recommended for expendi-tures for architectural and engineering consultants' services incurred afterDecember 1, 1978. An estimated schedule of disbursements for the CDB loanof US$3.2 million equivalent is shown in Annex I, Table 16.

III. MARKET DEVELOPMENT AND PROSPECTS

A. Caribbean Region

3.01 The Caribbean region offers excellent beach-oriented vacationscatering during the winter season (mid-December to mid-April) mainly to themore affluent North American and European visitors and during the summer to themore budget-minded tourists. The total number of tourists to the Caribbeanincreased from 3.7 million in 1970 to 4.7 million in 1977 (Annex I, Table 17)and is estimated to have exceeded 5 million in 1978. The annual growth ratein tourist flows in the 1970-77 period was about 3.5%. As a result of thesevere recession in Europe and North America, traffic slowed substantially in1974 and decreased in 1975 (-2%). In 1976, tourist traffic to the Caribbeanincreased, but by less than 1%, reflecting competition from the US bicentennialcelebrations and the Olympic Games in Canada. Traffic picked up substantiallyin 1977 (+6%) and partial figures for 1978 indicate an even higher growth rate,attributed to the continuing economic recovery and to recent introductions ofdiscount fares on regularly scheduled flights.

3.02 The main sources of tourists to the Caribbean are the US, Canada andWestern Europe. The most recent data show the US accounting for 48% of totaltourist arrivals in the Caribbean, Canada for about 9% and European countriesfor 6%. The high US share is explained partly by the inclusion among Caribbeandestinations of Puerto Rico, the Bahamas and the US Virgin Islands, which havea disproportionate share of American visitors, both tourists and businessmen.

3.03 Canadian vacation visitors to the Caribbean comprise mainly singlesand middle-age couples from the lower-middle to upper class and require a mixof accommodations from self-catering apartels to the more luxurious hotels.By comparison, the US visitors tend to be somewhat older and more affluent andtend to demand high quality accommodations. The advent of cheaper travelresulting from the introduction of charters and promotional fare systems onscheduled airlines is expected, however, to increase the percentage of middleand lower-middle income groups among US visitors. European holiday visitorstypically are relatively affluent, travel mostly in couples and look for goodquality hotels.

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3.04 , Future prospects for tourism in the Caribbean are considered favor-

able provided the economic recovery in the originating markets is sustained.The Canadian and the US markets are expected to grow at a modest rate reflect-ing increased market penetration of low cost group vacation travel, offset

somewhat by4slower economic growth. By comparison, the number of Europeanvisitors to, the Caribbean is expected to grow at a faster pace reflecting

higher economic growth, and increased vacation demand for long haul destina-tions. Travel sources estimate the likely overall growth in tourism to theCaribbea~n region over the long-term at 5 to 6% per annum or slightly belowttht 6.5% growth rate observed prior to the 1974/75 recession.

B. Barbados

3r05 Barbados, as a sea, sun and sand resort destination with interestingrestaurant and cuisine styles, adequate entertainment and sport facilities,duty-free shopping and, most importantly, an unusually friendly population,

appeals to a broad sector of the market. Relatively easy air access servesas a major stimulant to tourism growth on the island. Price levels varywidely but are essentially on a par with other developed tourist destinationsin the Caribbean.

3.06 Visitor traffic to Barbados reached 269,000 in 1977 (and an estimated315,000 in 1978), in addition to over 100,000 cruise tourists. Between 1967and 1977, tourist traffic increased three-fold or over 11% annually, substan-tially higher than the growth rate for the region as a whole. Tourist flowsdeclined in 1975, reflecting the recession, and due to the Olympic Games andUS bicentennial celebrations, grew by only 1% in 1976. However, traffic hasrevived with 20% growth in 1977 and an estimated 17% growth in 1978. Therelatively high tourism growth in Barbados can be attributed to:

(a) increased supply and variety of accommodation;

(b) adequate air access;

(c) preservation of the natural setting of the island; and

(d) lack of hostile feelings towards tourists which has affected tourismto some other Caribbean destinations.

3.07 Canadian tourism which in 1977 was the most important originatingmarket for Barbados and accounted for 31% of total tourists (Annex I, Table 3),is likely to continue growing, albeit at a less rapid pace than in the lastdecade. A major stimulating force is expected to result from planned promo-

tional drives by Barbados in the western provinces of Canada which until nowhave provided only a minor proportion of the Canadian visitors. For the USmarket, which accounted for 26% of the visitor arrivals to Barbados in 1977,increased frequency of scheduled and charter flights and recent availabilityof various promotional fares enhance the potential for tourism to Barbados,

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while the expected slower growth of the US economy has a restraining impact.The UK accounted for 10% and Germany for 4% of total visitors in 1977 withthe German share increasing in recent years with the general increase inGerman tourism abroad reflecting increased holiday entitlements and disposableincome. The prospects for increase in European arrivals are bright due toexpected sustained economic growth and the present low level of market pene-tration by Barbados.

3.08 A regression analysis was conducted relating the past number ofvisitors from the three largest markets (Canada, US and UK) to the levelof economic activity in these markets (as measured by the GDP) and to therelative price indexes in Barbados and the originating markets, after adjust-ment for exchange rate fluctuations (Annex I, Tables 18-20). The analysisshows that each 1% growth in GDP has been associated with a 2.1% growth inCanadian visitors, a 2.7% increase in US visitors and a 3.1% increase in UKvisitors. Furthermore, a 1% increase in relative prices in Barbados has beenassociated with a 1% decline in US visitors but had no significant impact onthe number of Canadian or UK visitors. Assuming (i) an increase of 3% perannum in GDP in each of the originating countries, (ii) no increase in rela-tive prices in Barbados in the future after acccounting for exchange rateadjustments and (iii) a GDP demand elasticity of 2 for markets not accountedfor by the regression analysis, the projected rate of growth of tourismarrivals would be 7% per annum which has been adopted in the market projec-tions for Barbados. This is substantially in line with the 6.5% growth pro-jected in the Tourism Development Plan for Barbados prepared by the OAS in1977.

C. Heywoods Village

3.09 The potential demand for the Heywoods Village originates from twosources: (i) the increase in tourism to Barbados in general and (ii) thespecific demand generated by the village concept.

3.10 Total hotel guestnights (excluding apartels, apartments and guest-houses) in Barbados in 1977 amounted to about 634,000, of which 560,000 werespent in the higher Category I and II hotels. Total guestnights spent inapartels and apartments amounted to 892,000, of which 374,000 were in thehigher Category I and II apartels and Category I apartments (Annex I, Table21). Assuming an overall 7% annual growth in tourists, plus the specificdemand generated by the village concept (para. 3.11), and no change in theaverage length of stay, by 1985 an additional 430,000 guestnights in highercategory hotels and 290,000 guestnights in higher category apartels will needto be accommodated. Since 225,000 additional guestnights would, in principle,be absorbed by existing hotels and apartel facilities through an increase inaverage room occupancy from about 60% in 1977 to 70% in 1985, only the demandfor 300,000 hotel guestnights and 195,000 apartel guestnights will have to beaccommodated through construction of new accommodation. This requirement--at70% room occupancy--translates into some 630 new hotel rooms and 400 apartelrooms in the higher categories. The proposed Heywoods Village would provide

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192 hotel rooms and 116 apartel rooms or about 30% of this additional capacity

required by 1985. Since few high quality beach sites on the west coast arestill undeveloped, the remaining supply gap is expected to be provided for

mainly through expansion of existing hotels and apartels.

3.11 The Heywoods Village is expected to generate additional demand for

its village concept which aims to combine demand for accommodation in high

quality small hotels and apartels with the demand for central facilities

usually provided only by large luxury hotels. A market research study con-

ducted in 1978 by consultants (the Economic Intelligence Unit) concluded that

by 1985 about 6,100 visitors or one third of total annual visitors projected

for the Heywoods Village can be attributed solely to the village concept.

3.12 Present trends of hotel expansion in Barbados and the adoption of

new policies toward hotel development indicate that accommodation capacity

will increase over the intermediate-term future at about 5% annually. Such

expansion, together with the expected increase in demand projected for

Barbados, implies a 70% room occupancy by 1985 for the Heywoods Village as

well as for existing and newly constructed hotels on the island. Taking into

account the marketing difficulties encountered in the early years of opera-

tions, the room occupancies for the Heywoods Village are assumed to be only

40% in 1982, rising to 55% in 1983, 65% in 1984 and 70% in 1985.

IV. PROJECT ORGANIZATION AND MANAGEMENT

A. Organization

4.01 The Government plans to form a wholly-owned statutory corporation,

the Barbados Tourism Investment Corporation (BTIC) to own the assets of the

Heywoods Village and to provide overall management and coordination for its

operation. In addition to managing the village, the Corporation would own

and maintain principal fixed assets, and would own and operate the central

restaurant, beach bar, discotheque, and golf course. The hotels and apartels,

laundry, gift shops, beach handicraft market, minimarket, cycle rentals and

the water sports facilities would be leased to private operators and conces-

sionaires who would supply the working capital and would pay fees to the

Corporation for facilities and services. Services to be provided by the

Corporation would include management and maintenance of common facilities

such as internal roads, sewerage, tennis courts, other recreation facilities,

grounds, and the village hall. In addition, the Corporation would coordinate

the operations of the hotel/apartel operators and concessionaires and provide

them with central marketing, central purchasing, financial guidance, training

and quality control assistance. Draft legislation acceptable to the Bank for

the establishment of the Corporation assuring administrative and financialautonomy to the Corporation along with a satisfactory organization plan for

the village have been submitted to the Bank. Assurances were obtained during

negotiations that future changes in the organization plan would require prior

consultation with the Bank. Enactment of the legislation in a satisfactory

form will be a condition of effectiveness of the loan.

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4.02 The Corporation's Board of Directors will have overall responsi-bility for establishing policy and reviewing management performance and willreport to Government through the Ministry of-Tourism. The Government plansto appoint representatives of the Ministries of Tourism and of Finance andPlanning, a hotel/apartel-operator from the village on a revolving basis, andpersons from various professional backgrounds in the private sector as membersof the Board. Assurances were obtained during negotiations that at least onehotel/apartel operator from Heywoods Village will be appointed to the Boardand that a majority of the Board members will be drawn from the privatesector.

4.03 Government contributions to village investment (including interestduring construction and other charges) of about BDS$12.5 million (US$6.25million), representing about 38% of total village investment cost of aboutBDS$32.7 million, will be invested in the Corporation as equity. Funds lentby the Bank and the CDB for the village, adding to about BDS$21.5 million,will be passed on to the Corporation as a long term loan. Assurances wereobtained during negotiations that Government contributions will be in the formof equity and that funds provided by the Bank and by CDB will be repaid bythe Corporation to the Government over a twelve-year period including threeyears of grace at an interest rate of 10%. These terms are consistent withprevailing loan terms in Barbados. The average inflation rate in Barbados inthe 1976-1978 period was 7%. The inflation rate for the 1979-1981 period isexpected to average 7.5%.

4.04 The innovative project design involves some unique aspects--especially the relatively autonomous entrepreneurial role of the individualhotel/apartel operators, as compared with a traditional resort--which tendto increase certain operating costs, reduce the share of profits received bythe ownership corporation and increase risks. The Heywoods Village thereforewould be unlikely to attract the interest of private investors until it issuccessfully established. At that time, the Government will formulate itsviews with respect to possible sale of village assets or equity to privateinvestors to produce liquid funds which could be utilized in new developmentactivity. Assurances were obtained during negotiations that the Governmentwill submit a completion report to the Bank on the execution and initialoperation of the project and containing its views on the possible sale ofthe whole or part of Heywoods Village in the form of shares or otherwise toBarbadians without jeopardy to the project's objectives.

4.05 The proposed organization of the BTIC is shown in Chart I. Author-ity and full responsibility for management of the village in an efficient,commercially-oriented fashion will be delegated to a General Manager who willbe retained on a management contract initially of at least five years' dura-tion. He and the other senior management of the Corporation, including aFood and Beverage Manager, Financial Manager and Marketing Manager would beresponsible for providing technical assistance and training to hotel/aparteloperators and concessionaires as well as for Corporation management functions.

CHART I

PROPOSED BARBADOS TOURISM INVESTMENT CORPORATION - ORGANIZATION CHART FOR

HEYWOODS VILLAGE

MINISTRY OF TOURISM

BO-'RD OF DIRECTORSI

GENERAL MANACE'] _VILLAGE MANAGEMENTI'COnMITTEE (VMC) r - -

_ ~~ [I_I7FINAN IATaR FOOD AND BEVERAGE ADMINISTRATION HOTELOPE1ATORS

4IIANAGEBJAGENAGER |__ MNA GE A _ CONCESS _NIS

,4FIRM HARKETING_________ CENTRA JCTIRKETIFS Central Restaurant Golf Course._____ ATIVI Beach Bar Village Hall

Discotheque Recreation FacilitiesPurchasing Maintenance

Securityntrnal Audtint GroundskeepingAecounting

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To the extent that these senior management personnel may not be Barbadian,local staff would be trained to take over these functions eventually. Fundsto finance the services of key senior personnel during the preopening periodand the first two years of operation are included in the project. It wasagreed during negotiations that the qualifications and experience and termsand conditions of employment of the General Manager, Financial Manager, Foodand Beverage Manager and Marketing Manager shall be satisfactory to the Bank.It was further agreed that the General Manager would be employed no later thanJanuary 1, 1981.

B. Management

4.06 The Heywoods Village organization and management structure isdesigned to provide an appropriate degree of control over marketing, food andbeverage operations, quality control and village management, while allowinga significant degree of management autonomy for the individual hotel/aparteloperators and concessionaires in the operation of their businesses. Toachieve this objective, the General Manager would be responsible for preparingan operations manual outlining the policies and standard operating procedureswhich the Corporation and the operators and concessionaires of the leasedbusinesses would be expected to follow. In addition, the Government plans toestablish a Village Management Committee (VMC) to provide a forum for partici-pation of hotel/apartel operators and concessionaires in decision making andto improve coordination and communication. The VMC would be chaired by theGeneral Manager and would include, as members, the senior management of theCorporation, all hotel/apartel operators and at least one representative ofthe concessionaires. VMC responsibilities would include:

(a) establishing tariff and discount structures and policies for roomand hotel restaurant sales;

(b) providing guidance to the central marketing department on promo-tional policy and programs and on selection of and negotiation withsales representatives, wholesalers, and tour operators;

(c) dealing with labor disputes and recommending terms, conditions andpay scales for non-managerial persons employed within the village;

(d) making recommendations to the management of the Corporationregarding policies, procedures, and quality standards includingproposals for modifications of the operations manual;

(e) formulating training programs and training standards for employees;and

(f) resolving disputes involving operators and concessionaires and, ifunable to effect settlement, forwarding recommendations through theGeneral Manager to the Board.

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4.07 The Central Marketing Department, under the direction of the mar-

keting Manager, would with guidance from the VMC, have responsibility forplanning marketing programs, conducting marketing promotion activities,negotiating with sales representatives, wholesalers and tour operators,

and processing bookings from these sources on behalf of the hotel/apartels.Hotel/apartel operators would allocate the number of their rooms to be soldthrough the Central Marketing Department. This Department would assignbookings when preferences for individual units are not expressed, as wellas overflow bookings, through a rotational system based on unsold allocatedrooms. The operators would individually market their unallocated and unsoldrooms through travel agents and individuals.

