The views expressed herein are those of the writer and do not represent the opinions or editorial position of I-Witness News. Opinion pieces can be submitted to news.iwitness@gmail.com.

The media are regularly filled with reports of corporations that are either in dire financial straits, have actually gone into bankruptcy protection, or have had their distressed assets picked up by vulture funds to be torn apart and sold piecemeal to other investors.

One of the less surprising of these reports was the announcement last month (Jan. 15, 2015) by the Canadian subsidiary of the huge American discount department store chain, Target Corporation (1,801 USA stores and 366,000 employees), that it will close all its 133 Canadian stores, putting over 17,000 people out of work.

Target in both countries carries clothing, shoes, jewelry, health and beauty products, electronics, bedding, kitchen supplies, sporting goods, toys, pet supplies, automotive accessories, hardware products, and seasonal items. The Corporation competes directly against other discount retailers. In Canada, these include Walmart, Costco, Loblaws, Sears, Canadian Tire, and Shoppers Drug Mart.

In its only international venture ever, Target opened its first Canadian stores in March 2013. Only 22 months later, the Corporation threw in the towel after concluding that it cannot make any money in the cut-throat Canadian retail market. To date, Target has lost US$2.1 billion. Things were so bad that, “Target Canada would have been unable to meet its employees’ payroll for the week of Jan. 16, 2015 if it hadn’t filed for bankruptcy court protection from creditors according to court documents that it filed at the Ontario Superior Court of Justice

Business commentators have offered several fairly obvious reasons for Target’s failure in Canada, nearly all if them relevant to the similar fate that awaits Argyle International Airport (AIA).

These include: significantly higher prices for products than in the USA due to higher Canadian transportation, distribution, and fuel costs; customer disappointment that products were much higher in price and variety much lower than in the US stores these customers usually frequented; a lack of familiarity with the very different Canadian market; chronic supply-chain problems resulting in empty shelves for weeks on end; uncompetitive prices compared to Walmart Canada and others; poor marketing and no online sales presence.

Target, in one form or another, has been around since 1902. It is second in size in the United States to global giant Walmart. Canadians flock by the thousands every year to shop at its American stores, an important factor behind its ill-fated foray into Canada. It has hundreds of very bright senior managers, directors, and external consultants.

But still Target Canada failed just as many expect AIA to fail.

It is well known that government-owned enterprises like AIA have a significant advantage over their private-sector counterparts because the former are able to circumvent market discipline based on the law of supply and demand by arbitrarily raising taxes on their citizens, wildly borrowing money from local banks and all manner of international lenders, capriciously selling public land and floating potentially worthless government bonds, and so forth, when their often misguiding business ventures or foolish nationalization projects go awry. Even when sovereign nations default on their loans, they never go out of business, so to speak, they just shrug and move on. Were Target Canada a Crown-owned corporation, it would surely still be running full steam ahead while burning up even more of the people’s money. Still, this does not necessarily preclude comparing nominally publicly-owned entities (i.e., those that are government controlled and managed on behalf of the public) and truly publicly owned ones (i.e., those individually owned by one or even thousands of individual shareholders). Moreover, many of the former are regularly converted into the latter (where they generally prosper) and vice versa (where they generally flounder or fail).CONCEPTION AND RATIONALE

CONCEPTION AND RATIONALE

In 2005, SVG’s largest and only truly international business venture (the Ottley Hall marina was meant to service mainly the Caribbean market) was conceived when the Honourable Prime Minister Ralph E. Gonsalves decided to build AIA. Of course, the idea of a real international airport (as opposed to the regional airport at Arnos Vale) had been bandied about for decades. But it was only this Prime Minister who had the vision and tenacity to put the idea into practice. Similarly, while Target came to Canada only in 2013, rumours were circulating since at least 2004 about its interest in expanding there. Presumably, both operations were preceded by careful thought and consideration. Without knowing whether Target had done a full-blown feasibility study based on mass-market research and focus group interviewing, we know for certain that thousands of shoppers were spending millions of dollars annually at its American stores and that many of these shoppers were longing for a Target store closer to home, as reported in the media.

In the case of AIA, we know even less. About all we have been told is that:

“It was August 8th 2005 when Prime Minister Dr Ralph Gonsalves addressed a gathering at the Methodist Church Hall on the issue of airport development in St Vincent and the Grenadines, and made clear the intentions of the government to construct an international airport at Argyle.

“In what is now an historic speech, Prime Minister Dr. Gonsalves addressed two crucial questions.

“The following is a quote from Dr Gonsalves speech.

“WHY DO WE NEED AN INTERNATIONAL AIRPORT?

“ “I begin first by answering two queries posed by some persons:

  • Does St. Vincent and the Grenadines really need an international airport?
  • And if we need one, can we afford one?

