Caribbean growth elusive without competitive tourism industry

POSTED: 02/18/13 12:26 PM

News Americas, LONDON – There are strong signs that the numbers of visitors from the U.S. and Canada are once again on the increase and that the world’s most advanced developing economies, including China and Brazil, are gradually returning to previous high levels of growth.

This may, however, not be as good news as it seems for tourism dependent economies in the Anglophone Caribbean in particular, David Jessop, director of the Caribbean Council writes.

“Accumulating evidence from industry professionals and economists suggests that the years ahead will be challenging, unless Caribbean tourism can increase its yield, heighten competitiveness, and stabilize airlift. Without this, governments that have come to depend on tourism may struggle to stimulate overall GDP growth.

Last week I wrote about this challenge. I noted that the numbers of visitor arrivals into the region are again increasing, but the value of the tourism economy is moving in the other direction. Since then I have had the opportunity to consider an interesting IMF working paper that provides some technical underpinning to what is happening to the Caribbean tourism economy.

If income is declining – annual visitor spend has fallen by US$5billion since 2007 according to industry sources and profitability has yet to reach pre-2007 levels. This suggests that the Caribbean is becoming less competitive in relation to other destinations and those current levels of tourism employment and tax revenue may not be sustainable.

Governments ignore this at their peril. It means that nations and the region cannot sit idly by and wait for recovery. They need actively to seek to increase airlift, develop new markets, sell themselves more effectively, and ensure they have a product that is globally competitive, profitable and consistently meets visitor expectations.

To try to understand the nature of possible solutions, I spoke recently to the just retired Director General of the Caribbean Hotels and Tourism Association, (CHTA), Alec Sanguinetti, who has spent almost all of his working life as a widely regarded and well-liked senior airline, hotel and association executive.

In our conversation, what came though most strongly was his belief that without sustainable airlift from outside the region that matches the market mix of hotel rooms in the region, the land based industry is unlikely to prosper, and that over time, all-inclusives and low-income generating cruise tourism could come to predominate.

The former CHTA director suggests a number of solutions.

He argues that if the region is to attract full service carriers from key US gateways – the trend is to low cost airlines – the region needs a single coherent policy on aviation, air navigation and taxation.

Another solution he proposes is for government to think much more about their airport offering. By much improving passenger side services in the form of shopping and other amenities, ramp-side airline taxes, he suggests, might be reduced, making the cost of using Caribbean airports more attractive.

This would also have greater appeal to visitors from newer markets such as China, Russia and Brazil who actively seek a shopping experience. There is also, he believes, a need to take a long-term approach to full service carriers if the region is to drive its product up scale, increase yield, and by extension increase the revenue that government raises.

He also notes that if airlines such as British Airways are taking aircraft away from the Caribbean to fly to destinations such as Cancun that have the same rate of Air Passenger Duty, then the region is becoming less competitive and is being harmed by the rapidly escalating range of local taxes that are now imposed on all who enter and leave the region.

The CHTA’s former director suggests that other answers lie with filling hotels. Economic data, he notes, shows that hotels in the region experience on average 62 percent occupancy across a year. By filling the remaining third for much of the year the industry could not only increase revenue and employment but gradually improve yield. To achieve this, the region and industry partners need to invest in marketing in ways that access the rapidly changing market segments that are attracted to the Caribbean.

He also feels that the region has not understood that a significant part of the quality of the tourism offering will depend on education and training. Without this, the industry’s competitiveness will decline and its capacity to generate national economic growth will be limited. Visitors, he says, are becoming more sophisticated and there is only so long that they will pay high prices if they feel that service levels or, for instance, cuisine do not provide value for money.

This equally applies, he believes, to the total experience. “Why pay an expensive air fare, multiple taxes and for an expensive hotel room if on arrival you are met with long queues, unfriendly immigration and customs officers, let alone complicated visa requirements if you are not from North America and Europe?” he asks.

He says that the region also has to consider why the Dutch and Spanish speaking Caribbean are doing so well; why leading academics in the region believe that the Anglophone Caribbean tourism destinations may be the slowest to recover from the recession; and why inter-regional travel fell in the five years up to 2010 from 1.6m visitors to just 0.5m.

At present, there may be, he says, an increasing sense of well being that tourist numbers are now increasing, but the reality is that that visitor spend is down. For this reason Caribbean competitiveness and the region’s approach requires review. South East Asia, he notes, adopted approaches after 9/11 that improved the visitor experience and have made them globally competitive.

For him the future also lies in improving service levels, seamless travel, and nurturing the personal ambition of those who have a talent for hospitality. “Why,” he asks, “are Caribbean people working on cruise ships able to provide such outstanding levels of service in comparison to many of their on-shore counterparts?”

The reason, he believes, is training, and a sense of personal confidence and pride, which on land, only the best hoteliers, large and small in the Caribbean, have been able to nurture. He believes too that more should be done to encourage recognition that tourism is for lawyers, managers, accountants as well as chefs and others, more traditionally associated with the industry.

Alec Sanguinetti’s comments suggest that what is urgently needed now, is someone in government or the industry who can demonstrate politically, that without a competitive tourism industry, Caribbean growth and recovery may prove elusive.”

 

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