4.08 The initial marketing campaign, including proper planning, design

of materials, selection of target markets and intensive and skillful pre-selling are crucial for the success of the project. Accordingly, the task ofplanning and, as necessary, implementing the overseas marketing program during

an 18-month preopening period and at least the first two years of operationshould be undertaken with the assistance of experienced marketing firms withan established reputation in Barbados' principal markets. The MarketingManager would work closely with the firm or firms and would perform allcentral marketing functions upon completion of the contract. Assurances wereobtained that marketing consultants will be retained whose selection and termsand conditions of contract will be acceptable to the Bank to assist in thepreparation and the strategic design and promotional aspects of a marketingprogram. Assurances were also obtained that the marketing program will be

submitted to the Bank for its approval no later than March 31, 1981.

4.09 The Food and Beverage Manager, in addition to overseeing the

directly operated central food and beverage activities, would be responsiblefor training restaurant employees, setting and enforcing minimum qualitycontrol standards for all food sold in the village, providing technicalassistance on menu preparation and restaurant management and operating acentral purchasing service.

4.10 Central purchasing would be done on the basis of orders submitted

by all food sales operations in the village and hotel operators would be en-couraged, but not required, to use this service. The objective would be to

use the resulting substantial volume of business to negotiate better pricesand improve the quality and priorities in obtaining supplies. It should alsohelp to raise the quality of food served in village restaurants. While thevillage would of necessity have to purchase from sources providing acceptablequality, service and prices, it is anticipated that these volume purchaseswould assist the Speightstown fishing industry and the small farm cooperativesgrowing vegetables which are proposed in IDB and CDB projects for the area(para. 7.01).

4.11 The Financial Manager, in addition to his corporate financialresponsibilities, would provide some technical assistance to the hotel/apartel operators and, to a lesser extent, the concessionaires. He would

assist each operator in setting up the original books of account based on the

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uniform system of hotel accounts 1/ and would train the operator and hisaccountant or bookkeeper to keep the books and prepare financial statements.

He would assist in reviewing annual budgets and would review hotel/apartelfinancial performance on a quarterly basis against budgets and the performance

of other hotels. He would meet periodically with each operator to discussperformance, financial condition, trends, problem areas and means of dealingwith them.

4.12 The seven hotels and apartels would be leased to experienced

operators who would be chosen under selection criteria listed in the organi-zation plan for the village which would include:

(a) at least five years' senior management experience in hotelsof at least 25 rooms;

(b) at least one full year of study at a recognized hotel traininginstitution or equivalent on-the-job training;

(c) an undertaking to work personally as the full-time manager of thehotel/apartel;

(d) financial capability to provide sufficient capital to open andadequately maintain the operations of the leased hotel/apartel;and

(e) Barbadian nationality.

Assurances were obtained during negotiations that criteria for the selection

of hotel/apartel operators will be acceptable to the Bank.

4.13 Ten year renewable lease agreements would be signed with hotel/apartel operators under terms and conditions acceptable to the Bank. Onrenewed leases the Corporation should raise rents to reflect market rates forspace in well established hotel/apartels. Provisions of a draft model lease,acceptable to the Bank, between the Corporation and the individual hotel/

apartel operators have been submitted to the Bank. Some general terms andconditions of these leases are listed in Annex III and relate to participationin the VMC, employment policies, pricing and discount structure, role of theoperators in relation to the central marketing function, maintenance ofstandards and facilities, working capital levels, rental payments and terms,financial reporting and conditions for sale or possible termination of leases.Assurances were obtained that terms and conditions of lease agreements withhotel/apartel operators will be acceptable to the Bank.

4.14 The concessions including the laundry, gift shops, beach handicraftmarket, minimarket, water sports and cycle rental will be leased to qualifiedconcessionaires in agreements with similar terms and conditions to those ofthe hotel/apartel leases, as appropriate. They will, however, generally be

1/ The system as adopted by the American Hotel and Motel Association.

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for shorter time periods. Assurances were obtained that the beach handicraftmarket will be leased on terms that will promote its use as an effective handi-craft production and marketing center for the northern part of the island.Assurances were also obtained that terms and conditions of lease agreementswith concessionaires will be acceptable to the Bank.

4.15 The taxi concession, as is the practice elsewhere in Barbados, willbe assigned to a taxi association for a fixed fee. With respect to transpor-tation, the proposed project is located some 21 miles from the internationalairport and 12 miles from Bridgetown. It is essential, therefore, that ade-quate transportation services be provided. During negotiations, assuranceswere obtained that the taxi concession agreement will include provisionsrequiring the concessionaire to transfer tourists in groups to and from theairport and Bridgetown on a regular basis at reasonable cost.

V. FINANCIAL ANALYSIS

A. Barbados Tourism Investment Corporation

5.01 BTIC income projections for the 1982-1989 period are shown inTable 4. After experiencing large losses in the first three years of opera-tion, primarily as a result of high fixed interest and high depreciation andamortization expense relative to house profit, the Corporation is expected tooperate on approximately a break-even level in 1985 and on an increasinglyprofitable basis thereafter. Profits before tax in current prices grow fromabout BDS$0.4 million in 1986 to about BDS$3.5 million in 1989. In 1989,profits before tax represent a return of 24% on the Corporation's sales, 23%on equity and 12% on total assets employed (Annex I, Table 22). Despite theinitial losses, the Corporation is expected to exceed the breakeven point oncash flow from operations in the second year and is expected to earn a finan-cial internal rate of return on total investment of about 14% in currentprices and 7% in constant prices . Projections are based on the assumptionsoutlined in Annex II.

5.02 For the first typical year, 1985, over 60% of the Corporation'srevenues are composed of charges to hotel/apartels and concessions with mostof the remainder produced by the Corporation operated central restaurant,beach bar, discotheque and golf course (Annex I, Table 23). For Corporationdirect operations, gross operating income averages 33% of sales, overhead,excluding allocation of central overhead, is 17% and house profit is 16% oftotal sales. However, these businesses contribute only 13% of the Corpora-tion's total house profit, despite contributing 37% of its total revenue,because operating costs are higher than those associated with the revenues)from charges to hotel/apartels and concessions. Central overhead expense ofabout BDS$2.8 million in 1985 amounts to 25% of total revenue.

5.03 BTIC income statements do not include the revenues, expenses (otherthan payments to the Corporation) and profits of the hotel/apartels and con-cessions which are independent legal entities. Projected income statements

Table 4: BARBADOS TOURISM INVESTMENT CORPORATION INCOME STATEMENTS 1982-1989

Pro Forma (Current BDS$'000)

1982 1'983 19-84 1985 1986 1987 1988 1989(6 mos) _

Revenue

Revenue from Operations of the Corporation 965 2990 3785 4355 4665 4990 5340 5710Hotel/Apartel Rentals & Charges 710 4515 5680 6575 704o 7530 8055 8620Concessionaire Rentals 80 245 305 355 375 405 430 465

Total Revenue 1755 7750 9770 11285 12080 12925 13d25 14795

Cost of Sales 800 2030 2490 2830 3025 3240 3465 3705Gross Operating Income c55 5720 7280 8055 9055 9685 10360 13090 l.

Overhead Expense

General & Administration 505 1145 1110 1110 1190 1270 1360 1455Marketing 400 975 915 985 1055 1130 1205 1295Utilities 160 380 440 485 520 555 595 635Repair & Maintenance 195 440 670 915 975 1045 1120 1200

Total Overhead 1260 2940 3135 3495 3740 4000 4280 4585

House Profit (Loss) (305) 2780 4145 4960 5315 5685 6080 6505

Interest 1005 2110 2140 2355 2050 1905 1735 1555Depreciation & Amortization 1375 2745 2745 2745 2810 2135 1400 1400

Profit Before Income Tax (2685) (2Q75) (740) 60 455 1645 2945 3550

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for the entire Village including these entities on a combined basis (Annex I,

Table 24) provide an indication of overall village financial results and show

1985 total village revenues more than 100% higher and house profit about 25%

higher than BTIC revenues and house profit alone.

5.04 Projected balance sheets and sources and uses of funds statementsfor BTIC for the 1982-1989 period (Tables 5 and 6) depict, as do the income

statements, a generally satisfactory and stable financial picture. TheCorporation must borrow about BDS$1 million during the first year of opera-tions to maintain working capital requirements in the face of large operating

losses. These borrowings, however, can be fully repaid in the second year of

operation as cash flows become positive. Reflecting these short term borrow-ing requirements, the projected current ratio is a low 0.6 to 1 at the end of

1982, but does not drop below 2.5 to 1 thereafter. Debt service coverage is a

low but adequate 1.5 in 1986, when the first full year of principal paymentson long term debt is scheduled to commence, and improves slowly thereafter.

Equity as a percentage of the long term capital structure drops from an

initial 38% to a low of 25% at the end of 1984 as a result of losses, then

increases steadily thereafter, as retained earnings levels increase. TheGovernment plans to establish a profit sharing plan for BTIC employees todistribute a portion of future retained earnings.

5.05 Hotel/apartel accounts should be maintained in conformity with the

Uniform System of Hotel Accounting. Assurances were obtained that annualaudited accounts for the hotels and apartels on a summarized basis, prepared

in accordance with the uniform system of accounts, would be submitted to the

Bank. Assurances were also obtained during negotiations that annual accountsfor the Corporation, audited by independent auditors acceptable to the Bank,

will be submitted to the Bank within four months of the end of each fiscal

year.

B. Hotel/Apartels and Concessions

5.06 The financial revenues and the occupancies for the individualhotel/apartels are an essential determinant of the success of the Corporation

and every business associated with it. Projected income statements for the

seven hotel/apartels on a combined basis for the 1982-1989 period are shownin Annex I, Table 25. On a combined basis, total hotel/apartel revenues in

1985 are composed of 77% room sales and 23% food and beverage sales. Direct

costs average 19% of room sales, 74% of food and beverage sales and 32% oftotal sales. Overhead, including an imputed salary for the operator, is 38%

of total revenue and house profit is 30% (Annex I, Table 26). Operatingresults, of course, differ among the types of hotels, as shown in the pro-jected income statements for a 32-room hotel, a 48-room hotel and a 58-roomapartel in Annex I, Tables 27, 28 and 29.

Table 5: BARBADOS TOURISM INVESTMENT CORPORATION BALANCE SHEETS 1982-1989

Pro Forma (Current BDS$'000)

,urrent Assets 1982 1983 1984 1985 1986 1987 1988 1989

Cash 170 415 2535 4515 3875 4880 7370 10275Inventory 110 175 220 255 275 290 315 335Receivables & Other 355 840 1060 1230 1320 1410 1505 1615

otal Current Assets 635 1430 3815 6000 5470 6580 9190 12225

Fixed Assets, Net 23870 22650 21430 20210 21305 21035 19635 18235ormation Expense 6860 5335 3810 2285 760 --- --- --

otal Assets 31365 29415 29055 28495 27535 27615 28829 tnhrin

;urrent Liabilities

Creditors and Accruals 170 410 460 520 565 605 645 690 'Short Term Borrowings 960 --- --- --- --

Current portion, Long-term Loans --- 680 1460 1605 1775 1960 2155

'otal Current Liabilities 1130 410 1140 1980 2170 2380 2605 2845

Undisbursed Loans 760 215 --

Long-term Loans 19620 21010 20875 19415 17810 16035 14075 11920Total Liabilities 21510 21635 22015 21395 19980 18415 16680 14765

Paid-in Capital 12540 12540 12540 12540 12540 12540 12540 12540

Retained Earnings (2685) (4760) (5500) (5440) (4985) (3340) (395) 3155

Net Worth 9855 7780 7040 7100 7555 Q200 12145 195;5

Total Liabilities and Net Worth 31365, 29415 29055 28495 27535 27615 28825 30460

Table 6: BARBADOS TOURIS A INVESTMENT C--PPORATION SOiUnl"ES AND USES OF FUNDS STATEMENTS 1982-1989

Pro Forma XCurrent BDS$'000)

1982 1983 1984 1985 1986 1987 19H8 1989

Beginning Working Capital 460 (495) 1020 2675 2 420C 6585

Sources of Funds

New Borrowings 1505 1390 545 - -

Net Incoite (2685) (2075) (740) 60 455 1645 2945 3550

Depreciation and Amorti zation 1375 2745 2745 2745 2810 2135 1400 1400

Total Sources 195 2060 2550 2805 3265 3780 4345 4950 I

Uses of Funds

Capital Expenditures - - - 2380 1105

Reduction in Long- term Debt - - 680 1460 1605 1775 1960 2155

Other 1150 545 215 -

Total Uses 1150 545 895 1460 3985 2880 1960 2155

Net Change in Working Capital (955) 153.5 1655 1345 (720) 900 23l'..5 27'95

Ending Working Capital Balance (495) 1020 2675 4020 3300 4200 6555 9380

.. I -s-,

5.07 Hotel/apartel. operator.. would lease the builc'Q.ngs, equipment, furni-ture and fixtures from the Corporation but wouid themselves provide the work-ing capital investment including that for chiLia, linen and cutlery and wouldpersonally manage their respective hotel/apartel on a semi-autonomou3 basissubject to the lease conditions, operations manual policies and the proceduresand decis.ons of the VMC (para. 4.06). Operators would pay the Corporation arental fee amounting to 40% of net room sales for the 48-room hotel and 32%for the 32-room hotels and apartels. They would also be responsible for pay-ing the BTIC 15% to 17% of total revenues (depending on type of hotel/apartel)as reimbursement for the appropriate cost or hotel-related overhead borne bythe Corporation including central marketing, repair and maintenance, gardeningand hot water supplies. The operator's total financial compensation in 1985is projected at 6.6% of sales ia :he 32-room hotels, 5.6% of sales in 48-roomhotels and 5.7% of sales in anarzels and would be based on performance.

5.08 A 32-room hotel would require initial invescments by the operatorof about BDS$135,000 (US$67,500) and would yield a projected before-tax com-pensation it, current prices of BDS$121,000 (US$60,500) to the operator in thetypical vear of 1985. Similarly a 48-room hotel would require an investmentby the operator of about BDS$230,000 (US$115,000) and would vield total com-pensation in 1985 of BDS$153,000 (US$81,500). For the apartels, investmentreouirements would be BDS$170,000 (US$85,000) and total compensation to theoeprator would be BDS$122,GDO ($61,000). These projected compensation levelsrepresent returns to the operators of 23 to 27% on 1985 net working capitalinvestment in addition to equitable imputed salaries ranging from BDSS49,000to BDS$65,000 (BDS$30,000 to $40,000 in 1978 prices) based on complexity ofmanagement responsibilities. Projected investment requirements and compensa-tion for hotel/apartel operators are shown in Annex I, Table 30. `

5.09 Under the Hotel Aids Act, during the first ten years, operatorswho incorporate would be taxed only on money they take out of the business assalary or dividends. Earnings reinvested in net working capital, as well asthe operator's option, subject to Corporation approval, to sell his lease,which can be valued at about five times anticipated annual return would allowthe operator opportunities to accumulate capital assets.

