- By Gina T. Reily
OPA: Tourism freeze resulted in $8.3M drop in GVB's 2020 revenue
The freeze in tourism due to the Covid-19 pandemic that reached its peak last year has resulted in an $8.3 million drop in the Guam Visitors Bureau's revenue, from $24.1 million in FY 2019 to $15.8 million in FY 2020, according to the Office of the Public Accountability's audit released today.
"In comparison to FY 2019’s highest recorded visitor arrivals of 1.6 million, total arrivals decreased by 14 percent in February then later plummeted by 98 percent in March following the international and local government quarantine restrictions," OPA said.
While auditors did not identify any material weaknesses in GVB’s financial reporting and compliance, OPA found four deficiencies.
These included: Consumption tax refund revenues were understated by approximately $232,000; travel expenses included certain items paid with no invoice details for hotel accommodations, canceled airfares, and cancellation fees; a $42,000 Japan Savings Account, opened in prior years, had a balance that was not recorded as of Sept. 30, 2020; and (4) $23,000 in petty cash from prior years, held in Osaka and Tokyo Japan offices, was not accounted for and written off.
GVB’s revenues are primarily appropriations from Tourist Attraction Fund, which significantly decreased from $22.3 million in FY 2019 to $14.8 million in FY 2020.
"The precipitous drop in visitor arrivals adversely impacted hotel occupancy taxes and the Tourist Attraction Fund (TAF), from which GVB’s operating and capital budgets are derived," OPA said.
OPA found that in-kind contributions also significantly decreased to $144,000in FY 2020 from $374,000 in FY 2019, largely due to the postponement or cancellation of GVB events.
"In FY 2020, GVB recorded $112,000 of federal contributions primarily from Coronavirus Aid Relief and Economic Security or CARES Act funding. The funds were used to facilitate remote work and set up online meeting platforms and implement various protocols for the health and safety of GVB’s staff and visitors," OPA said.
OPA said GVB closed FY 2020 with a net loss of $1.0 million. This decreased GVB’s cumulative net position to $10.6 million in FY 2020, from their FY 2019 net position of $11.6 million.
"GVB made efforts to assess finances and evaluate strategies in response to the uncertainties caused by the Covid-19 pandemic," OPA said.
OPA noted that, in anticipation of the pandemic’s unknown duration, GVB management cut operating costs and shifted stewardship of resources toward containment of the pandemic and recovery plans.
"In FY 2020, GVB’s operating expenses decreased by 41 percent, from $26.4 million in FY 2019 to $15.7 million in FY 2020. Professional services decreased by 39 percent to $9.3 million in FY 2020 due to the minimum fee adjustment of all overseas marketing representations to maintain a market presence," OPA said.
"Professional services in Japan ($4.1 million), Destination Management and Improvement ($2.5 million), and Korea ($863,000) accounted for 47 percent of GVB’s total operating expense."
OPA found a 12 percent increase in personnel expenses, which was attributed to several filled positions previously vacated since FY 2019.
"The majority of GVB’s variable expenses decreased due to Covid-19’s impact, including a 71 percent decrease in travel and a 62 percent reduction in promotional and in-kind expenses," OPA said.
Prior to the Covid-19 pandemic, the Visitor Safety Officer Program was created to respond to safety and security incidents and provide basic information to Guam’s visitors.
The program quickly adapted to serving the community in protecting Tumon’s parks and beaches, with over 12,000 documented reports of assisting residents with Covid-19 advisories on social distancing and the use of public parks and beaches.
Marketing plans were re-evaluated and modified. This included a focus on recovery plans, minimal spending on social media to save for a bigger push in the future, and deploying creative plans to help boost the island’s economy.
Prior to the Covid-19 pandemic, the development and enhancement of local sporting and recreational events supported by GVB added value in luring thousands of visitors to engage in sporting and cultural events unique to Guam (such as the United Guam Marathon, Guam Barbecue Block Party, and Guam Micronesia Island Fair).
Although priorities were set to assist in the containment of Covid-19 for most of 2020, GVB continued to work diligently to upgrade event offerings to include and ensure better hygiene safety protocols and best practices when traveling and engaging socially in Guam.
Due to continued uncertainties surrounding the extent and duration of the Covid-19 outbreak and its impact, the outlook for visitor arrivals in 2021 and beyond remains uncertain.