“Fundamentally, both questions are inter-related. Having studied this issue for many years, it is clear to the ULP administration and its leadership that the full realization of the potential of our country’s growth and development hinge on an international airport, among other vital considerations.

“The requisites of economic diversification and regional and international competitiveness demand an international airport” Source: AIDC 

At best, this is pretty thin gruel — or pretty “long water,” if you prefer the cook-up analogy — since it doesn’t answer either question. What actually is “the potential”? How would AIA lead to its “full realization” (whatever “full realization” means)? Exactly how does the country’s “growth and potential hinge on an international airport”? What are the other “vital considerations”? What kind of “economic diversification” is being proposed? How would “competitiveness” be enhanced by building exactly the same thing all our neighbours have had in place for decades — often with mixed or disappointing results — in an already overcrowded, high-risk, seasonal market?

Given the size, complexity, cost, and potential risk of the project, each of these questions deserved a detailed, evidence-based presentation followed by a full public debate. None was ever given or even allowed.

PRICING AND PRODUCTS

AIA will face the results of all the price and product disadvantages of Target, and then some. Target couldn’t supply the same products or the same prices in Canada that it did in the United States. Neither can SVG supply the same AIA spin-off products or prices as our neighbours.

Economies of scale have always constrained our economic growth and development. This is why many of our estate and peasant cash crops failed and the price of everything, including food, labour, housing, transportation, and, yes, even hotel accommodation is so high compared to many other Caribbean and nearby Latin American countries.

Price competitiveness is a very important consideration in the hospitality industry. The proliferation of Internet travel comparison sites (trivago, Hotel Planner, TripAdvisor, OneTravel, etc.) has made it very easy to choose and pay for the best value flights, accommodations, and attractions. Given the dearth of our existing mainland holiday operations and the lack of any evidence that they will soon expand, not to mention the paucity and relatively poor quality of our allied natural and human-made tourist attractions, Saint Vincent Island will long remain a comparatively expensive place to spend a comparatively lacklustre holiday. A feature by feature comparison that anyone with an Internet connection can easily do of accommodation at the luxury all-inclusive Buccament Bay Hotel and Resort with any of the three elegant Sandals resorts in nearby St. Lucia (which allows free access to the different facilities at all three venues) would show that the latter are a much better overall value, as is a vacation in St. Lucia generally, given the scope and development of its tourism products.

Sandals, an upscale couples-only all-inclusive Caribbean-based hotel and resort company, has just opened its first operation in Barbados and is planning to open another hotel-and-resort operation there very soon. A well established and globally respected holiday resort leader, Sandals would hardly even stoop to visit our scruffy mainland with an investment tour, let alone an investment promise. All we can ever hope for are dodgy enterprises like Buccament Bay’s parent Harlequin whose sales arm is now in liquidation.

At the economy end of the accommodation continuum, the value, choice, variety, and quality of hotels, guesthouses, and private-residence rentals all have much to be desired in our country compared to other nearby destinations.EXPERTISE AND MARKETING

EXPERTISE AND MARKETING

Target failed party because it had no experience with the Canadian market, including knowledge of the shopping habits of its potential customers. Canadians are generally more budget conscious and debt-adverse than their American neighbours, something Target’s highly-paid executives should have known.

If we don’t want to repeat Target’s disaster in SVG, what are the concrete plans of those who will be charged with ensuring AIA generates a large passenger load? In particular, what is the projected post-AIA-completion increase in airline traffic — three, five, and ten years down the road — based on data collected about similar projects in similar environments elsewhere?

Has the tourism budget, especially overseas promotion, been increased commensurate with the increase in potential tourist interest a brand-new airport is expected to generate? Which countries and which types of traveller will be the focus? What will be the main attractions — existing, refurbished, and brand new — that will prompt visitors to come to a country they have never heard of? And, most of all, what is our current track record in providing an excellent mainland tourist product?

Not very good, judging from our existing cruise ship and airport arrival numbers. Not very good, judging from the grossly out-of-date video nauseatingly regurgitated 24/7 on our amateurish tourism television channel.

Do we even have the means, technical and personnel-wise, or the massive budget needed to attract tens of thousands more people to the mainland and then meet, if not exceed, their expectations, given our failure to do so with our mature cruise-ship industry? To be sure, there is a vibrant and flourishing holiday business in the Grenadines, largely a product of its inviting beaches, crystal clear turquoise waters, and local and international private development initiatives. But tourism outside the mainland is irrelevant to AIA since there is no reason to believe that those who now travel to the keys by plane from Barbados, St. Lucia, and elsewhere would switch to AIA given that the number and variety of flights to and from these other countries would always exceed those to and from the mainland. More particularly, our regional hub, the totally renovated and expanded Grantley Adams airport in Barbados, is now one the finest and most comfortable airport in the entire Eastern Caribbean. With so many duty free shops, restaurants, private lounges, and other services, why would any long-distance traveller want to use the relatively small, bargain-basement AIA as an in-transit point instead?