5.10 Projected levels of compensation and opporturities for capital gainscompare favorably with existiag salary levels for Barbadian senior level hotelmanagement personnel which presently average BDS$20,000 to BDS$40,000 for thelarger luxury hotels and should provide sufficient incentive to attract well-qualified operators. There are a number of potential operators who, by aug-menting their financial resources by borrowing from the BDB and commercialbanks, should be able to finance expected investment requirements.

5.11 Concessionaires would also provide the working capital for theirbusinesses and would pay a percentage of sales as rent. A financial projec-tion for the various concessions in 1985 shows exrected house profits beforetax ranging from 7% to 21% of sales and from BDS$51,000 to BDS$85,000 incurrent pL.es (Annex I, Table 31).

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VI. ECONOMIC EVALUATION

A. Project Benefits and Costs

6.01 The expenditures of Heywoods Village hotel/apartel guests on goodsand services are defined as the economic benefits of the pr-oject. Theseexpenditur--s are incurred in the hotel/apartels (room, food and beverage), inthe central facilities (central restaurant, beach bar, discotheque, golfcourse) and in the various concessitcns operated within the village (gift shop,mini-market, handicraft center and water sports). The benefits have beencalculated from the financial revenue projections (Annex I, Tables 23, 25 and31) with the following adjustments:

(a) all revenues were calciilated in constant 1978 prices;

(b' an 8% Gtvernment sales tax and a 10% service charge were added tohotel and restaurant revenues;

(c) a shadow foreign excnange rate of US$1 = BDS$2.40 was applied totourist expenditures

(d) expenditures by Barbadians within the village were excluded sincesome of these might be diverted from existing enterprises on theisland. This assumption tends to underestimate benefits since someof the facilities provide a unique product (e.g. village hall); and

(e) Heywoods Village guest expenditures outside the village wece addedto project benefits. These include outside expenditures on foodand beverage (US$2.50 per day for hotel guests and US$2 per day forap.rtel guests) and internel transportation (US$20 per touriststay). Expenditure on air travel with the national airline and onairport taxes were excluded because the costs associated w.th themcould not be clearly identified. Furthermore, benefits attributableto the Speightstown bypass road were not taken into account becauseof lack ef data on users' time savings and vehicle velocities,lending additional ccnservative bias to the economic benefitsestimate.

6.02 The costs associated with these benefits are as follows:

(a) initial invesUaent cost (including working capital) and replacpmentcost of buildings, furniture, fittings and equipment;

(b) operating costs of the various village facilities; and

(c) operating costs related to Heywoods Village guest expendituresoutside the village, which have been calculated at 70%. of expendi-tures for food and entertainment and 50% for ground transportation.

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6.03 Revenues diverted from other hotels and associated operating costshave been excluded from project benefits and costs. Since in the low seasonhigher category hotels in Barbados are currently operating at only 50% roomoccupancy and only one third of the Heywoods Village guests can be considereda captive market, it is clear that some guests will be diverted from otherhotels and do not represent incremental project benefits. In 1982, two-thirdsof the bednights generated in the low season (or 30% of total revenues) canbe considered diverted. Between 1982 and 1987, the portion of divertedrevenues decreases linearly from 30% of total revenues to zero as the pro-jected increase in demand for higher category accommodation increases relativeto available supply.

6.04 Operating costs in 1978 constant prices have been derived from thefinancial projections (Annex II). Interest, depreciation and amortization,and internal transfer charges within the village have been eliminated.Opportunity costs for hotel manager salaries were included.

6.05 The detailed cost and benefit streams are given in Annex I, Table 32.The economic rate of return on the project is 17.5% (best estimate). Sensi-tivity tests show how changes in various assumptions are expected to affectthe economic rate of return (ERR) on the project:

Assumption Change ERR (%)

(a) Best estimate -- 17.5

(b) Expenditures outside village excluded -- 16.1

(c) Investment and replacement costs (%) +10 16.1-10 19.0

(d) Net benefits (%) +10 18.8-10 16.0

(e) Net benefits delayed (years) 1 15.52 13.9

B. Project Beneficiaries

6.06 Project beneficiaries include (i) the Government, (ii) individualhotel, apartel and concession lessees, (iii) employees in hotel/apartels andother tourist facilities, and (iv) producers of goods and services consumedby Heywoods Village guests. In 1985, about 55% of the direct benefits fromthe project are retained by the village employees, 30% by the Government, and15% by village hotel/apartel operators, concessionaires and outside restaurantowners.

6.07 Total employment within Heywoods Village is estimated at about500 employees at an average annual wage/salary (1978 prices) of BDS$10,000(US$5,000). An additional 300 jobs will be created outside the village in

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related enterprises such as transportation, restaurants, entertainment, handi-crafts, shops and travel agencies. The investment cost (excluding pricecontingencies) per permanent job created in the village is estimated atUS$29,000. About 600 man-years of employment will be required for construc-tion during project implementation.

C. Balance of Payments Effect

6.08 In 1985, when the Heywoods Village is in its first typical yearof operations9 expenditures of village guests in Barbados are expected toapproximate US$8.7 million (in 1978 prices). It is estimated that the for-eign exchange costs associated with these expenditures will amount to US$2.3million leaving net foreign exchange flows at US$6.4 million before, andUS$4.9 million after debt service. In other words, a net 56% of 1985 HeywoodsVillage guest expenditures is expected to be retained in Barbados and anadditional 18% will be utilized for project debt service.

D. Project Risk

6.09 There are inherent risks in the project due to its innovativenature, In addition to being the largest hotel complex in Barbados, withits normal hotel management requirements, BTIC will have the additional tasksof attracting seven qualified Barbadian operators and organizing them into asmoothly operating and cooperative group controlling seven hotels and apartelsand seven food and beverage facilities. The project must also recruit acapable General Manager who can exercise full authority and responsibility forproviding central management, as well as coordinating the activities of thehotel/apartel operators and concessionaires.

6.10 Marketing the village during the early years will be a more complextask than marketing a single hotel as different hotel/apartels will haveindividual decor and different operators rather than one clearly focusedimage. The marketing will be difficult until the travel industry, which istraditionally conservative and skeptical of experiments, is convinced byexperience that the service and quality of the product offered by HeywoodsVillage is at least comparable to the conventional hotel/apartel productoffered elsewhere in Barbados and the Caribbean.

6.11 Failure in dealing effectively with the innovative elements ofthe project will reduce benefits significantly. Even with such failures,however, the project would remain an attractive hotel complex with a strongdemand base and satisfactory tariff levels relative to investment cost.Government could as a fallback position, sell the complex or retain awell-known international hotel operating company to manage and market it.

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VII. SOCIAL ASPECTS

7.01 Speightstown is a small rural and fishing community. According tothe 1970 census, 19% of male and 58% of female Barbadians between the ages of14 and 65 in Speightstown and surrounding St. Peter's Parish were unemployed,reflecting the rural character and an absence of significant industry. TheSpeightstown area is currently the focus of Government policy to emphasizedevelopment of the northern part of the island and the following steps havealready been taken:

(a) consultants have been engaged to draw up an urban development planfor Speightstown. Work on the plan has been initiated and isscheduled for completion by September 1979;

(b) a uniform bus fare throughout the island has recently been intro-duced. This has contributed to an increase in business inSpeightstown from adjoining parishes to the north and the east;and

(c) there are, in addition to the Heywoods Village, three other projectsunder consideration for the Speightstown area including:

(i) a fish processing and storage plant. There are currently 26fish landing points on the island which the Government plansto consolidate into three or four fish processing and storageplants, including one at Speightstown, by providing neededfacilities; and

(ii) two projects being prepared in agriculture are directlyrelated to Speightstown and the development of tourism; theyare an integrated rural agricultural development project whichis expected to be financed by IDB and the Spring Hall agricul-tural project which is expected to be financed by CDB. TheIDB project, involving 2,100 acres owned by 1,500 smallfarmers, and aimed at increasing the production of vegetable,fruit and other agricultural products, is scheduled to beappraised in February 1979. The Spring Hall project is locatedin nearby St. Lucy's Parish to the north of Speightstown,involves 208 acres and 20 farmers and has similar objectivesto the IDB project.

7.02 The above measures and projects as well as Heywoods Village willhave a significant positive economic and social impact on the Speightstownarea. The population expects employment and income to rise for localresidents. A sidewalk will connect Heywoods Village and Speightstown andbusinesses are already developing plans to take advantage of the expectedincrease in tourist spending in the area. Potential negative aspects of theproject are:

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(a) the project will increase traffic flows through the Speightstownarea;

(b) the Droject will, to some extent, reduce public access to a portionof the Heywoods beach which has traditionally been a popular picnicand bathing spot; and

(c) the expectations of the local population with respect to employmentand income may be higher than what the project may deliver.

7.03 The project attempts to minimize such potential negative impact by:

(a) including in the proposed project a bypass road for Speightstownwhich will reduce traffic congestion generated by the project;

(b) designing the village tourism facilities to allow the public con-tinued direct access to the beach and to parking, much as they hadpreviously; and

(c) including beach facilities, a village hall and recreation facilities,that will be available both to tourists and the local population.

7.04 In addition, the Government intends to:

(a) hold discussions and meetings to prepare the local population forthe influx of tourists and to provide them with a realistic assess-ment of the benefits of the proposed project; and

(b) proceed with the implementation of the fisheries and agriculturalinvestment proposals outlined above, and to encourage HeywoodsVillage to purchase its fish and agricultural product needs fromthese projects.

7.05 From a more general point of view, the project, by limiting itselfto local operators and concessionaires, provides Barbadians with opportunitiesto play a more important role in the island's hotel industry. The intimacy ofthe hotels and apartels will also allow greater social interaction betweenthe local population and the tourists than would be likely in a single largerfacility.

VIII. AGREEMENTS REACHED DURING NEGOTIATIONS AND CONDITIONS TO BE FULFILLED

8.01 During negotiations, agreements were reached and assurances obtainedon the following:

(a) provision by December 31, 1979 of the Government's plans andtimetable for implementing appropriate improvements in the hoteltraining school to better meet the needs of the sector (para 1.28);

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(b) the Project Implementation Unit's key staff will be appointedby June 30, 1979 and their qualifications and experience andterms and conditions of employment shall be satisfactoryto the Bank (para. 2.30);

(c) the Government will ensure that any future development of landadjacent to the project site will be controlled in a mannerconsistent with sound town and country planning concepts andwith due regard to the requirements of the project (para. 2.31);

(d) the existing road through the project site will be closed and thetraffic permanently diverted to the bypass road as soon as thebypass road around the project is completed (para. 2.34);

(e) future changes, if any, in the BTIC organization plan willrequire prior consultation with the Bank (para 4.01);

(f) at least one hotel/apartel operator from Heywoods Village will beappointed to the Board of the BTIC and a majority of the Boardmembers will be drawn from the private sector (para. 4.02);

(g) Government contributions to village investment will be inthe form of equity; an amount equal to the funds provided forvillage investment by the Bank and by CDB will be transferred tothe Corporation as a long term loan to be repaid to the Govern-ment over a twelve-year period including three years of grace atan interest rate of 10% (para. 4.03);

(h) the Government will submit a completion report to the Bank onthe execution and initial operation of the project and containingits views on the possible future sale of the whole or part ofHeywoods Village without jeopardy to the project's objectives(para. 4.04);

(i) the qualifications and experience and terms and conditions ofemployment of the BTIC General Manager, Financial Manager, Foodand Beverage Manager and Marketing Manager shall be satisfactoryto the Bank (para. 4.05);

(j) marketing consultants will be retained whose selection and termsand conditions of contract will be acceptable to the Bank toassist in the preparation and the strategic design and promotionalaspects of a marketing program (para. 4.08);

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(k) a Corporation marketing program will be submitted to the Bankfor its approval no later than March 31, 1981 (para. 4.08);

(1) criteria for the selection of operators for the hotels and apartelswill be acceptable to the Bank (para. 4.12);

(m) the terms and conditions of the lease agreements with hotel/aparteloperators will be acceptable to the Bank (para. 4.13);

(n) terms and conditions of lease agreements with concessionaires willbe acceptable to the Bank (para. 4.14);

(ol the taxi concession agreement will include provisions requiringthe concessionaire to transfer tourists in groups to and from theairport and Bridgetown on a regular basis and at reasonable cost(para. 4.15); and

(p) annual accounts for the hotel/apartels on a summarized basis andprepared in accordance with the uniform system of accounts willbe submitted to the Bank annually; financial statements forthe Corporation prepared in accordance with acceptable accountingprinciples will be audited by independent auditors acceptable to theBank and will be submitted to the Bank within four months of the end

of each fiscal year (para. 5.05).

8.02 Conditions of effectiveness of the proposed loan will be:

(a) obtaining CDB approval for its participation in the cofinancing ofthe loan (para. 2.28); and

(b) enactment of legislation acceptable to the Bank establishing thestatutory Corporation which will own and operate Heywoods Village(para. 4.01).

ANNEX ITable 1

- 43 -

BARBADOS: TOURISM PROJECT

ARRIVALS IN BARBADOS 1960-1977

Air Arrivals Cruise Ship ArrivalsNo. of % Increase Over No. of % Increase Over

Year Visitors Previous Year Visitors Previous Year('000) ('000)

1961 37.0 2.8 n.a. --

1962 44.0 18.9 n.a. --

1963 51.0 15.9 27.2 --1964 58.0 13.7 41.7 53.31965 68.4 17.9 52.7 26.41966 79.1 15.6 51.6 (-2.0)1967 91.6 15.8 45.5 (11.9)1968 115.7 26.4 79.0 67.21969 134.3 16.1 80.6 6.01970 156.4 16.5 79.6 (1.2)1971 189.1 20.9 79.2 (0.6)1972 210.3 11.3 100.1 26.41973 222.1 5.6 116.5 16.41974 230.7 3.9 119.5 2.61975 221.6 (4.0) 98.5 (17.6)1976 224.3 1.2 99.4 0.91977 269.3 20.0 103.1 3.71978 315.0 (est.) 17.0 n.a. --

Average Annual Growth Rate

Air Arrivals Growth Rate %

1961-1970 17.41970-1974 10.21974-1978 8.11970-1978 9.1

Cruise Ship Arrivals

1963-1970 16.61970-1977 3.8

Source: Barbados Statistical Service.

ANNEX ITable 2

- 44 -

BARBADOS: TOURISM PROJECT

BARBADOS' SHARE OF AIR VISITOR ARRIVALS IN THE CARIBBEAN 1970-1977

Total Air Visitors Air Visitors Barbados' Shareto the Caribbean to Barbados of the Market

Annual Growth Annual GrowthYear ('000) (%) ('000) (%) (%)

1970 3,716.8 156.4 4.21971 3,989.4 7.3 189.1 20.9 4.91972 4,309.2 8.0 210.3 11.3 4.91973 4,490.8 4.2 222.1 5.6 4.91974 4,568.1 1.7 230.7 3.9 5.11975 4,451.7 (2.6) 221.6 (4.0) 5.01976 4,457.6 0.1 224.3 1.2 5.01977 4,728.7 6.1 269.3 20.1 5.7

Source: Caribbean Tourism Association, Caribbean Tourism & Research Center, andvarious national tourist organizations.

