Tourism not rebounding, structural failure still a danger

David Jessop, Gleaner Writer

Tourism,employs, directly and indirectly, one in every nine persons in the Caribbean, and is the largest employer after the public sector.

Treated well, it has an extraordinary contribution to make to regional growth; treated badly, it has the capacity to damage economies and reduce government revenues.

These are the simple messages that the Caribbean Hotel and Tourism Association (CHTA) hopes Caricom heads of government will hear and see as they meet in Montego Bay, July 4-7. In the past 20 years, the economic structure of the Caribbean has changed almost beyond recognition. The region has moved from being dominated by an agriculture-dependent preference-based model involving government's constant intervention, to one that has to rely on an industry that is private-sector led, and which has become, because of the region's natural environment, the most tourism-dependent in the world.

Essential provider

Put another way, tourism and its continuing ability to compete globally has in all but a few nations become the essential provider of employment and national income; and by extension, the taxes that pay for electorates' expectations of public services from education and health care to roads.

Unfortunately, it is a change and an industry that many politicians and senior officials seem to have difficulty in understanding.

For example, the traditional way in the region to determine tourism's success has been through counting the number of tourist arrivals, reviewing how long visitors stay, and assuming that if the numbers increase, income is improving and all is well.

By using this method, many Caribbean governments are suggesting that tourism is recovering after a particularly bleak period during the early stages of the global recession.

However, commercial measures globally used by the industry suggest otherwise. They show that the revenue and profitability of the sector continue to be extremely weak and that there is a danger of structural failure if the challenges facing the industry are not addressed.

Speaking about this recently, CHTA's outgoing president, Enrique de Marchena, noted that contrary to popular belief, he expected 2010 to be more challenging than 2009.

The World Travel and Tourism Council (WTTC), he said, had revised its global growth forecast for travel down from 3.5 per cent to 0.5 per cent, and while in the Caribbean the average daily rate and revenue per available room - the standard measures used by hoteliers to measure profitability - were slightly ahead of 2009, these were respectively down by 16 per cent and 21 per cent on 2008, and in some locations, by as much as 35 to 40 per cent.

He suggested that these figures ought to give rise to serious concern by governments and required immediate action "if we are to save the industry from further hardship and protect ... the individual destination economies that tourism impacts".

There was the immediate need, he suggested, for public- and private-sector leaders to address the necessary policy issues, and for Caribbean tourism to be established on a sustainable basis.

His ideas were given substance in an earlier speech made by Bob Crandall, the former president of American Airlines and the man credited with recognising the Caribbean's enormous tourism potential and developing accordingly, an extensive route network across the region.

Speaking in San Juan, Puerto Rico in May, in a speech that ought to be studied by every Caribbean leader, politician, permanent secretary and industry professional, he laid out gently but emphatically what needed to be done if Caribbean tourism economies were to prosper.

There was no lack of information about what was required, he said. It was making change happen that needed to be addressed.

The region's governments needed to come together, reach agreement and act collectively to increase awareness of the central importance of Caribbean tourism.

To do this, they required the economic briefing tools to explain the economics of the industry.

Tourism, he argued, should be reflected in every aspect of government policies from employment, trade, investment through to environment.

Enhance competitiveness

The industry's profound effect on public policy needed to be fully understood.

In his remarks, Crandall set out in detail what was required for the Caribbean to enhance its competitiveness. Some of his examples, he indicated, were simple to achieve, such as the reduction of form filing on arrival; a pleasant immigration and customs experience; the availability of high-quality continuous Internet connectivity; and minimal levels of public service and public education to ensure the centrality of tourism was well understood.

Addressing other challenges might take longer but were pressing.

He cited the importance of marketing the region's proximity, diversity and quality as the availability of low-cost air transport diminished.

Just as important, it was time, he said, for the Caribbean to stop taxing its own exports: travel and tourism.

Tourism was an export product, as it derived its revenues from abroad in exchange for a domestic service, he argued. Despite this, governments taxed the tourism product sometimes heavily, thereby reducing the quantity consumers are willing or able to purchase.

This was not, he said, an argument for doing away with taxation, but for modifying fiscal strategy, for instance, in ways that recognise the relative value of different types of visitors—those who spent the most and stayed longer as opposed to those who visited for the day or less.

This message about the need for a change in government thinking is coming strongly from others too.

Policy recommendations

Last month, the WTTC published a report that made a series of policy recommendations on how governments might optimise the industry's role in economic development.

In it, the WTTC suggested that an industry that had created some 2.4 million direct and indirect jobs in the Caribbean and contributed US$8.7 billion annually to GDP would only achieve future growth if governments addressed the structural problems facing the industry.

It called for a new emphasis on long-term planning at both the national and regional levels; industry measurement to ensure adequate forecasting; recognition that safety, security and health issues affected the tourism economy and the visitor as much as they touched the lives of Caribbean citizens; and the promotion of linkages to the wider economy.

Caribbean heads meeting in Jamaica will address at or near to the top of their agenda the parlous state of the regional economy. How much time they will devote to tourism, the industry best placed to bring the rapid and sustainable economic recovery that they require, remains to be seen.

David Jessop is director of the Caribbean Council.david.jessop@caribbean-council.org