And who is going to run AIA if and when it is ever completed? Many Vincentians were pleasantly surprised and heartened when the Prime Minister announced a few years ago that a private overseas entity would be contracted to manage the airport, given the public’s perception of poor and indifferent performance by the current government personnel running E.T. Joshua Airport. Now we are told that airport management will be in the hands of “a new wholly owned government company … staffed by a number of suitably trained and qualified persons” none of whom appear to have been selected as yet. On the surface, it seems as if either the government and the airport development company were unable to attract qualified and seasoned outsiders to manage the airport or that these same authorities were afraid to give away decision making to an arms-length and impartial entity. Either possibility is worrying in an age where more and more public airports are being surrendered to outside specialists in the name of professional management, cost containment, and the avoidance of conflict of interest or outright corruption.

SUPPLY CHAIN

Issues of supply have always plagued SVG and will continue to do so whether an airport is built or not. Again, much of this has to do with scale and level of development since it is impossible to stock the array of hard goods needed, not to mention spare parts, for such a small, relatively poor population. This is also true of local food items, many of which are only seasonally available or prohibitively expensive.

But the most important part of the AIA supply chain is not how to fill empty shelves in the shops of Kingstown but how to fill empty seats on the planes that are supposed to land at Argyle. All scheduled airline flights start with no seats sold. The nagging question is what concrete plans have been made to minimize the number of seats that go unsold? Or is the ULP government simply going to pay for these unsold seats or offer other extortionary concessions, praying that years down the road these seats will actually be paid for by their occupants?

COMPETITION

Competition killed Target in Canada. Competition will also kill AIA even as the value-added from any new visitors is dwarfed by the airport’s huge operational and ancillary costs. On the one hand, running a full-service international airport is a very expensive proposition; on the other, there are simply too many highly developed, moderately-priced, tourism-friendly winter holiday destinations in the Caribbean and elsewhere to choose from — nearly all of whom have long retired their airport construction or renovation debts — to allow SVG to stand out as a highly desirable place for tens of thousands of new foreigners to visit.

The entire Caribbean archipelago and surrounding area is brimming with all manner of desirable holiday destinations. Cuba, a relatively cheap but wondrous place to visit, has seen its tourist industry triple in recent years. If relations with the United States normalize, as many expect they soon will, there will be a flood of tourists from America, with serious negative implications for travel to well-established archipelago destinations, including relatively inexpensive tourism leaders like Puerto Rico and the Dominican Republic. Where will this leave tiny and unknown St. Vincent Island in the ensuing competition for visitors? Likely at the same place it is for cruise-ship passengers: dead last. This is no empty hypothesis; the fact is most Caribbean Sea countries with large cruise-ship visitors also have large overnight airline visitors and vice versa. (S0urce)

CONCLUSION

In the short term, bankruptcy is a terrible thing. Target’s 17,600 employees will soon lose their jobs. Many will also lose their homes when they can’t pay their mortgages. Millions are owed by the Corporation in unpaid taxes, rent, and debt charges. All these will take a great deal of time to clear up as the bankruptcy process unfolds. But in the long term, bankruptcy and the liquidation of assets that follows can have a cleansing and rejuvenating effect as vibrant, better-managed enterprises take their place, often hiring many of the very employees that were laid off.

Not so for most troubled government-owned commercial enterprises which are resuscitated time and again by one fiscally-challenged government after another until they are finally euthanized or transferred to the private sector where they belonged in the first place.

And so it will be for AIA: a slow and painful death or a desperate distressed-asset sale to some yet unknown vulture capitalist.

ENDNOTE

This is the fourth in a series of seven essays on the folly of the proposed Argyle International Airport. The first three may be found at:

Get ready for a November election

Lessons for Argyle airport from Canada’s Montreal Mirabel int’l

Lessons for Argyle Int’l Airport from the cruise industry

C. ben-David

 

The views expressed herein are those of the writer and do not necessarily represent the opinions or editorial position of iWitness News. Opinion pieces can be submitted to news.iwitness@gmail.com.