BARBADOS: TOURISM PROJECT

FOREIGN VISITORS BY COUNTRY OF RESIDENCE 1967, 1970, 1973-77('000)

Average AnnualGrowth %

1967 % 1970 % 1973 % 1974 % 1975 % 1976 % 1977 % 1967-1977

United States 29.8 33 57.1 37 74.8 34 66.2 29 54.9 25 56.0 25 70.4 26 9.0

Canada 18.3 20 39.6 25 68.6 31 77.2 33 75.5 34 73.0 33 83.7 31 16.4

United Kingdom 9.6 10 12.1 8 17.7 8 23.8 10 24.8 11 25.8 11 25.5 10 10.3

Federal Republic of (a) -- (a) -- 4.6 2 6.3 3 7.1 3 8.6 4 11.4 4 25.5-/

Germany

Venezuela 1.8 2 2.7 2 2.7 1 2.9 1 3.4 2 4.4 2 5.9 2 12.6

(c)Caribbean Commonwealth 24.7 27 33.4 21 36.6 16 38.2 17 38.5 17 38.5 17 49.3 18 7.2

Other Countries 7.4 8 11.5 7 17.1 8 16.1 7 17.4 8 18.0 8 23.1 9 12.1

Total Visitors 91.6 100 156.4 100 222.1 100 230.7 100 221.6 100 224.3 100 269.3 100 11.4

(a) Included in "Other Countries" H

(b) Average annual growth for the 1973-1977 period.(c) Includes Guyana, Jamaica, Trinidad & Tobago, the Leeward and Windward Islands. X

Source: Barbados Statistical Service.

BARBADOS: TOURISM PROJECT

VISITOR ARRIVALS BY MOarth 1973-1977('000)

Monthly AveragePercentage of

1973 % 1974 7. 1975 e/ 1976 % 1977 7 1978 Yearly Arrivals

1973-1977

January 18.4 8.3 20.5 8.9 19.1 8.6 20.5 9.1 25.2 9.4 28.6 8.9

I:ebruary 23.1 10.4 25.5 11.0 24.7 11.1 24.6 11.0 28.2 10.5 31.3 10.8

March 23.7 10.7 24.6 10.7 23.8 10.7 22.2 9.9 25.8 9.6 33.0 10.3

April 20.9 9.4 21.2 9.2 17.4 7.9 21.8 9.7 26.1 9.7 25.1 9.2

May 13.2 5.9 13.8 6.0 14.6 6.6 13.4 6.0 14.9 5.5 17.7 6.U

June 11.5 5.2 13.6 5.9 11.4 5.1 11.3 5.0 13.3 4.9 16.2 5.2

July 18.6 8.4 18.3 7.9 17.7 8.0 18.8 8.4 22.4 8.3 26.9 8.2

Auigust 22.3 10.0 23.0 10.0 21.7 9.8 21.5 9.6 26.3 9.8 - 9.8

September 11.6 5.3 12.8 5.5 12.4 7.0 12.2 5.4 16.0 5.9 - 5.6

October 13.8 6.2 15.3 6.6 15.4 6.9 15.7 7.0 18,8 7.0 6.8

Novenmber 21.6 9.7 20.5 8.9 20.9 9.4 18.7 8.4 24.0 8.9 9.0

Decesiber 23.4 10.5 21.7 9.4 22.5 10.2 23.6 10.5 28.4 10.5 10.2

Total /a 222.1 100.0 230.7 100.0 221.6 100.0 224.3 100.0 269.3 100.0 100.0

/a Totals may not add due to rounding.

Soutrce: Barbados Statistical Service.

ANNEX I_ 47 - Table 5

BARBADOS: TOURISM PROJECT

AVERAGE LENGTH OF STAY BY TYPE OF ACCOMMODATIONS(nights)

Hotels Guest Apartels Apartments

Establish Luxury 'A'Class "B"Class Housesments

1970 5.0 5.0 6.0 6.0 9.0 n.a n.a.1971 6.0 7.0 6.0 5.0 10.0 " "1972 6.0 7.0 6.0 6.0 6.0 It1973 7.0 8.0 7.0 5.0 5.0 It1974 9.1 7.8 6.5 4.8 5.5 14.5a/ -

1975 8.3 6.7 7.3 4.5 3.8 11.9 12.31976 8.5 6.7 7.6 5.0 4.0 11.1 11.71977 9.0 7.5 7.7 5.6 3.4 10.1 12.0

1977 7

Jan. 9.0 7.3 8.9 4.7 5.2 10.3 11.9Feb. 10.1 8.3 9.9 6.3 7.4 11.8 12.6Mar. 10.3 7.5 8.9 6.3 4.4 12.5 13.9

Apr. 8.3 6.7 7.4 4.9 5.0 9.2 11.0May, 8.9 6.7 4.9 4.3 3.3 10.4 15.0Jun. 7.6 5.6 5.6 4.5 2.7 8.5 13.2

Jul. 8.3 6.4 6.7 5.1 2.0 9.2 11.5Aug. 9.1 5.1 8.1 5.9 1.6 10.7 13.5Sep. 7.2 5.4 6.3 6.4 3.7 8.5 8.7

Oct. 8.8 6.8 5.1 3.8 2.6 8.9 11.5Nov. 8.1 7.8 7.1 5.3 2.2 10.3 9.1Dec. 9.0 7.9 3.5 6.9 2.6 10.5 10.7

a/ Includes apartments

Source: Barbados Statistical Service

IBAIKBLX TO: UlRI SM PROJEC(

BED CAPACIITY TN VIS;Cl1th ACCOMMOD)ATIONS 190b8,_ 197'-1978

Luxury G "A ( Gueuest AparteisV IotalYCar Hotels ' -Houses Apartments Accoinmd,(dat lonf

]968 1503 2262 338 1277 5380

1972 2151 1961 379 3047 7538

1973 2070 1961 399 3430 7969

1974 2179 1961 449 3864 8453

1975 2307 2259 214 4516 9296

1976 2493 2398 214 4435 9540 1

1977 2615 2326 254 5064 10259 1

1978 La 2691 2326 260 5740 11017

Average Aninual Growtli Rate (%) g p1 908-1')74 6.4 (2.4) 4.8 20.3 7.8197',-1978 5.4 4.4 (12.8) 10.4 6. 8I .90-1 978 6.0 .3 (2.6) 16.2 .

/a As of October 1978

SoutLLee; Ministry of Trade and Industry

bUARIYS: lOURISM PRO)JECT

VISITOR ACCOMMODATION BY SIZE. TYPE AND CrATMRY 1977

U-20 bedo 21-40 bead 41-60 bed. 61-80 leda 81-100 beds 100 + beds lOUL N

N.. oK cc- No. of N. of es- No. of No. of ec- No. of No. of cc- No. of No. of cu- No. of No. of es- No. of No. of e8- No. of

Hotels teblishneut. beds tablishoents beds tablishments beds tablishments beds tablishntv beds tablishments bedo tablish.nts % Mdi

Luxury 1otels - _ 1 40 3 140 3 207 1 100 9 2128 17 (11.01 2615 (25.5)

lass "A" lot.ls - - 6 191 - - 3 223 2 177 5 728 16 (10.S) 1319 '12.91

Ciao& M tlot1 4 62 9 291 5 232 3 210 1 87 1 125 23 (14.81 1007 ( 9.8)

G,UCSt (loo-'S 20 232 1 22 _ _ _ - _ _ - 21 (13.5l 254 ( 2.51

Subtotal 24 294 17 544 8 372 9 640 4 364 15 2981 77 (49.61 5195 (50.7)

Apartels: /b

Class I Apartel1 - - 2 60 - - 1 74 1 88 4 622 8 f5. r 844 '8.2)

Class It Apart.Is 2 28 3 110 3 144 1 70 - - 2 264 11 (7.11 616 '6.0)

Class 111 ApatelIs 1 19 4 112 1 44 2 134 1 84 3 369 12 (7.7' 762 (7.4)

Subtotal 3 47 9 282 4 188 4 278 2 172 9 1255 31 (20.0) 2222 (21.6)

Apartments: /

Class I Apartments 4 66 7 201 5 258 2 139 - - 1 150 19 (12.3) 814 (7.9'

Class 2 Aparteents 15 181 10 272 1 50 1 72 - _ 1 1453 28 (18.11 2028 (19.8)

Subtotal 19 247 17 473 6 308 3 211 - - 2 1603 47 (30.41 2842 (27.7)

ALL ACCU*4t0IATIONS 46 588 43 1299 18 868 16 1129 6 536 26 5839 155 (100.01 10259 (100.0)

D histribution 29.7 5.7 27.7 12.7 11.6 8.5 10.3 11.0 3.9 5.2 16.8 56.9 100.0

f'..ch Type is dtvided into a number of Categories on the bails of 1974 winter prices.

/k Apartels: Eacl .. it ia seIf-contained with a refrigerator. stove and eating facilities as well as some or all the facilities offered by hotels.

/c Apartmnts: Each unit is self-contAined, without co_munal dining facilities and services are generally limited to maid aervices.

Sour,e: Ministry ol Trade and Industry.

BARBADOS: TOURISM PROJECT

BED OCCUPANCY RATE BY TYPE OF ACCOMMODATION AND BY SEASON

(Percentage of Beds Available) 1970-77

Hotels GuestAll establishments Luxury "A" class "B" class houses Apartels Apartments

1970 Year 45.9 50.6 43.1 31.6 35.0 n.a. n.a.Winter - 71.1 58.0 45.8 41.6 n.a. n.a.Suimmer - 40.9 35.3 24.3 31.8 n.a. n.a.

1971 Year 47.9 55.5 41.1 35.8 31.8 n.a. n.a.Winter - 68.8 46.6 43.3 44.2 n.a. n.a.Summer - 48.6 38.7 31.2 25.8 n.a. n.a.

1972 Year 48.3 56.2 46.7 36.8 24.4 n.a. n.a.

Winter - 66.4 59.2 46.6 27.3 n.a. n.a.Summer - 50.8 39.9 31.9 22.6 n.a. n.a.

1973 Year 53.3 63.7 48.5 37.2 20.5 64.1 n.a. °Winter - 73.2 65.0 44.1 30.6 72.2 n.a.Suummer - 63.7 40.0 32.8 15.4 60.1 n.a.

1.974 Year 55.6 63.3 48.9 34.9 26.7 59.0/b- n.a.Winter - 70.5 61.4 44.4 41.3 76.6 n.a.Summer - 59.4 44.2 26.5 19.0 48.8 n.a.

1975 Year 49.9 59.1 37.5 19.4 20.8 53.4 59.3Winter - 64.4 53.9 33.5 30.0 67.5 72.9Summer - 55.9 26.6 13.3 14.6 45.4 39.6

1976 Year 44.7 53.0 36.1 22.1 19.4 50.4 45.9Winter - 67.7 50.5 28.7 24.0 63.6 59.7 X 2Suwnmer - 45.2 28.6 18.5 16.4 43.2 38.8 m x

1977 Year 54.1 61.3 40.4 40.7 25.4 53.4 55.1

/a Winter season: January-AprilSummer season: May-December

/b For 1973 and 1974 - apartments grouped with apartels.

Source: Barbados Statistical Service

ANNEX I- 51 - Table 9

BARBADOS: TOURISM PROJECT

PUBLISHED ROOM RATES OF SELECTED HOTELS, APARTELS AND APARTMENTS

a/(European Plan; Double Occupancy; in US$)

Summer Winter Summer WinterType of accommodation 1977 1977 1978 1978

Luxury hotels:

Colony Club 42-54 75-95 46-58 86-116Coral Reef Club 42-60 96-140 42-60 107-115Discovery Bay Inn 42-54 75-90 46-58 86-136Holiday Inn 42-46 78-86 55-61 86-96Hilton Hotel 42-48 78-92 44-52 83-97Marriot's Sam Lord's Castle 48-52 88-180 44-48 80-88Tamarind Cove 35-51 70-95 40-66 85-120Treasure Beach n.a. 68-75 35-38 70-90

Class I Apartels:

Cobblers Cove 35-40 77-85 35-40 95-110Coconut Creek 26-32 78 32-41 70-90Greensleeves n.a. n.a. 50-62 65-110Southern Palm 28-52 56-90 30-34 66-100Southern Surf 15-16 32-40 16-17 40-42

Class I Apartments:

Blue Horizon 18-35 34-44 22-23 40-48Merriville 17-25 32-54 16-26 n.a.Sand Acres 22-28 45-56 23-40 46-58Woodville 14-23 35-55 20-35 35-55Nautilus 18-30 32-45 18-30 36-50

a/ European plan excludes food. In cases where only Modified American Plans (MAP)are available, rates were adjusted by deducting approximate price for theincluded breakfast and dinner.

Note: Winter rates: December 15-April 15Summer rates: April 16-December 15

Source: Board of Tourism Rate Sheets and Industrial Development Corporation.

BARBADOS: TOURISM PROJECT

COMPARATIVE PRICES OF PACKAGE TOURS TO CARIBBEAN DESTINATIONS

(Ground Cost per Person for One Week Double Occupancy)

Summer 1978 (US$) Winter 1978/79 (US$)Destination Low High Mid-Point Low High Mid-Point

414 a!Barbados 159 414-! 287 230 7991 515Martinique 219 350 285 292 561 427Aruba 246 326 286 346 497 422Dominican Republic 217 325 271 269 542 406Guadeloupe 194 285 240 303 506 405Maarten (Dutch) 151 289 220 311 465 35tJamaica 135 334 235 205 512 359Trinidad 210 369 290 297 369 333Bahamas (Nassau only) 169 373 271 187 443 315St. Lucia 193 320 257 219 425 322Antigua 198 247 223 268 432 350Haiti 135 341 238 156 498 327Tobago 215 255 235 200 406 303St. Kitts 179 252 216 254 388 321St. Vincent 119 262 191 161 510 336Curacao 176 277 227 211 382 297Puerto Rico (San Juan only) 122 300 211 160 415 288

Prices are for Caribbean Holiday Inc. and include MAP hotel accommodations, airport transfer to andfrom hotels, and, in some cases, limited sightseeing tr.' - The prices quoted may be offered onlyduring part or on certain dates of the seasons.

a/ If Sandy Lane, a luxury hotel, is excluded, high price wc Id be US$355 for summer and US$482 forwinter.

