Businesses fight to keep the lights on as costs rise

At the Glam Factor boutique in George Town, the air is thick with the pleasant smell of shampoo and beauty products. The thrum of hair dryers and the busy snip of scissors provide a steady accompaniment to the occasional chatter of the stylists and their customers.

Monikah Adeniken beams as she watches the scene unfold.

But behind the flawless exterior, her heavily lashed eyes betray a trace of worry.

Rising electricity costs have impacted every business in Cayman. But for a salon owner, there are limited options to cut the dependence on the array of appliances that help keep Cayman beautiful.

She’s militant about the timing on the driers. Each night as staff sweep the fallen locks from the floor of the salon, she unplugs every piece of equipment, turns off every power circuit breaker and shuts down the water cooler. Every light fixture has been fitted with low energy LED bulbs.

Yet still, when her CUC bill appears at the end of the month, it is higher than ever.

Last month, it was around $1,500 for the salon and the BeYOUtuful spa upstairs. A year ago, it was a little over half of that figure.

Nowhere left to cut

Unlike homeowners around Cayman, businesses don’t qualify for government support and are feeling the impact of rising fuel costs.

“Everything we do requires power,” Adeniken said. “There is nowhere left to cut.”

At the same time, almost every supplier has pushed up costs and shipping fees have increased exponentially.

Instead of following suit and passing on those increases to her customers, Adeniken has done the opposite.

“I don’t want my clients to have to choose between having a hair wash and paying their light bill, so I have put my prices down,” she said.

So the salon stays full and the customers stay happy, but the profits will have to wait for another day.

Every business faces same challenge

The challenges at the Glam Factor are being faced by businesses of every size and scale in
all corners of Cayman.

The customers that disappeared during the pandemic have returned in droves.

But the costs have multiplied to such an extent that the chances of a financial recovery for businesses who suffered through COVID remain depressingly distant.

Troy Burke, owner of the Subway franchise in Cayman, estimates the electricity bill across the restaurant chain has doubled since January. Food costs are also up and staff wages have been increased to help them pay their own power bills.

But the upshot is that the price of a sandwich is going to have to increase as well.

“I don’t like to do it but there is no way we can sustain these additional costs,” said Burke.

Even larger businesses, like Foster’s, feel the impact. Across six stores and a distribution centre, a 35% increase in electricity costs, compared with last year, takes its toll. Owner Woody Foster said the business absorbed the impact of utilities increases, only passing on food and produce price rises to customers.

He is hopeful the tried-and-trusted formula can stay in place and that costs will stabilise soon.

‘Vicious cycle’

The challenge for many business owners is what the Chamber of Commerce refers to as the “vicious cycle” of inflation.

Increasing wages to help staff survive cost-of-living rises puts pressure on their own bottom line, sometimes forcing price increases, which contribute to the cost-of-living rising further.

Pushing up wages becomes futile if the spending power of those salaries keeps declining.

“Some businesses have increased wages and have provided supplemental compensation to staff who have seen an increase in their cost of living,” said Chamber president Shomari Scott. “But this trend is not sustainable, particularly for small businesses. It is a vicious cycle that can only be addressed by working on strategies to stabilise or reduce energy costs.”

Scott said spiralling fuel prices in particular are impacting every area of business and the Chamber is keen to see a swifter transition to solar energy to help stabilise costs.

The Chamber council met with both OfReg and the Caribbean Utilities Company recently to press the case for renewables as a cost-cutting measure.

“The faster we can introduce clean energy into the power grid, the more savings will be passed on to businesses and consumers,” said Scott.

Tourists return but profit elusive

Even within the resurgent tourism industry, spiking visitor numbers are unlikely to translate to increased income any time soon.

Cayman Islands Tourism Association president Marc Langevin said the industry expects to see a gratifying influx of visitors this season with the threat of COVID – and the inconvenience of the regulations that came along with it – now a thing of the past.

But he warned that would not be enough for struggling businesses within the sector, who survived through a near two-year border closure, to get back on their feet.

“We are seeing all the signs of a very strong recovery but it will not be business as usual,” he said. “The cost of doing business has changed, the cost of operating has changed. We need new solutions to the problem.”

While Langevin, the general manager of The Ritz-Carlton, operates a multi-million dollar business that has the wherewithal to absorb six-figure increases in its energy bills on top of staff pay increases and rising pension costs, he says he can empathise with the many small businesses suffering through a genuine cost-of-living crisis on the back of COVID.

“We are talking about a large hotel but it is the same thing if you are a boat operator or a ‘mom and pop’ shop,” he said. “It might be a different number of zeroes but it is the same problem for everyone. Costs are too high.”

‘Inflation is imported’

Government has moved to address cost-of-living increases for homeowners, subsidising fuel costs to keep electricity bills manageable.

But inflation is impacting almost every country Cayman does business with – particularly the UK and the US.

Unlike those countries, Cayman does not have a means to control its own economic destiny. It can’t print money or control interest rates, and is largely beholden to global conditions and economic policy from the US.

“Inflation is something that is hard for us to deal with,” Premier Wayne Panton acknowledged in a recent interview with the Compass. “In a sense, we are effectively importing inflation, because the first cost of these products [is] beyond our control.”