As the global economic outlook darkens, the Caribbean tourism industry has begun to look closely at its revenue forecasts and how best to position itself to weather the storm that will affect negatively arrivals from the second quarter of 2009 onwards from all of its main markets.
Although bookings over the winter season and into February from the US, Canada and Europe are good, hoteliers are coming to believe that the impact of the global economic recession on the industry in the Caribbean will be severe. In doing so they ruefully make the point that it will finally if unfortunately demonstrate to Governments and electorates just how dependent the region has become on earnings from an industry that is still not widely understood or supported.
Caribbean tourism has of course experienced downturns in the past, but these occurred for the most part when the region’s economy was more broadly based. Then agriculture protected many Caribbean economies through the artificially high prices paid by Europe under preferential arrangements for commodities like sugar and bananas.
But today, despite the fact that there is still no accounting model for most nations or the region as a whole to indicate tourism’s true value, there is enough information available to suggest that any downturn will affect a wide range of economic activity in almost all Caribbean economies. How tourism has come to permeate the Caribbean economy in this way ought to be the subject of contemporary economic history.
However, even without empirical evidence it is not hard to identify what a severe recession in the region’s primary markets might mean.
Visitors and what they spend now touch virtually every form of economic activity across the Caribbean. This means that it is no longer just the hotel owners or the employees who will suffer, but everyone from the accountant and lawyer to the beach vendor who makes a living from the industry. Moreover a recession touching tourism will have the dangerous slow burn effect of causing tax revenues and foreign exchange reserves to fall, making it more difficult for government to fund social and other programmes and by extension maintain present levels of employment in the public sector.
Previously those who were put out of work in developed countries in an economic down turn tended to have blue collar jobs; but as the Bank of England warned a week ago, this time around those whose jobs will be the first to go will be the middle class working in the services sector, the very category of global visitor on whom the Caribbean tourism industry relies. As if to demonstrate this British Telecom in the United Kingdom made 10,000 employees redundant and reports suggests that tens of thousands of jobs across Europe and North America in the financial services and legal sector will also go.
Added to this the tourism landscape has changed since previous recessions. Today the industry in the region is competing with global destinations that can often offer a better quality product, cuisine, service and attractions at lower prices. It is up against destinations as varied as Europe, the US, Dubai, China and the Indian Ocean to say nothing of closer to home destinations in Florida the Mediterranean.
The consequence is that the region is about to enter a period of considerable economic uncertainty during which both land and cruise based tourism will decline. While there may be some exceptions like Jamaica, where its decision to diversify its markets and marketing approach appear to be paying dividends, more common will be the experience of the Bahamas where, the International Monetary Fund recently cut its overall growth estimates.
According to IMF documents their original forecast that the Bahamas’ gross domestic product would grow by nearly two per cent in 2008 has now been downgraded to one per cent while Nassau is forecasting a six per cent decline in visitors this year and a slowdown in investment into resort and hotel development.
Speaking about this Prime Minister Hubert Ingraham recently warned Bahamians about what this will mean. In remarks that could apply across the region he said, `Unemployment is now a most serious concern. Many workers in the tourism sector face the prospect of layoff or unemployment for considerable period at least until the global economy especially that of the US, is stabilised and returns to forward.`
In all of this no particular segment of the tourism market seems to be immune.
Although some all inclusive owners seem unfazed in public by the recession, there are signs that in private they too are becoming concerned as occupancy levels fall below the magic percentages that ensure that their cash flow and margins remain strong. As a consequence some are believed to be pressing government for rapid concessions on taxation in order to maintain competitiveness.
Elsewhere, destinations and properties are continuing to place their faith in the top end of the market remaining strong, but they too may be in for a rude awakening as even the wealthy appear to be spending less. Hedge fund and private equity performance has been appalling with quite literally trillions of dollars being lost by the wealthy, leading to growing evidence from top-end retailers that sales of items such as jewellery and watches are in steep decline.
Less surprisingly the lower end of the market is also suffering with some of the low cost carriers that previously flew to the region either going out of business or withdrawing at a time when the bigger scheduled airlines are cutting their schedules and fleets.
What this suggests is that the outlook for tourism from the second quarter of 2009 onwards and by extension the Caribbean economy as a whole is far from bright. While some of the worst effects may be mitigated in the short term by price and tax cutting plus new approaches to national regional and property marketing and the encouragement of visitors from nations like Brazil, China and India, the region’s tourism industry with some exceptions, looks likely to remain depressed to well into 2010.
This is a scenario that points beyond mitigation, to using the time to better understand the role that tourism plays in the Caribbean economy and to renovate it infrastructure and marketing plans so that Governments and the industry are well placed to take advantage of global economic recovery when it occurs.
By: David Jessop
Source: http://www.caribworldnews.com/