BARBADOS: TOURISM PROJECT

SUMMARY OF ESTIMATED PRLOJE(T COSTS

(in BDSS00O)

lai,d Cicil Furniturc Physical Professional Marketing Project Pre-Opening Total Cost

Agq,.OI II- Works & Fixtures Equipment Facilities Services Expenditure. Admin. Expenses BDS5 _US$

Hotel and Apartels 7,869 1,723 1,142 10,734 1,178 11,912 5,956

Common Buildings 1,380 103 411 1,894 190 2,084 1,042

Sport Buildings 112 12 124 14 138 69

Sport Facilities 493 115 608 67 675 337

Infrastructure & Landscape 1,662 2.593 388 4,643 314 4,957 2,479

Solar Water Heating 272 534 806 89 895 447

Bypass Road (Contract) 406 910 1.316 100 1,416 708

Bypass Road (Force account) 862 862 862 431

Marketing and Technical As.t. 2,295 2,295 1,148

Proj ect Admsinistration 645 645 322

Preopening Expenses 6 Interest_ _____ __ ___ ____ ______ ____ ___ __ __ _ 739 739 370

Base Cost 2,068 14,491 1,838 2,590 20,987 1,952 2,295 645 739 26,618 13,309

Cont ingenc iesPhysical (9.02) 1,666 183 278 2.127 216 65 2,408 1,204

Price (20.2%) 3.155 400 558 4,113 373 808 80 5.374 2 687

4,821 583 836 6.240 589 808 145 739 7t,782 3,891

PROJECT TOTAL 2,068 19,312 2,421 3,426 27,227 2,541 3,103 790 739 34,400 17,200

Foreign Exchange Component o-

Percentage of Total 66.4 70.0 84.9 64.0 70.0 75.0 25.0 63.2 63.2 a K

BDS$'000 12,827 1,694 2,910 17,431 1,779 2,327 197 21,734 -

US5'000 6,413 847 1,455 8,715 890 1,163 99 10,867

8ARBAWD0 TOG815H PROJECT

CONTITGENCY ALLCWANCES

(In BD0S 000)

Land Civl Works F-rn1 itr- 6 FPltorn- - oElnonti Prof....onal Snr-icn- M-rkn-i.n epnditures P-o-ect Adulan0sratlon :pncoo Tonal COnnlnonorla

Anqo.l.ioniTnt.l Local Foraig Total Loc I Fore.Ln Total Loc l For-g, Tot.I Local FonLn Total Loc I F.rnign Total LoRSl For-lsn Total L- local PeLo Treal

TOTAL PiRJECT CoSTEXCLUDING CONTI8NACIES 2,068 4.859 9,632 14.49t 551 1,217 1,83S 389 2.201 2,590 586 1.366 1,952 574 1,721 2,295 464 161 b45 739 10,250 16,368 26.618

P-re.nta8e of Total 100.0 33.5 66.5 100.0 30.0 70.0 100.0 15.0 05.0 100.0 30.0 70.0 100.0 25.0 75.0 10O.0 75.0 25.0 100.0 100.0 38.5 61.5 100.0

GOQNTINGeNC1X8

.1.5 Ailneanna for Ponbabln-Prlca mom...a:

I() Parntga 21.7 21.8 21.8 22.0 21.7 21.8 21.8 21.5 21.5 19.0 19.1 19.1 35.2 35.2 35.2 12.4 12.4 12.4 15.9 22.9 20.2

.(i)1 Aao nt 1,053 2,102 3,155 121 279 400 85 473 558 III 262 373 202 606 808 60 20 80 1.632 3.742 5.374(b) Alla_o . -an Uaf-r.a.n.

Fanner.(15 P.r.entago 11.7 11.4 11.5 10.0 9.9 10.0 10.8 10.7 10.8 11.1 11.1 11.1 10.1 9.9 10.1 7.6 9.9 9.0

(11) Aaoun 573 1,093 1,666 55 128 183 42 236 278 65 151 216 49 16 65 784 1.624 2.406

(L) Total CPnatln".eyAllotoancaa:(I) Pa-ronnaa 133.5 33.2 33.3 32.0 31.6 31.8 3i2.6 372. 2 32.3 30.1 30.2 30.2 35.2 35.2 35.2 22.5 22.3 22.5 23.5 32.i 29.2

(ii) A-on .626 3.195 4,821 17 407 38 17 709 836 176 413 589 202 606 808 109 36 145 2,416 5.366 7.782

.(11i) Pnr-anatga of 33.7 66.3 100.0 302 69.8 100.0 15.2 848 100.0 29.9 70.1 100.0 25.0 75.0 100.0 75.2 24.8 100.0 31.0 69.0 100.0

Total

DTA. PROJEcT COSTIRCLUDIRG CONTfNGE8C185 2.068 6.485 12,827 19,312 727 1.694 2,421 516 2,910 3.426 762 1,779 2.541 776 2,322 3.103 593 197 790 739 12,666 21,734 34.400

Pnrnenagae of Tot1l 100.0 33.6 66.4 100.0 30.0 70.0 100.0 15.1 84.9 100.0 70.0 70.0 100.0 25.0 75.0 100.0 75.0 25.0 100.0 100.0 36.8 63.2 100.0

TOTAI. CONTIN8GNCIES: A. Parcanatga of total pro-ent co-t. 21.62; a. porr..noga of proJ.at -oat ninhot con.nn. nciaa, 27.62.

t-:hao8a Ran,7 US51.00 - 8vS22.00Pnlco Ecalatlo (P.rL-ntS.g): 1979 I900 1981-1984

Civtl -ook ad P.oi.f..oo.L *a:'I 9.8 680 7.0PornInane 6 aqoIpm.nn 6.5 6.0 6.0

BARBAD5OS: IOURISM PROJECt:

PROJECT FINANCtING

Govt. of Barbados CDB INF.D TOTAI

BDS$(000) US$(000) BDS$(000) US$(000) BDSO(000) 0OS$(00)

LAND ACQUISITION 2,068 1.034 2,068 1,034

CIVII. WORKS 4.241 2.120.5 2,469 1.234.5 7,78.1 3.890.5 14.491 7,245.5

Hotels and Other Buildings 2,808 1,404 6,553 3,276.5 9,361 4,680.5

Sport Facilities 99 49.5 394 197 493 246.5

Infrastrtictuire and Landscaping 518 259 2,075 1,037.5 2,593 1,296.5

Solar WaLer lleating 108 54 164 82 272 136

Bypass road (Contract) 364 182 546 273 910 455

Bypass road (Force Account) 344 172 518 259 862 431

FURNITURE ANI) FIXTURES 368 184 1.470 735 l 838 919

EQUIPMENT 414 207 402 201 1.774 887 2.590 1295

lHotels and Other Buildings 233 116.5 1,320 660 1,553 776.5

Sport Facilities 23 11.5 92 46 115 57.5

Infrastructure and Landscaping 78 39 310 155 388 194

Solar Water lleating 80 40 454 227 534 267

PRCFESSIONAL SERVICES 586 293 1.366 683 1,952 976

MARKEflNG AND 'I'ECIINICAL ASSISTANCE , 574 287 1,721 860.5 2295 1,147.5

PROJECT ADMINISTRATION 129 64.5 516 258 645 322.5 H1 LI

PRE-OPENINC E.XPENSES & WORKING CAPITAI. 739 369.5 739 369.5 a |

BASE COST 9,119 4,559.5 4,857 2,428.5 12,642 6,321 26,618 13,309

CONTINCENCIES: 2,881 1,440.5 1.543 771.5 3,358 1,679 7,782 3,891

Physical Increase 867 433.5 580 290o 961 480.5 2,408 1.204

Price Increase 2,014 1,007 963 481.5 2,397 1,198.5 5,374 2,687

TOTAL 12,000 6,000 6,400 3,200 16,000 8,000 34,400 17,200

BARBADOS: TOURISM PROJECT

PROJECT IMPLEMEN7ATION SCHEDULE

First Year Second Year Third Year Fourth Year Fiftlh Year

Quarter: 3 4* ]** 2 3 4 5 6 7 8 9 101 11 12 13 14 15 16 17 18

Hotels and Apartels

Construction PPP PPP PPp TTT XXX XXX XXX XXX XXX XXX XXX XXX MAA AAA AAA AAAFurniture & Equipment LLL LLL ITTT TTT MMM, MMM MMM MMM MMM DDT) DDD DDD GGG GGG

Common Buildings

Construction PpP PPP PPP TTT XXX XXX XXX XXX XXX XXX XXX XXY XXX AM MAA AAAFurniture & Equipmenit LLL LLL TTT MMM MMM MMM MMM MMI DD') DDD GGG

Sports Buildings

Construction PPP PPP PPP TTT XXX XXX XXX XXX XXX XXX XXX XXX MA MAAAFurniture & Equipment .LL LLL TTT MtM MMM MMM MMM MMM DDD DDI) GGG GGG

Infrastructure &Landscaping

Site Clearance FF FFF FFFCivil Works PPP PPP PPP TTT TTT XXX XXX XXX XXX XXX XXX XXX XXX AAA MAAEquipment PPP TTT TTT DDD DDD DDD DDD DDD GGG GGG GGG

Solar Water HeatingSystew PPP PPP TTT TTT DDD DDD DDD DDD DDD GCG GGG GGG

Bypass Road (Force Account) FFF FFF FFF FFF FFF FFF FFFBypass Road (Contract) PPP PPP PPP TTT XXX XXX XXX XXX XXX XXX M A MA

tMarketina and Technical Assista)ce _4 MMM FOIM MHM MMM MMM RMM t4MM MMM 14MM 4MIM 4MM

LEGEND: * Board Approval Y Manufacturing** Effectiveness D Delivery and installationr Preparation of design, specifications F Force account

and tender documents A Defect liability period , ~I. Preparation of furniture and equipment list, C Guarantee period

specifications and tender documents M Marketing and Management AssistanceX Construction period

BARBADOS: TOURISM PROJECT

ESTIMATED SCHEDULE OF DISBURSEMENTS OF IBRD LOAN(US$ millions)

1/ DIS_URSEMENTS ACCUMDLATED DISBURSEMENTS UNDISBURSED BALANCEFY CALENDAR YEAR SEMESTER AMDUNT % AMOUNT % AMOUNT %

1979

1 8.0 100.0

'80 __________

2 0.4 5.0 0.4 5.0 7.6 95.0

1950

1 0.6 7.5 1.0 12.5 7.0 87.5

'81 __ _ _ _ _ _ _ _ _

2 1.1 13.7 2.1 26.2 5.9 73.8

_1981

1 1.3 16.3 3.4 42.5 4.6 57.5

'82

2 1.7 21.2 5.1 63.7 2.9 36.3

1982

1 1.3 16.3 6.4 80.0 1.6 20.0

'83

2 0.5 6.2 6.9 86.2 1.1 13.8

1983_ _ _

1 0.6 7.5 7.5 93.7 0.5 6.3

'84 _

2 0.2 2.5 . 7.7 96.2 0.3 3.8

1984 OW

1 0.2 2.5 7.9 98.7 0.1 1.3

'85 _

2 0.1 1.3 8.0 100.0 0.0 0.0

I/ Beginning from date of IBRD Loan Agreement

BAPBADOS: TOURISM PROJECT

ESTIMATED SCHEDULE OF DISBURSEMENTS OF CDB LOAN(US$ nlillions)

1/ DISBURSEMENTS ACCUMULATED DISBURSEMENTS UNDISBURSED BALANCECALENDAR YEAR SEMESTER AMOUNT % AMOUNT % AMOUNT %

1979

1 3.20 100.0

2 0,05 1.6 0.05 1.6 3.15 98.4

1980

1 0.23 7.2 0.28 8.7 2.92 91.3

2 0.55 17.2 0.83 25.9 2.37 74.1

1981

1 0.68 21.2 1.51 47.3 1.69 52.7

2 0.77 24.1 2.28 71.2 0.92 28.8

1982

1 0.61 19.0 2.89 90.3 0.31 9.7 |a..

2 0.31 9.7 3.20 100.0 0.00 0.0

L/ Beginning from date of Loan Agreement

BARBADOS: I_URISM PROJECT

VISITORS BY AIR TO TIE CARIBBEAN. 1970-1977

('000)

Averag% Increase Average Annual Annual

Country 1970 1971 1972 1973 1974 1975 1976 1977 (Decreae) Growth Growth

1977/1976 1970/1977 1970/73

Antignia 63.6 66.1 70 .1 71.1 68.9 62 .1 56 .4 67 .4 19.5 0.8 3.8

Aruba* 75.0 85.8 88 .7 95.2 105 .3 128 .9 146 .5 151.2 3.2 10.5 8.2

Barbados* 156.4 189.1 210 .3 222.1 230.7 221 .6 224 .3 269.3 20.1 8.1 12.4

Bonaire 7.4 5.6 8 .1 10.9 11.1 8 .6 10 .3 14.1 37.6 9.7 13.7

British Virgin Islands 16.2 19.1 22.0 24.0 29.2 31 .7 36.1 45.7 26.7 16.0 15.6

Caymana. Islands 23.2 24.4 30.6 45.8 53.1 54 .1 64 .9 67.2 3.6 16.4 25.4

Curacao 101.6 108.4 108.2 123.2 109.3 103 .3 118 .9 136.4 14.7 4.3 6.6

Grenada 30.4 35.6 37.9 33.5 14.7 21 .1 24.6 28.5 16.2 (0.9) 3.2

Guadeloupe+ 47S2 61.4 67.7 103.0 118.1 127 .4 143.8 167.1 16.2 19.8 29.7

llaiti 33.7 449 67.6 70.1 79.1 79 .2 85 ,9 95.0 11.7 16.1 27.7

Jamaica 309.1 359.3 407.8 418.3 432.0 395 .8 327.7 264.9 (19.2) (2.2) 10.6

Martinique 33A4 45.6 54.6 82.8 108.8 104 .9 120 .5 135.4 12.4 22.1 35.3

Montserrat 9.5 9.3 9.8 10.5 10.1 9 .0 9.6 1o.6 10.7 1.6 3.4

Puerto Rico 1,088.4 1,095.1 1,172.9 1,322.3 1,441.0 1,399 .1 1,298.7 1,376.5 6.0 3.4 6.7

St. Kitts/Nevis/Anguilla* 13.5 15.1 16.2 14.9 13.3 14 .6 14 .8 15.4

4.6 2.0 3.5

St. Vincent 15.8 15. 15.8 15.5 19,2 15 2 17 .2 18.2 6.0 2.0 (0.7)

Trinidad & Tobago 86.9 111.3 114.6 106.7 125.1 133 .3 156 .2 163.2 4.5 9.4 7.1

U.S. Virgin Island 669.8 686.7 729.1 681.9 592.8 569 .0 582 .4 644.3 10.6 -0.6 6.0

Bahamas 891.5 960.8 1,015.3 971.8 929.2 903 .1 939 .* 965-4 2.7 1.1 2.9 Ln

Dominica 12.5 14.4 14.8 14.9 16.3 13 .8 15 .6 16.7 6.9 4.3 6.2

St. Lticia* 29.5 33.2 42.4 45.8 51.8 46 .7 56 .4 70.1 24.2 13.1 15.8

Turks & Caicos* 2.1 2.7 4.7 5 9 7i0 8 2 .i 5.0 N/A N/A N/A

TOTAL 3,716.8 3,989.4 4,309.2 4,490.9 4,568.1 4,451 .7 4,457 .6 4,728 .7 6.1 3.5 6.5

* Air and Sea+ Air, sea anid cruise

o,,rce: Caribbean Tourism Association,

Caribbean Tourismi Research Center, various National Tourist Organizations.

