Is tourism’s recovery sustainable?

David Jessop
The View from Europe

After two lean years, Caribbean tourism is recovering. As travel restrictions are removed there is widespread optimism about the coming summer and winter season.

Industry reports suggest that 2022 got off to a good start. The World Travel and Tourism Council, a body supported by major international travel companies, says that the region’s recovery is outpacing the rest of the world and that it expects Jamaica, The Dominican Republic, and Aruba to be among the top twenty best performing destinations anywhere.

However, a deeper dive and conversations with industry professionals suggest that the picture is mixed, the structure of the Caribbean market is changing, and new thinking may be required to ensure sustainability.

The view is that the present positive picture may prove difficult to repeat next year when post-pandemic traveller exuberance fades, and present levels of excess disposable income and pent-up demand are tempered by a now near certain recession in the region’s main visitor markets.

Although arrivals figures produced by Aruba-based Tourism Analytics indicate that that overall average recovery rate for Caribbean long stay visitors in calendar year 2021 was equivalent to 54.4% of the arrivals numbers recorded in 2019, its metrics and analysis indicate significant national variations.

Last year three Caribbean destinations saw extraordinary levels of visitor recovery. This was either because as US destinations they were largely exempt from US public health protocols – Puerto Rico and the USVI recorded respectively 103% and 129% recovery rates in arrivals over 2019 – or, in the case of the Dominican Republic, its 77.5% recovery arguably reflected pandemic related entry requirements that were not particularly challenging.

The Turks and Caicos, the Dutch speaking Caribbean, Jamaica, Antigua, The Bahamas, and St Lucia also all showed an above average return to pre-COVID arrival numbers. However, elsewhere the bounce back in 2021 was slow, with for example Barbados experiencing only a 20% recovery over 2019, Cuba 8.3%, and Cayman just 3%. These trends continued in the first quarter of 2022.

What these wide variations point to are country specific factors. These range from the complexity and longevity of entry protocols, infection rates and travel advice in principal source markets, and Caribbean concerns about domestic vaccination and infection rates. Just as significantly, recovery rates also reflected a precipitate decline in US travel to Europe and Canada, with the big winners being US oriented Caribbean markets and Mexico.

Most Caribbean destinations now hope to end 2022 in a much better place.

Jamaica’s Tourism Minister, Edmund Bartlett, says that he expects to see 3.2mn arrivals this year (4.3mn: 2019) and full recovery in 2024; Cuba, despite losing its significant Russian and Ukrainian market and being closed to US tourism, is hoping to receive some 2.5mn visitors (2019: 4.3mn); while Barbados’ Minister of Tourism and International Transport, Lisa Cummins, has predicted a ‘healthy’ 2022.

This of course is welcome news but should come with a warning.

The global impact of the war in Ukraine is leading to a near certain recession in the region’s principal visitor markets, as well as high levels of imported inflation, significant price increases across the industry, and a consequent reorientation in visitor demand. This will be damaging particularly to those countries and enterprises that have just begun to repay significant levels of debt built up during the pandemic.

As presently configured the tourism sector imports almost everything from food to cutlery and linen. Not only will global food shortages and surging energy prices drive up all hotel operating costs, but they will also put pressure on wages, making the Caribbean, an already expensive US Dollar denominated destination, less able to compete with other warm water destinations that are hoping to replace lost Russian and Chinese clients with some of the region’s European and North American visitors.

In addition, airfares are likely to continue to rise. The global supply of oil and its derivatives has tightened because of sanctions. According to the International Air Transport Association, the cost of jet fuel is now nearly 149% more than a year ago and will remain high going into 2023 at a time when carriers expect crew and equipment shortages to continue.

What this suggests is that as the recession and higher prices bite, the Caribbean market may fragment with high end properties continuing to benefit from rising demand among affluent leisure travellers, while many less prosperous US, European and Canadians citizens turn to lower cost destinations such as the Dominican Republic and Cuba or head for the Maldives and Thailand.

More fundamentally, as room rates and air fares rise, significant numbers of visitors are expected to turn to cruising, all-inclusives, Airbnb types of accommodation, and villa rentals.

In Puerto Rico demand for short term rental accommodation is already surging, elsewhere in the region industry professionals suggest that clients are taking over large houses and villas in preference to globally branded properties, and according to Rick Sasso, the President and CEO of MSC Cruises, the cruise industry, especially in the Caribbean, is set to benefit from the growing disparity between lodging prices onshore and cruise pricing.

Jim Hepple, the Managing Director of Tourism Analytics, fears that the primary tourism conversation now underway in the Caribbean has become dominated by the recovery of 2019’s arrival numbers. He says that instead of creating a long-term sustainable industry, the conversation at the moment is about getting back to 2019 and is not about the kind of tourism the region wants moving forward or whether the tourist has changed and will want different things in the future.

“If the pandemic taught the Caribbean anything it was how vulnerable the region can be to external shocks. Governments and the private sector must sit down together to plan a sustainable future for the sector which plays to the region’s strengths and minimises the impact of such exogenous variables”, he observes.

Despite the IADB, the OECD and others producing reports on reshaping the post-pandemic Caribbean tourism economy, few in the sector, let alone among its external partners, have shown much interest in change, or recognise the need to reform the Caribbean’s largely undiversified model, which remains little different from decades ago in terms of its source markets, offering, import leakages, and capital structure.

Change, however, may be underway. Minister Bartlett argues that the time has come for Jamaica to “repatriate sovereignty” in tourism. He wants to identify how the industry might better drive sustainable economic growth though product diversification, induce growth in productive capacity, and place greater emphasis on quality, human development, secure employment, and the contribution of tourism’s multitude of SMEs.

His counterparts in Barbados and St Lucia are of the same opinion.

David Jessop is a consultant to the Caribbean Council and can be contacted at
david.jessop@caribbean-council.org
Previous columns can be found at https://www.caribbean-council.org/research-analysis/