What Can the Caribbean Do About the Recession?


How should Caribbean governments seek to support tourism during a global recession?

At a time of diminishing national reserves, this is a question set to haunt the industry, governments and the region as a whole, if, as seems probable, both public revenues and visitor arrivals continue to decline.

Although the fortunes of the Caribbean tourism sector can be demonstrated to be cyclical - tourism has shown globally a remarkable ability to bounce back after a crisis, bringing rapid cash benefits for industry and government alike - the present unprecedented downturn is taking place against the background of unresolved structural challenges, apparent from well before the global economic recession took hold.

Tourism-dependent region

The Caribbean is by almost every measure the most tourism-dependent region in the world. The sector will provide in 2009 on average 10 per cent of government revenues, 14.5 per cent of GDP, and 12 per cent of regional employment, figures that are much higher in Caribbean states where tourism leads economic activity.

Despite this, both the industry and governments have not focused on the industry's underlying weaknesses.

At its most obvious, the tourism sector has not addressed the problems associated with having made an early start and its consequent need to renovate locally owned tourism plants. These plants are, by international standards, now far from globally competitive, and are frequently overpriced.

This is compounded by a continuing absence of training at all levels, and a singular lack of hotel schools offering both practical and academic skills to meet the future needs of the industry.

Integration of industries

Beyond this, Caribbean tourism is not integrated to any significant degree with local agriculture, fisheries or manufacturing, preferring instead to rely on high-cost imported inputs.

At the level of government, increased levels of taxation on visitors while seemingly painless, points in the longer term to diminishing returns if nations, in so doing, begin to price themselves out of the market.

More parochially, there is continuing public-sector distrust of an industry in which many hoteliers have not understood the need to invest time in improving their relationship with government, or of convincing the public that tourism is about professional levels of service.

Added to this far from exhaustive list, there are continuing problems with airlift within the region and externally; unresolved tensions between the cruise industry and land-based tourism; and the challenge of how to deal with the ever-increasing costs of financing, food and energy.

There are, of course, national and individual exceptions to all of these issues, and there are many good people in both the public and private sector trying to find solutions.

What it all adds up to is the need for a holistic regional approach to Caribbean tourism if visitors are not to turn to other warm-water destinations in the Indian Ocean or Far East, or newer markets in India, China and Brazil.

According to one leading Caribbean financial institution, hoteliers were able to maintain during the high season, payments to suppliers, but in some cases, were not able to build up reserves to cover the leaner summer season.

This suggests that if forward bookings are weak, the financial strength of some operations will be under significant strain as the year goes on.

Unfortunately, the outlook is not bright.

The World Travel and Tourism Council forecasts two difficult years for the Caribbean.

Beyond 2010, they suggest there remain many uncertain variables that could affect the outlook, and they project that growth in Caribbean travel and tourism GDP will only be of the order of about 0.3 per cent in 2010.

Source of income

Government revenues from tourism now make up an ever-increasing source of income.

As import tariffs fall as a result of trade liberalisation, revenue streams from tourism are set to become more significant, not least because visitors, for the most part, are able to bear a higher burden of taxation.

Paradoxically, however, governments now have significantly less money to spend on attracting much-needed visitors at a time when Cabinet ministers, the industry, airlines, cruise-ship companies, and investors are all vying for increased support.

Speaking about this recently, Alec Sanguinetti, director general of the Caribbean Hotel and Tourism Association, suggested that there is pressing need to try to resolve this paradox if the industry is to flourish.

He believes that finding solutions requires new forms of partnership with government if the business of tourism is to flourish.

For him, this means identifying, far more rapidly than has been the case in the past, the steps to ensure the long-term sustainability of the industry and not, as he describes it, "a short-term fix to the current crisis".

"If we are able to achieve this," he suggests, "then we will be able to establish a platform to underpin future sustainability and be able to respond to future cyclical challenges."

The point he and others in the industry are making deserves to be widely heard and understood by both the private and public sector.

Tourism is central to the region's economic viability.

By David Jessop, director of the Caribbean Council

Source: The Jamaica Gleaner

Last Updated on Monday, 13 July 2009 08:08