- 60 -

ANNEX ITable 18

BARBADOS: TOURISM PROJECT

REGRESSION ANALYSIS OF CANADIAN ARRIVALS IN BARBADOS

Arrivals GDP* CPI** ArvLog GDPLog CPILog

1970 39,609 128,746 62.5 4.598 5.110 1.7961971 53,690 137,723 67.7 4.730 5.139 1.8311972 61,918 145,753 69.0 4.792 5.164 1.8391973 68,639 156,733 74.2 4.837 5.195 1.8701974 77,246 162,399 86.5 4.888 5.211 1.9371975 75,517 163,912 100.0 4.878 5.215 2.0001976 73,005 172,439 95.7 4.863 5.237 1.9811977 83,749 176,923 102.8 4.923 5.248 2.012

STEP 1

INDEPENDENT VARIABLE SELECTED... GDPLOG

SUM OF SQUARES REDUCED IN THIS STEP.... .071FROFORTION OF VARIANCE OF Y REDUCED.... .903F FOR THIS VARIABLE (D.F.=1, 6) ...... 55.785

CUMULATIVE SUM OF SQUARES REDUCED.* .071CUMULATIVE PROPORTION REDUCED . ..... .903 OF .079

F FOR ANALYSIS OF VARIATION (D.F.= 1, 6) 55.785

MULTIPLE CORRELATION .95020 (ADJUSTED R = .95020)R-SOUARED, .90289 (ADJUSTED R-SO. .90289)STD.ERROR OF ESTIMATE .03569 (ADJUSTED SE= .03569)

VARIABLE REG.COEF. STD.ERROR COEF. COMFUTED T BETA COEF.GDFLOG 2.08730 .27946 7.46894 .95020INTERCEPT= -6.019

STEP 2

INDEPENDENT VARIABLE SELECTED... CPILOG

SUM OF SQUARES REDUCED IN THIS STEP .... .000PROFORTION OF VARIANCE OF Y REDUCED .006F FOR THIS VARIABLE (D.F.=1, 5) .310

DO YOU WANT TO USE THIS VARIABLE IN THE REGRESSION (Y OR N)?YCUMULATIVE SUM OF SQUARES REDUCED ...... .071CUMULATIVE FROPORTION REDUCED ......... .909 OF .0;9

F FOR ANALYSIS OF VARIATION (D.F.= 2, 5) 24.841

MIJLTIFLE CORRELATION .95319 (ADJUSTEED R = .94516)R-SQUARED .90856 (ADJUSTED R-SO. .89332)STD.ERROR OF ESTIMATE .03793 (ADJUSTED SE= .04097)

VARIABLE REG.COEF. STD.ERROR COEF. COMPUTErD T 8ETA COEF.GDPLOG 2.53668 .85978 2.95038 1.15478CPILOG -. 27295 .49006 -. 55697 -. 21800INTERCEFT-= -7.830

lDURBUN-WATSON STATISTIC 1.87658

* In USS millions, 1975 prices.** Computed by dividing the consumer price index in Barbados by the corresponding

index for the US with 1975-100 and adjusting for changes in rate of exchangefrom 1975 base.

-61- ANNEX I

Table 19

BARBADOS: TOURISM PROJECT

REGRESSION ANALYSIS OF US TOURIST ARRIVALS IN BARBADOS

Arrivals GDP* CPI** ArvLog GDPLog CPILog

1970 57,111 1,361,337 59.6 4.757 6.134 1.7751971 68,487 1,400,686 65.7 4.836 6.146 1.8181972 75,525 1,481,230 69.4 4.878 6.171 1.8411973 74,779 1,561,603 74.6 4.874 6.194 1.8731974 66,237 1,541,476 89.0 4.821 6.188 1.9491975 54,894 1,526,457 100.0 4.740 6.184 2.0001976 56,041 1,615,606 100.3 4.749 6.208 2.0011977 70,389 1,694,770 101.9 4.848 6.229 2.008

INDEPENDENT VARIABLE SELECTED... CF'ILOG

SUM OF SQUARES REDUCED IN THIS STEP .002PROPORTION OF VARIANCE OF Y REDUCED .... .074F FOR THIS VARIABLE (D.F.=1, 6) .482

CUMULATIVE SUM OF SQUARES REDUCED.-.... .002CUMULATIVE PROPORTION REDUCED .......... .074 OF .022

F FOR ANALYSIS OF VARIATION (D.F.= 1, 6) .482

MULTIF'LE CORRELATION .27277 (ADJUSTED R = .27277)R-SQUARED .07440 (ADJUSTED R-SQ. .07440)STD.ERROR OF ESTIMATE .05881 (ADJUSTED SE= .05881)

VARIABLE REG.COEF. STD.ERROR COEF. COMPUTED T BETA COEF.CPILOO -.16619 .23930 -.69449 -.27277INTERCEPT= 5.130

INDEF'ENDENT VARIABLE SELECTED... GDPLOG

SIJM OF SQUARES REDUCED IN THIS STEP, .013PROPORTION OF VARIANCE OF Y REDUCED. .559F FOR THIS VARIABLE (D.F.=1, 5) ...... 7.626

DO YOU WANT TO USE THIS VARIABLE IN THE REGRESSION (Y OR N)?YCUMULATIVE SUM OF SQUARES REDUCED ...... .014CUMULATIVE PROPORTION REDUCED .......... .633 OF .022

F FOR ANALYSIS OF VARIATION (D.F.= 2, 5) 4.321

MULTIPLE CORRELATION .79591 (ADJUSTED R = .75656)R-SOUARED *63347 (ADJUSTED R-SU. .57238)STD.ERROR OF ESTIMATE .04054 (ADJUSTED SE= .04379)

VARIABLE REG.COEF. STD.ERROR COEF. COMPUTED T BETA COEF.CPILOG -.95302 .32923 -2.89470 -1.56418GDPLOG 2.71124 .98177 2.76158 1.49224INTERCEPT= -10.129

DIURBIN-WATSON STATISTIC 1.95346

* In USS millions, 1975 prices.** Computed by dividing the consumer price index in Barbados by the

corresponding index for the US with 1975-100 and adjusting forchanges in rate of exchange from 1975 base.

- 62 -

ANNEX ITable 20

BARBADOS: TOURISM PROJECT

REGRESSION ANALYSIS OF UNITED KINGDOM TOURIST ARRIVALS IN BARBADOS

Arrivals GDP* DMV** ArvLog GDPLog DMVLog

1970 12,083 207,959 1.0 4.082 5.318 01971 13,621 213,711 1.0 4.134 5.330 01972 14,851 218,946 1.0 4.172 5.340 01973 17,690 233,345 1.0 4.248 5.368 01974 23,782 231,848 1.5 4.376 5.365 0.1761975 24,802 228,162 1.5 4.394 5.358 0.1761976 25,843 234,115 1.5 4.412 5.369 0.1761977 25,481 235,754 1.5 4.406 5.372 0.176

INDEPENDENT VARIABLE SELECTED... DMVLOG

SUM OF SQUARES REDUCED IN THIS STEP... .114FROPORTION OF VARIANCE OF Y REDUCED .... .881F FOR THIS VARIABLE (D.F.=1, 6) ...... 44.534

CUMULATIVE SUM OF SQUARES REDUCEDE..... .114CUMULATIVE FROPORTION REDUCED .......... .881 OF .129

F FOR ANALYSIS OF VARIATION (D.F.= i, 6) 44.534

MULTIPLE CORRELATION .93876 (ADJUSTED R = .93876)R-SQUARED .88127 (ADJUSTED R-SG. .88127)STD.ERROR OF ESTIMATE .05051 (ADJUSTED SE= .05051)

VARIABLE REG.COEF. STD.ERROR COEF. COMPUTED T BETA COEF.EiMVLOG 1.35360 .20284 6.67337 .93876INTERCEPT= 4.159

INDEPENDENT VARIABLE SELECTED... GOPLOG

SUM OF SQUARES REDUCED IN THIS STEP .... .014PROPORTION OF VARIANCE OF Y REDUCED .... .110F FOR THIS VARIABLE (D.F.=1, S) ...... 61.033

DO YOU WANT TO USE THIS VARIABLE IN THE REGRESSION (Y OR N)?YCUMULATIVE SUM OF SQUARES REDUCED ...... .128CUMULATIVE PROPORTION REDUCED .....,.... , .991 OF .129

F FOR ANALYSIS OF VARIATION (D.F.= 2, 5) 275.576

MULTIPLE CORRELATION .99549 (ADJUSTED R = .99474)R-SOUARED .99101 (ADJUSTED R-SQ. .98951)STD.ERROR OF ESTIMATE .01523 (ADJUSTED SE= .01645)

VARIABLE REG.COEF. STD.ERROR COEF. COMPUTED T BETA COEF.DMVLOG .87466 .08658 10.10189 .60660GDFLOG 3.08930 .39544 7.81238 .46912INTERCEPT= -12.335

DURBIN-WATSON STATISTIC 2.36039

* In US$ millions, 1975 prices.** Dummy variable.

BARBADOS: TOURISM PROJECT

TOTJRIST BEDNIGHTS IN 1977 BY TYPE OF ACCOMMODATIONS

Hotels Apartment Hotels ApartmentsGroup Group Group Guest Group Group Group Group Group Total

Month I II III Houses I II III I II Bednights

January 50,302 10,524 6,662 784 6,441 20,958 14,159 13,770 44,530 168,130February 57,902 13,767 10,272 899 8,625 22,936 16,579 16,914 47,636 195,530March 46,714 11,979 9,862 817 7,481 24,244 16,616 16,080 49,884 183,677April 45,551 7,693 5,468 642 6,442 15,822 13,357 11,245 33,311 139,531

Winter SeasonSub-total 200,469 43,963 32,264 3,142 28,989 83,960 60,711 58,009 175,361 686,868

May 31,884 2,380 3,791 360 5,732 10,468 6,921 5,949 20,553 88,038June 21,902 2,055 3,216 492 3,512 6,716 4,172 3,682 14,764 60,511July 30,910 4,309 5,569 705 7,209 11,942 7,993 8,542 26,995 104,174August 37,460 5,321 9,601 857 7,369 16,350 12.526 11,229 33,116 133,829September 26,076 3,885 4,748 480 3,822 10,943 6,847 5,278 20,316 82,395October 32,858 3,276 3,270 325 5,360 11,077 11,116 7,063 26,460 100,805November 48,293 8,045 5,450 406 8,322 14,131 9,513 10,307 34,400 138,867December 50,160 6,938 5,938 588 6,203 13,458 9,972 8,491 36,618 138,366

Summer SeasonSub-total 279,543 36,209 41,583 4,213 47,529 95,085 69,060 60,541 213,222 846,985

Calendar YearTotal 480,012 80,172 73,847 7,355 76,518 179,045 129,771 118,550 388,583 1,533,853

Source: Barbados Digest of Statistics =|

BARBADOS: TOURISM PROJECT

BARBADOS TOURISM INVESTMENT CORPORATION FINANCIAL RATIOS 1982-89

1982 1983 1984 1985 1986 1987 1988 1989

Operational Indicators

Sales/Total Assets .06 .26 .34 .440 .44 .47 .48 .49House Profit/Total Sales ( .7) ,36 .42 .44 .44 .44 .44 .4Profit Before Tax/Total Sales (1-53) (.27) ( .08) .01 .0o4 .13 .21 .24

Profitability Indicators

Profit before tax/year-end equity (.27) (.27) (.11) .01 .o6 .18 .24 .23Profit before tax/year-end total assets (.09) (.07) (.03) - .02 .o6 .10 .12

Financial Structure Indicators

Current Ratio .6 3.5 3.3 3.0 2.5 2.b 3.5 4..Equity/Long-term Capital 33% - 27% 25% 25% 28% 34% 43% 53%Debt Service overage 0 1.RV 1.Qy 1.8x 1.5x 1. 6 x 1.7x T.Qx

Net Working Capital (BDS$'000) (495) 1020 2675 4020 3300 4200 6565 9360

c..z4

BARBADOS: TOURISM PROJECT

BARBADOS TOURISM INVESTMENT CORPORATION COMPOSITION OF THE 1985 INCOME STATEMENT(Current BDSS'000)

Central Beach Disco- Golf Subtotal Central Cor-Restau- Bar theque Course Major Revenue poration (un- BTICrant Producing consolidated) Consolidated

Business

Revenue

Food and Beverage 2914 736 222 - 3872 3872

Charges to Hotelsand Concessionaires - - b930 6930Other - - 111 227 338 147 485

Total Revenue 2914 736 333 227 4210 7077 11287Cost of Sales

Food and BeverageMaterials 1174 299 44 - 1517 1517

Payroll and Related 596 137 111 98 942 - 942Other Direct Costs 233 59 40 37 369 - 369

rllotal Cost of Sales 2003 495 195 135 2828 - 2828

Gross Operating Income 911 241 138 92 1382 7077 8459

Overhead Expense

General and Adminis-tration 126 37 i7 24 204 906 1110

Marketing 87 - 7 94 892 986Utilities 204 15 i7 16 252 233 485Repair and Mainte-

nance 146 - 16 5 167 747 914 t

N 04Total Overhead 563 52 50 52 717 2778 3495

House Profit (Loss) 348 189 88 40 665 4299 4964Interest 2155 2155Depreciation and 2155 215

Amortization

Profit before Tax 348 189 88 40 665 (601) 64

House Profit as % of Sales 12% 26% 26% 18% 16% 61% 414%

BARBADOS: TOURISM PROJECT

HEYWOODS COMBINED INCOME STATEMENT 1982-89(Current BDS$'000)

1982 1983 1984 1985 1986 1987 1988 1989Total Revenue 5000 16060 20240 23370 25005 26755 28630 30635

Cost of Sales 2815 7485 9225 10510 11250 12035 12880 13780

Gross Operating Income 2185 8575 11015 12860 13755 1472.0 15750 16855Overhead Expense

Gen. and Administration 785 2000 2190 2300 2460 2635 2820 3015Marketing 485 1240 1255 1380 1475 1575 1685 1805Utilities 600 1290 1565 1765 1890 2020 2160 2315Repair and Maintenance

225 575 56o 1165 1245 1330 1425 1525

Total Overhead Expense 2095 5105 5870 6610 7070 7560 8090 8660

House Profit (Loss) 90 3470 5145 6250 6685 7160 7660 8195

Interest 1005 2165 2150 2155 2050 1905 1735 1555Depreciation & Amortization 1375 2745 2745 2745 1810 2135 1400 14ooProfit before Tax (2290) (144o) 250 1350 2825 3120 4525 5240

4" 1

BARBADOS: TOURISM PROJECT

COMBINED INCOME STATEMENT FOR ALL SEVEN HOTEL/APARTELS 1982-89(Pro Forma--Current BDSt'QO0)

1982 1983 1984 1985 1986 1987 1988 1989Revenue

Net Room Revenue 2503 8224 10349 11988 12827 13 [25 14686 15714Food and Beverage Revenue 780 2525 3176 3652 3908 4181 4474 4787

Total Revenue 3283 10749 13525 15640 16735 17906 19160 20501

Direct Room Cost 672 1690 2050 2328 2491 2665 2852 3052Direct Food and Beverage Cost 738 1929 2368 2690 2879 3080 3296 3526

Total Direct Cost 1410 3619 4418 5018 5370 5745 6148 6578

Gross Operating Income 1873 7130 9107 10622 11365 12161 13012 13923

Overhead Expense

Administration and General 279 856 1077 1191 1274 1363 1458 1560Marketing 82 269 338 391 418 448 479 512Utilities 442 912 1126 1280 1370 1466 1568 1678Repairs and Maintenance 33 134 191 250 268 286 307 328Central Charge for Overhead 510 1671 2102 2431 2601 2783 2978 3187

Total Overhead 1346 3842 4834 5543 5931 6346 6790 7265

House Profit 527 3288 4273 5079 5434 5815 6222 6658

Rental Fee 202 2845 3577 4146 4437 4746 5079 5432Return to Operator (including 325 443 696 933 997 1069 1143 1226

salary)

BARBADOS: TOURISMt PROJECT

HEYWOODS VILLAGE HOTELS COMBINED INCOME STATEMENT 1985

(Constant BDS$'000) (Current BDS$'000)A 32- A 48- Total for A 32- A 48- Total for Percent-Room Room An Seven Room Room An Seven age ofRevenue Hotel Hotel Apartel Hotels Rotel Hotel Apartel Hotels Sales

Net Room Revenue 787 1180 1301 7323 1288 1932 2130 11988 77Food & Beverage Revenue 336 612 --- 2232 550 1001 --- 3652 23

Total Revenue 1123 1792 1301 * 9555 1838 2933 2130 15640 10u

Direct Room Cost 162 221 247 1422 265 361 405 2328 15Direct Food & Beverage Cost 266 423 __ 1644 435 693 --- 2690 17

Total Direct Cost 428 644 247 3066 700 1054 405 5018 32

Gross Operating Income 695 1148 1054 6489 1138 1879 1725 10622 68

Overhead Expense 0

Administration & General 69 112 148 727 113 184 242 1191 8Marketing 28 45 33 240 46 73 53 391 2Utilities 88 123 137 784 143 202 224 1280 8Repair & Maintenance 17 27 24 153 27 44 40 250 2Central Charge for Overhead 168 269 221 1484 276 440 362 2431 16Imputed Manager's Salary 35 40 30 245 57 65 49 400 3 e >Total Overhead 405 616 593 3633 662 1008 970 5943 38

House Profit 290 532 461 2856 476 871 755 4679 30 4

Rental Fee 251 472 417 2531 412 773 6d2 4140 27

Total Return to Operator 74 100 74 570 121 163 ]?2 933 6(inciuding salary)

BARBADOS: TOURISM PROJECT

A 32-ROOM HOTEL INCOME STATEMENT 1982-89(Pro Forma--Current BDS$'000)

1982 1983 1984 1985 1986 1987 1988 1989(6 mos.)