7 replies on “Lessons from Target Canada for Argyle Int’l Airport”

  1. Caribbean Man says:

    Very analytical piece! I’m not Vincentian, but to some extent I’m aware of the on-going saga surrounding Arglye International Airport (AIA). Much of the debate that I hear taking place seem to be partisan views with very little reference to market analysis and research. I would not necessarily predict that AIA will end up like Target, in Canada, but there are ample examples of large state funded capital projects from across the Caribbean that have failed or performed less than anticipated because the supporting prerequisites for success are absent. Political rhetoric and partisan analysis can lead to unrealistic public expectations as capital projects are often touted as economic panacea, when in reality it often take several years of effective management for such projects to break even then start making a profit. One gets the impression looking on from the outside that much is being done to get AIA completed without simultaneously addressing the other sectors of the economy and the tourism product so that AIA can be profitable in the shortest possible time. Many good things are taking place in SVG, but I’m not aware of an overarching national development plan or strategy against which one can both place and assess the relevance of AIA. In the absence of clear development goals, identifiable indicators and benchmarks, it is difficult to meaningfully evaluate progress.

    1. I don’t mean to be argumentative, but you say, “Many good things are taking place in SVG, but … it is difficult to meaningfully evaluate progress.”

      I don’t understand. How can you have the former without knowing the latter?

      Please tell us what the “good things” are and what critreria or measurements — “identifiable indicators and benchmarks” as you call them — you are using to assess their goodness.

  2. I find it very interesting , that now the completion of the Argyle International Airport is some months away there are articles in this Newspaper forecasting Doom & Gloom ; regarding the
    Airport .

    I have no doubt that because it will be the first time big passenger Jets will be coming to SVG .
    It is going to take some time before things move into high gear , Yes I am well aware of the fact
    that Hotel accommodations ; especially on the mainland will take sometime to come onstream .

    These and other things I have no doubt will be grist for those who are critical of Government . I
    do not have a brief for the Government , but the fact is an Airport has to be builhavet before you can get Investors to build Hotels ; Tourists have to know that they can get to SVG without
    having to deal with the uncouth Officials in Barbados ; or go to Trinidad ; Grenada or St. Lucia
    and then travel by LIAT to SVG , or take the American Eagle to Cannouan .

    I am well aware that some of the persons who write in this Newspaper are not Vincentians so
    they are unaware of the 49 years old Saga about Governments building an Airport on the Mainland . in 1966 , the Labour Party was in control of the governance of SVG . I recall that
    its Manifesto stated that the two main things it was going to do was to build a New Hospital at
    Largo Heights & Build an International Airport . That never happen , my understanding is that
    the Hospital could not be built at Largo Heights because the infrastructure was no there to build the Hospital .

    I recall that when Mitchell was the leader of the Country , I read in a newspaper that he had got funds from the European Union , to build an Airport . That money was spent
    to build an Airport in Bequia . I cite these two examples , to illustrate the fact that had either
    of these Governments built an Airport on the mainland , it would have cost a hell of a lot less
    then than Argyle is costing . So spare me any nonsense about the cost of the Airport .
    Both leading Political Parties had their chances to do something for the people in SVG and they blew their chances . I also recall that a certain Prime Minister once stated that the Grenadines will secede from St. Vincent . Perhaps that is why an Airport was built in Bequia .

    Obviously it will take some time for us to get a lot of Tourists , some Hotels ; Guest Houses etc , so people will have to be patient , Rome was not built in a Day . The Politicians who are
    in the Opposition are going to say a lot of negative things , despite the fact that their Party was in the governance of SVG for many years and did not do a damn thing . So now they are howling and steeped in negativism .

    An opportunity will be available for Farmers , large & small to sell their products abroad , however there needs to be the formation of CoOperatives to be successful . Hopefully after
    the Argyle Airport , the Government will propose the building of a Modern Hospital , at Arnos Vale . For many years I have been of the opinion , that having a Hospital next door to a Cemetery , is psychologically bad for patients health .

    Veridical

  3. Please please please see what the most intelligent man in Dominica Gregor Nassief says why they do not need and also cannot afford an international airport for Dominica.

    http://www.dominicavibes.dm/readers-145846/

    Wake up and smell the roses, coffee or whatever. No ground work has been done for St. Vincent to have an international airport.
    It is very glaring that there was no thought process involved.
    1. No wind studies
    2. No hotel infrastructure to accommodate airlift
    3. No infrastructure to accommodate fuel farms
    4. No deep water infrastructure to accommodate fuel tankers and storage of fuel
    5. No infrastructure to accommodate emergency services
    6. Brilliant LIES

    The list reads like a broken banana republic and it goes on and on and on.

    Vincentians take heed and read this article by Gregor Nassief, He should get an award for it. The most sensible man in the caribbean.

    Make do with what you have until can afford.

  4. I would like to know why what I have written has not yet been moderated . I do not recall that what I wrote is laden with anything that that can be construed as being controversial . I am
    beginning to believe that there may be ulterior motives for not publishing what I have written .
    Three days have passed , and what I have written has not yet been published ;

    Veridical

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