Revenue

Net Room Revenue 270 883 1110 1288 1378 1474 1578 1688Food & Beverage Revenue 118 380 478 550 589 630 674 721

Total Revenue 388 1263 1588 1838 1967 2104 2252 2409

Direct Room Cost 81 195 234 265 284 303 325 347Direct Food & Beverage Cost 121 315 384 435 465 498 533 570

Total Direct Cost 202 510 618 700 749 801 858 917

Gross Operating Income 186 753 970 1138 1218 1303 1394 1492

Overhead Expense

Administration & General 27 78 98 113 122 129 139 150Marketing 10 31 40 46 49 53 56 60Utilities 52 103 126 143 153 164 175 186Repair & Maintenance 4 16 22 27 29 31 33 35Cen.tral Charge for Overhead 58 189 238 276 295 316 338 362

Total Overhead 151 417 524 605 648 693 741 793

House Profit 35 336 446 533 570 610 653 699

Rental Fee 2/ --- 283 355 412 441 472 505 540Return to Operator 35 53 91 121 129 138 148 159

1/ 15% of total revenue2/ 32% of net room revenue

BARBADOS: TOURISM PROJECT

A 48-ROOM HOTEL INCOME STATEMENT 1982-89(Pro Forma--Current BDS$'000)

1982 1983 1984 1985 1986 1987 1988 11989

Revenue

Net Room Revenue 406 1325 1666 1932 2067 2212 2367 2532Food & Beverage Revenue 213 692 871 1001 1071 1146 1226 1312

Total Revenue 619 2017 2537 2933 3138 3358 3593 3844

Direct Room Cost 104 261 318 361 386 413 442 473Direct Food & Beverage Cost 187 493 608 693 742 794 849 908

Total Direct Cost 291 754 926 1054 1128 1207 1291 1381

Gross Operating Income 328 1263 1611 1879 2010 2151 2302 2463

Overhead Expense

Adminlstration & Genersl 42 134 170 184 197 211 225 241.Marketing 15 50 63 73 78 83 89 95Utilities 69 144 177 202 216 231 247 265Repair & Maintenance 6 25 35 44 47 50 54 58Central. Charge for Overhead 93 303 381 440 471 504 540 577

Total Overhead 225 656 826 943 1009 1079 1155 1236

House Profit 103 607 785 936 1001 1072 1147 1227 H

Rental Fee 2/ 54 530 666 773 827 885 9h7 1nl8Return to Operator 49 77 119 163 174 187 200 214

1/ 15% of total revenue2/ 40% of net room revenue

BARBADOS: TOURISM PROJECT

A 58-ROOM APARTEL INCOME STATEMENT 1982-89(Pro Forma--Curent BDS$'000)

1982 1983 1984 1985 1986 1987 1988 1989(.6 mos.) - -

Net Room Revenue 440 1463 1843 2130 2279 2438 2609 2792

Direct Room Cost 111 291 356 405 433 463 496 531

Gross Operating Income 329 1172 1487 1725 1846 1975 2113 2261

Overhead Expense

Administration & General 56 177 222 242 259 277 296 317

Marketing 11 37 46 53 57 61 65 70

Utilities 75 158 196 224 240 257 275 294

Repair & Maintenance 4 18 28 40 43 46 49 52

Central Charge for Overhead - 75 249 313 362 387 414 443 474

Total Overhead 221 639 805 921 986 1055 1128 1207

house Profit 108 533 682 804 860 920 985 1054 ¢

Rental Fee 2/ 47 468 590 682 729 780 835 893

Return to Operator 61 65 92 122 131 140 150 161

1/ 17% of total revenue2/ 32% of total revenue

BARBADOS: TOURISM PROJECT

HEYWOODS HOTEL OPERATOR PROJECTED INVESTMENT REQUIREMENTS AND FINANCIAL RETIJRN(Current BDS$'000)

1982 1983 1984 1985 1986 1987 1988 1989

For a 32 Room Hotel Operator:

External Working Capital Investment Required 125 135 - - -Total Working Capital Investmenta 125 171 205 232 248 266 284 305Total Compensation 35 53 91 121 129 138 148 159Imputed Salary 37 50 54 57 61 66 70 75Profit (2) 3 37 64 68 72 78 84% Return on Total Investment 2 2 18 27 27 27 27 27

For a 48 Room Hotel Operator

External Working Capital Investment Required 160 230 - - - - - -Total Working Capital Investment 160 268 323 366 391 419 446 478 1Total Compensation 49 77 119 163 174 187 200 214Imputed Salary 53 57 61 65 70 75 80 86Profit (4) 20 58 98 104 112 120 128X Return on Total Investment (3) 7 18 27 27 27 27 27

For an Apartel Operator

External Working Capital Investment Required 150 170 - - - - - -Total Working Capital Investment 150 241 281 313 335 360 384 412 xTotal Compensation 61 65 92 122 131 140 150 i61 oImputed Salary 27 43 46 49 53 56 60 64Profit 34 22 46 73 78 84 90 97% Return on Total Investment 23 9 16 23 23 23 23 23

BARBADOS: TOURISM PROJECT

HEYWOODS CONCESSIONAIRES CONSOLIDATING 1985 INCOME STATEMENT(Current BDS$'000)

Mini- Beach Handi- WaterLaundry Gift Shops Market craft Center Sports TOTAL

Total Revenue 661 1057 885 40 529 3372

Cost of Materials 141 581 620 144 , 1486Cost of Labor 155 317 141 33 264 910Other Costs 185 8527

5 - - ~~ ~ ~~~~85 270Total Costs 481 898 761 177 349 2666

Gross Profit before Central Fee 180 159 124 63 180 706

Central Rental Fee 99 74 62 12 1Q6- 353

House Profit 81 85 62 51 74 353

Central Fee as a % of Sales 15% 7% 7% 5% 20% 10House Profit as a % of Sales 12% 8% 7% 21% 14% 10%

BARBAlOS: TOURISM PROJECT

ECONOMIC BENEFITS AND COST STREAMS(BDS'000 in 1978 prices)

2/ 4/ 2/ Revenues Cost ofOther 3/ Coat of Other Oper. 4/ Diverted Costs Tourist Tourist

Invest- Replace- Gvt. Hotel llotel Central Goods Costs- Con- Cost of From Related Expend. Expend.nent LI ment Sales Service Hotel Direct Oper. Corporation Sold-Cen. Central cessions Goods Sold Other to Diverted Outside Outside

Costs Costs Tax Charge gsSegl e- Costs R OVt DI.OR Corporatn. Corporation Revenues r--i... UHln.1. --o -a Vill..A Vll.e.

3,558 _ _ _ _ _ _-9,267

13,110 - - - - - -- -- -- --5,569 11 231 289 2,848 1,081 906 671 510 992 610 436 1,239 372 433 256

-- -- 782 977 9,026 2,694 1,902 2,004 1,249 2,238 1,827 1,285 3,086 926 1,337 796__ __ 993 1,241 10,608 3,071 2,194 2,370 1,432 2,235 2,155 1,514 2,724 807 1 573 936

- 2,345 1,072 1,340 11 466 3 259 2,327 2,551 1,520 2,337 2,320 1,629 1,960 588 1,692 1,007__ -_ 1,229 1,363 11,466 3,259 ,, 2,7 2,551 1,520 2,337 2,320 1,629 98 29 1,692 1,007 1-- 91 __ 2,345 1,307 1,634 11,466 3,259 2.327 2,551 1,520 2,337 2,320 1,629 1,692 1,007 ,i:

1 307 1,634 11:46 2:327 1,520 2,337 2,320 1,629 -- -- 1,692 1,007 rr-19914,490 1,307 1,634 11,466 3,259 2,327 2,551 1,520 2,-337 2,320 1,629 - 1,692 1,007

-1996 - 23 1,307 1,634 11,466 3,259 2,327 2,551 1,520 2,337 2,320 1,629 1.692 1,007 1 I-- 2.345 ~1,307 1,634 11,466 3,259 2,327 2,551 1,520 2,337 2,320 1,629- -1,9 107

-2001 4 985 1,307 1,634 11,466 3,259 2,327 2,551 1,520 2,337 2,320 1,629 -- -- 1,692 1,007-- 4.985 1,307 1,634 11,466 3,259 2,327 2,551 1,520 2,337 2,320 1,629 -- -- 1,692 1,007

-20016 4 2 5 1,307 1,634 11,466 3,259 2,327 2,551 1,520 2,337 2,320 1,629 1,692 1,0072 2,4 1,307 1,634 11,466 3,259 2,327 2,551 1,520 2,337 2,320 1,629 -- -- 1,692 1,007

(6,130) 1,307 1,634 11,466 3.259 2,327 2,551 1,520 2,337 2,320 1,629 1,692 1,007

I/ Including all initial investment in working capital.2/ Excludi,.g central overhead charge.3! Excluding entral charges to hotels and concessionaires, and excluding local guests' expenditures.4/ Excluding costs related to local guests.

- 75 -

ANNEX IIPage 1

BARBADOS TOURISM PROJECT

PRINCIPAL ASSUMPTIONS USED IN THE FINANCIAL AND ECONOMIC ANALYSIS

A. Financial Analysis

1. Income statements are projected separately for BTIC, for each ofits direct revenue generating businesses, for the hotel/apartels and for theoverall village project on a combined basis. While projections are in currentprices and assume 7% inflation, the assumptions are stated below for the firsttypical year, 1985, in 1978 BDS dollars.

Barbados Tourism Investment Corporation Income Statements

2. The assumptions are as follows:

(a) the Corporation will own and operate the central restaurant, beachbar, discotheque, and golf course and its income statement willconsolidate all revenues and expenses of these operations;

(b) revenues for all food and beverage operations in the villageassume the following expenditure patterns:

(i) average breakfast prices are BDS$6 per person in the highseason and BDS$4 in the low season. Average lunch pricesare BDS$1O and average dinners are BDS$24 in the high seasonand BDS$16 in the low season. Average beverage expendituresare BDS$1O per day for hotel guests and BDS$4.40 for apartelguests;

(ii) hotel guests will spenid BDS$50 per person per day onfood and beverage in ihe high season and BDS$40 in. the lowseason. Apartel gues:s will spend BDS$26 in the high seasonand BDS$21 in the low season;

(iii) all guests will buy o;ae lunch and one dinner outside thevillage per stay and uill eat breakfast in their hotel/apartel room. Food and beverage expenditures for hotelguests in the village will be spent 50% in their hotel,40% in the central restaurant and 10% in the beach bar.Of in-qillage food and beverage expenditures, apartelguests will spend approximately 58% in the minimarket,21% in the 48-room hotel restaurants, 17% in the centralrestaurant and 4% in the beach bar; and

(iv) sales to Village non-residents will represent 20% of centralrestaurant and beach bar sales, but will not add to hotelfood and beverage sales;

- 76 -

ANNEX IIPage 2

(c) in the central restaurant and beach bar, cost of sales includesfood material costs of 45% of food sales, beverage costs of 26%of beverage sales, payroll and related expenditures based on 57employees in the central restaurant and 14 employees in the beachbar and other direct costs of 8% of sales. For the restaurantand bar combined, overhead as a percentage of sales, excludingany allocation of central overhead expense, includes administrationand general expense of 4.4%, marketing of 2.4%, utilities cost of6% and repair and maintenance expense of 4%;

(d) in the discotheque, it is assumed that an average of 40 clientsa day will spend BDS$5 for cover charges and BDS$10 per person fordrinks. Direct cost of sales include music and entertainment at 8%of sales, and beverage cost at 20% and other direct costs at 6% ofbeverage sales. Direct overhead for administration and generalexpense, utilities and repair and maintenance is 15% of sales;

(e) golf course revenue projections assume 15% of the guests play golfan average 1/2 round a day and outsiders play an additional 4,200rounds per year. Greens fees are BDS$7 and club rentals are BDS$3.Direct costs for a seven-person staff and course maintenanceexpense are about 60% of 1985 sales and other overhead is about20% of sales;

(f) miscellaneous revenues include BDS$70,000 for rentals of thevillage hall, BDS$10,000 for the taxi franchise and BDS$10,000 forthe cycle rental franchise. Tennis, swimming pools, changing roomsand other recreational facilLties will earn no revenue;

(g) total BTIC overhead expense, including that for directly runbusinesses, will be as follows:

(i) general and administrative expense of 9.8% of Corporationsales, including payroll costs for 37 people, general andadministrative expenses of 4.8% of sales for directlyrun businesses and BDS$10,000 per month;

(ii) central marketing expense of 8.7% of sales including5% of hotel sales, 3% of central restaurant sales, 2.5%of golf course sales and the central marketing officer'ssalary;

(iii) utilities expense of 4.3% of sales including telephone,water and electricity costs of about BDS$142,500 annuallyand utility costs averaging 6% of sales for the directlyrun businesses; and

(iv) repair and maintenance expense of 8.1% of sales representing2-1/2% of investment cost of fixed assets plus an average 4%of sales for directly operated businesses;

- 77 -ANNEX IIPage 3

(h) investments in fixed assets and preopening expenses are depreciatedor amortized annually on the following basis: buildings at 2.5%,air-conditioning at 12.5%, furniture and fixtures at 12.5%, equipmentat 10%, civil works at 5% and preopening expenses and professionalservices at 20%;

(i) interest expense will be 10% per annum on long-term debt and 15% onshort-term borrowings for working capital needs;

(j) the Corporation will be exempt from corporate income tax duringthe first ten years of operation under the Hotel Aids Act;

(k) individual operators will lease the seven hotels and apartels fromthe Corporation for a ten-year period and will provide the workingcapital. Hotel/apartel operators will pay a rental fee of 40% ofnet room sales for the 48-room hotels and 32% for the 32-room -

hotels and the apartels. Under renewal leases rental fees willrise 2% of net room sales. Hotel operators will also pay theCorporation 15% and apartel operators 17% of total sales as reim-bursement for hotel overhead expenses funded by the Corporationincluding repair and maintenance, security, marketing, energysavings, groundkeeping and central purchasing; and

(1) concessionaires will lease the other revenue generating facilitiesfrom the Corporation for the following rentals: central laundry,15% of sales, gift shops and minimarket, 7% of sales; beach handi-craft market, 5% of sales; and water sports, 20% of sales.

Hotel/Apartel Income Statements

3. The assumptions are as follows:

(a) revenue projections assume annual room occupancy rates rise asshown in part B, para. 1 of this Annex. Double occupancy ratesin 1985 are 1.9 for hotels in the high season, 1.8 for hotelsin the low season and 1.9 for apartels throughout the year. In1985, tariffs for a double room are US$75 (in 1978 prices) forhotels and US$70 for apartels in the high season and US$40 andUS$35 respectively in the low season. Commissions average 10%of gross room sales. Food and beverage revenues for hotels arederived from the assumptions in 2(b) above. Apartels have nofood and beverage business. There are no other revenues;

(b) direct room costs assume high season room department payrollsof 16 employees for 32-room hotels, and 20 employees for 48-roomhotels and apartels. Other direct room costs are 11% of salesfor hotels and 12% of sales for apartels;

(c) direct food and beverage department costs are based on highseason payrolls of 17 employees in 32-room hotels and 22 employeesin 48-room hotels; material costs are 45% for food and 26% forbeverages. Other direct cost is 10% of sales.

- 78 -ANNEX IIPage 4

(d) administration and general overhead expense in 1985 is 6.1% of salesfor 32-room hotels, 6.3% for 48-room hotels and 11.4% for apartelsbased on high season payrolls of seven, eight, and six employeesrespectively. These expenses exclude about six staff membersordinarily hired by a hotel whose services for security, maintenanceand gardening will be supplied by the Corporation and also excludethe manager's imputed salary which is retained in house profit andas part of the operator's total financial return. Total adminis-tration and general expense adjusted for these excluded costs wouldbe 11.5%, 10.5% and 16% of sales respectively;

(e) total marketing expense is 7.5% of sales of which 5% is includedin the overhead charge (see para. 2(k) above) by the Corporationfor central marketing and 2.5% is the estimated cost of theoperator's individual marketing activity;

(f) utilities expense is 7.8% of sales for 32-room hotels, 6.9% for48-room hotels and 10.5% for apartels. A portion of total estimatedair-conditioning costs for the complex is assigned to hotel/apartelson a per room basis. Telephone costs are based on telephone com-pany quotations for PABX and extensions plus 25% for long distance.Gas costs are 1.8% of food and beverage sales, .9% of apartel salesfor kitchen fuel, plus about BDS$300 per room for hot water lessabout 75% in estimated saving3 from solar energy. Water and otherelectricity adds an additional 2% of sales for hotels and 3% forapartels to utility costs;

(g) total repair and maintenance expense is 6% of sales for hotels and7.5% of sales for apartels of which about 75% is incurred by thecentral Corporation and charged to hotel/apartels in the overheadcharge while 25% is incurred by the individual unit; and

(h) hotel and apartel operators will pay rent and overhead charges toBTIC as outlined in para. 2(k) above on net 45 day terms. Scaleddown rental fees will be charged to the operators during the 1982opening year.

Concessionaire Income Statements

4. The assumptions in 1978 prices are as follows:

(a) the central laundry would be leased on a long-term basis to aconcessionaire who would supply the investment for equipmentother than the boiler and hot water tank, as well as workingcapital. Projected revenues assume sales of BDS$1.50 per bednightfor guests, BDS$1.25 per bednight for commercial business from thehotels and restaurants and no outside business. Cost of sales andoverhead including the manager's salary, is projected at about 73%of sales. The Corporation's rental charge would be 15% of salesleaving profits to the concessionaire of 12% of sales or aboutBDS$50,000;

- 79 -ANNEX IIPage 5

(b) the six gift shops including a newsstand/bookstore, duty-freeshop, men's boutique, women's boutique, pharmacy and beauty shopwould be leased to concessionaires for a rental fee of 7% ofsales. Projected revenues assume sales of BDS$4 per bednightto guests plus an additional 10% in outside business. Profitsare projected at 8% of sales or about BDS$52,000;

(c) the minimarket would be leased for a rental charge of 7% ofsales. It is conservatively assumed that its revenues would bederived solely from apartel guests as outlined in assumption2(b) above. Profits before tax are projected at 7% of sales orabout BDS$38,000;

(d) the IDC would rent the beach handicraft center f or handicraftpromotion for a fee of 5% of sales. Revenues of BDS$1 perbednight are assumed. Profits of 21% of sales remain aftercost of sales of 60% and labor costs of BDS$31,000; and

(e) water sports would be rented to one or more concessionaires at arent of 20% of sales. Revenues assume BDS$2 per guest bednightplus 10% for outside business. Costs include labor at 50% ofsales, fuel at 10% and maintenance and repair at 6% of sales.Profit to the operators would be about BDS$45,000 or 14% ofsales.

Barbados Tourism Investment Corporation Balance Sheets

5. Working capital requirements assume minimum cash balances of 30days expenses, accounts receivable of 30 days direct sales and 45 days onpayments due from hotel/apartel operators and concessionaires, an annualinventory turnover of 6x and 30 days accounts payable and accrued expenses.Working capital deficits during the first two years are funded by short-termborrowings.

6. All fixed assets provided by the Corporation remain on the Corpo-ration's books on a cost less depreciation basis. One third of furniture,fixtures and air-conditioning is replaced every fourth year and one thirdof equipment is replaced every fifth year at the same real cost as initialinvestment. China, linens, supplies, etc., are expensed annually as pur-chased. Expenses amortized over five years include preopening expense,project administration expense, preopening interest and the costs of theportion of the road around the project site.

7. Government contributions to the project, amounting to about 38% ofthe capital structure, will be in the form of equity. World Bank and CDBloans amounting to the remaining 62% of the capital structure will be set upas a 12-year loan including a 3-year grace period with interest at 10% perannum from the assumed opening date of July 1, 1982. Preopening interestexpense and commitment fees will be capitalized on the Corporation's booksas preopening expense and as equity contributions by the Government.

- 80 - ANNEX II

Page 6

B. Economic Analysis

1. Room occupancy rates for hotel and apartels are as follows:

1982 1983 1984 1985

High season 75 75 85 90

Low season 35 45 55 60

Total 40 55 65 70

2. The high season lasts from December 15 to April 15 (122 days) and

the low season from April 16 to December 14 (243 days).

3. The expenditure pattern of the village guests in 1985 is as follows:

(in 1978 BDS$ per day):

Hotels ApartelsHigh Low High LowSeason Season Season Season

Room a/ 91.9 51.5 85.7 42.8

Food and beverage b/ 59.0 47.2 30.7 24.8

Other cl 16.5 16.5 14.8 14.8

Total 167.4 115.2 131.2 82.4

a/ Includes 10% service charge and 8% Government tax but excludes commissions.

b/ Includes expenditure outside village, 10% service charges and 8% Government

tax.c/ Shopping, sports and entertainment, transport, laundry and miscellaneous.

4. The average length of stay in the village is seven days for hotel

guests and ten days for apartel guests.

5. The total number of visitors to the village is as follows ('000):

1982 1983 1984 1985

Apar- Apar- Apar- Apar-

Hotels tels Total Hotels tels Total Hotels tels Total Hotels tels Total

3.4 1.5 4.9 10.2 4.4 14.6 12.0 5.2 17.1 12.0 5.6 18.5

- 81 -ANNEX IIPage 7

6. The shadow foreign exchange rate is US$1=BDS$2.40.

7. Foreign exchange components of operating costs are as follows:

Food and beverage - 50%Utilities - 60%Administrative and general = 20%Room costs 10%Marketing = 75%Repair and maintenance = 60%Gift shop cost of goods (COG) = 25%Handicraft shop COG = 10%Minimarket COG = 30%Gold, water sports and discoteque = 50%

8. Diverted revenues are 30% of total room and food and beveragerevenues from tourists in 1982; 24% in 1983; 18% in 1984; 12% in 1985; and 6%in 1986.

9. The benefits from Government sales tax have been adjustec for thediversion effect.

10. Tourists spend BDS$40 per stay on transport within the iEland.Average transport charge per mile is Bi)S$1.60. The economic cost of transportservice per mile is as follows (in BDS$):

Vehicle cost 0.17Insurance 0.10Tires 0.01Fuel 0.03Oil 0.01Wages 0.40Repair and maintenance 0.08

Total 0.80

11. GOP relating to tourist expenditure outside the village is 30% offood and beverage expenditures and 50% of transport expenditures.

12. The residual value of the investment in the year 2008 amounts to35% of the initial investment in all buildings and 40% of furniture, fittingsand equipment.

- 82 -ANNEX IIIPage 1

BARBADOS TOURISM PROJECT

SOME TERMS AND CONDITIONS OF MODEL LEASES BETWEEN THE

BARBADOS TOURISM INVESTMENT CORPORATION AND HOTEL/APARTEL OPERATORS

1. Among the terms and conditions to which the operators would be sub-ject are the following:

(a) participating as a member of the VMC, and abiding by its decisions;

(b) referring any unsettled employee/employer grievances to the VMCfor arbitration and agreeing not to attract employees away fromother employers in the village through wage incentives;

(c) adhering to uniform pricing and discount structures on roomtariffs and following pricing guidelines on food and beveragesales;

(d) allowing the Corporation marketing department to conduct all nego-tiations with those sales representatives, wholesalers and touroperators with whom they are dealing;

(e) abiding by all policies and procedures for operations andmaintenance as outlined in the village operations manual;

(f) maintaining restaurant decor, cuisine, and quality standards asspecified in the lease;

(g) supplying and maintaining that level of working capital which theCorporation determines to be the minimum level necessary to operatethe hotel/apartels in accordance with specified standards;

(h) preparing quarterly income statements and working capitalaccounts in accordance with the uniform system of accounts andforwarding these statements in an agreed format to the Corporationfor review. Preparing and submitting an annual budget to theCorporation for consultation and using it as a management plan;

(i) paying all rental payments and other charges as outlined in thelease as due. (Some flexibility should be built into repaymentrequirements to accommodate seasonal fluctuations in working capitalneeds and slower than anticipated increases in general occupancyrates);

(j) submitting audited financial statements to the Corporationfollowing the close of each fiscal year;

- 83 -ANNEX IIIPage 2

(k) assigning or transferring the lease only with the approval ofthe Corporation and only to persons meeting the criteria forhotel operator selection;

(1) managing the hotel personally on a full-time basis;

(m) achieving acceptable financial and operational results. Leaseswould be subject to cancellation for any operator whose performancewith respect to predetermined standards for several successive yearsis significantly poorer than the performance of all other remainingoperators; and

(n) containing right of renewal provisions which allow the Corporationto adjust rental fees upward to reflect market prices for wellestablished hotel/apartel space.

- 84 -

ANNEX IVPage 1

BARBADOS TOURISM PROJECT

RELATED DOCUMENTS AND DATA AVAILABLE IN THE PROJECT FILE

A. Reports and Documents Related to the Sector

1. The Tourist Industry in Barbados. George V. Doxey and Associates

2. Caribbean Tourism: Profits and Performance Through 1980.Timothy S.S. Prime, 1976.

3. Tourism Supply in the Caribbean Region. Shankland Cox, 1974.

4. Tourism and Employment in Barbados. Dawn I. Marshall, 1978.

5. Tourism Development Plan of Barbados. OAS, 1977.

6. Board of Tourism Act, 1977.

7. Hotel Aids Act, 1967.

8. Barbados Development Bank Act.

9. Parks and Beaches Commission Act, 1970.

10. Barbados Physical Development Plan, 1970 and Supplements.

11. The Laws of Barbados, 1972.

12. Barbados Hotel School - Program for Training, 1978.

13. Report of Tourist Travel to the Caribbean, 1976, 1977. CaribbeanTourism Association.

14. Barbados - Hotel, Guest House and Apartment Rate Sheets. BarbadosBoard of Tourism.

15. Statistics of Monthly Overseas Trade. Barbados Statistical Service.

16. Development Plan, 1978-82. Barbados Industrial Development Corporation.

17. Annual Statistical Digest. Central Bank of Barbados.

18. Balance of Payments of Barbados. Central Bank of Barbados.

19. Barbados Development Bank Annual Reports, 1976-77, 1977-78.

20. Digest of Tourist Statistics. Barbados Statistical Service, 1976.

- 85 -ANNEX IVPage 2

21. Visitor Statistics. Barbados Board of Tourism, 1975.

22. Survey of Accommodation Establishments. Barbados StatisticalService (1970-1972).

23. List of Tourist Accommodations (1975 and 1978).

24. Wholesale Tour Agreements. Barbados Hotel Association.

25. Draft Policy Guidelines for Hotel Incentives in Barbados, 1978.

26. List of Restaurants and Seating Capacity. Barbados Tourism Board.

27. Barbados Visitor Expenditure Survey, Summer 1976.

28. Barbados Development Plan, 1972-77.

29. Small Hotels in Barbados - A Background Paper, 1978. Ministry ofTourism.

B. Reports and Documents Related to the Project

1. Heywoods Holiday Village, Final Designs. Robertson Ward Associates,1978.

2. Heywoods Holiday Village. Market and Economic Study. The EconomicIntelligence Unit, 1978.

3. Heywoods Holiday Village. Interna., Working Documents. OAS, 1977, 1978.

4. Heywoods Holiday Village - Institutional and Organizational Proposals.Ministry of Tourism, 1978.

5. Speightstown Redevelopment Plan, .972.

6. Hotel Agreement on Employment Ratu!s, 1977.

7. Published Hotel and Apartel Rates, 1973-78.

8. Ground Transportation in the Tourism Sector. Cabinet Paper, 1977.

9. Speightstown By-pass Road, Preliminary Plans, 1978.

10. Oistins Bay Fisheries Project Proposal. Private Consultants, 1978.

11. Historic District of Speightstown. OAS, 1978.

12. Report on the operations of the Barbados Hilton Hotel. IndustrialDevelopment Corporation.

- 86 -ANNEX IVPage 3

13. Draft bill for the establishment of the Barbados Tourism Investment

Corporation, 1979.

14. Draft Organization Plan for the Heywoods Village Organization, 1978.

15. Draft Provisions to be included in a Model Lease between the BarbadosTourism Investment Corporation and the Heywoods Village hotel/aparteloperators, 1979.

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