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Tourism under pressure
Published: Sunday | May 17, 2009
If there were still some uncertainty about the impact of the global crisis on the Jamaican economy, figures posted last week by the Jamaica Tourist Board (JTB) on visitor arrivals for March and the first quarter of the year leave no doubt that the tourist industry is hurting. The drop in arrivals in March reverses increases in January and February and diminishes the hope that the island would return to a growth path after three consecutive months of declines from October to December 2008. It also resulted in a growth rate of only 0.6 per cent for the financial year 2008-09 as against an original target of 13.5 per cent. When account is taken of the new rooms opened during the period, this meagre growth means that sections of the industry experienced significantly lower occupancy levels.
The double-digit decline in US tourists in March, even after normalising for Easter traffic and other special circumstances in this month last year, suggests that the move by American consumers to cut spending on vacations has taken effect. In fact, this was the fifth straight monthly decline since the downturn in US visitor arrivals began in July 2008. With recent economic data showing that US consumer spending fell for the second consecutive month in April, we should anticipate further slippage in arrivals of American tourists in the months ahead.
Leading indicator
Such an outcome should not be surprising, since the unemployment rate, which is a leading indicator of consumer spending, is expected to continue a steep climb into 2010. Moreover, the pressure on consumers in a tight economy to save more means that they will be looking for bargains and hence, heavy discounting will be necessary to attract travel bookings. Not only will the tourist industry be buffeted by declining arrivals, but its revenues are going to be squeezed.
The return of Mexico, which is planning to mount a multimillion-dollar campaign to restore its brand and bring visitors back to Cancun and other competing resort areas, is being anticipated. It is another factor that will make the marketplace more turbulent for Jamaica and other Caribbean destinations in the late summer. Hotels in Cancun have already cut rates by 50-70 per cent and are offering credit worth up to US$250 for food and other items.
According to a senior vice-president of Apple Vacations, one of the leading tour operators doing business in Jamaica, Mexico is already offering holiday packages that are 70 per cent and 50 per cent cheaper for May and June, respectively. As he says, there will be "a bonanza of good deals this summer".
In the meantime, Jamaica is benefiting from the diversion in tourist traffic from Mexico. We have, therefore, done better in April and are enjoying higher arrivals in May than were earlier anticipated. After this temporary relief, the difficult prevailing economic conditions will make it extremely challenging for the industry to achieve even the modest growth target of six per cent.
Still, there are some positive features of the tourism landscape which should provide encouragement as the industry confronts the difficulties. First, the Canadian market is sustaining its powerful momentum, recording growth of 27.7 per cent in the January - March 2009 period, after the extraordinary 23.9 per cent increase in 2008. From all indications, this market has potential for further strong growth, especially as, so far, Canada has weathered the economic storm much better than its powerful neighbour and the Euro zone region.
Positive responses
Second, the over 2,000 new hotel rooms by Iberostar, Fiesta and Riu, which have recently come on stream, will continue to spur interest in the destination, particularly in a market where consumers are going to be looking keenly for value. Other new products by Palmyra Resorts and Secrets are slated to come on to the market later this year and in 2010, adding more excitement to Jamaica's tourism offerings. Also, my impression is that improvements to our infrastructure are continuing to generate positive responses in the marketplace. These are factors that should enable the island to hold its own in a period of heightened competition.
Our heavy dependence on the US, which, in spite of the recent rapid growth of the Canadian market, still provides over 60 per cent of our visitors, remains an overpowering influence on the industry's prospects. At best, it will constrain the ability of the island to expand visitor arrivals over the next 18-24 months. The tourist industry cannot, therefore, be relied upon to offset the loss in foreign-exchange earnings by the bauxite sector and the falling inflows from remittances. Very likely, the returns from the industry will go down, even if we are fortunate to contain the slippage in arrivals.
At least, employment levels should not suffer major fallout since the additional jobs being created by the new hotels should help to offset job losses at existing properties. The buoyancy of recent years may not, however, return for some time.
Tourism under pressure
Published: Sunday | May 17, 2009
Dennis Morrison, Contributor
If there were still some uncertainty about the impact of the global crisis on the Jamaican economy, figures posted last week by the Jamaica Tourist Board (JTB) on visitor arrivals for March and the first quarter of the year leave no doubt that the tourist industry is hurting. The drop in arrivals in March reverses increases in January and February and diminishes the hope that the island would return to a growth path after three consecutive months of declines from October to December 2008. It also resulted in a growth rate of only 0.6 per cent for the financial year 2008-09 as against an original target of 13.5 per cent. When account is taken of the new rooms opened during the period, this meagre growth means that sections of the industry experienced significantly lower occupancy levels.
The double-digit decline in US tourists in March, even after normalising for Easter traffic and other special circumstances in this month last year, suggests that the move by American consumers to cut spending on vacations has taken effect. In fact, this was the fifth straight monthly decline since the downturn in US visitor arrivals began in July 2008. With recent economic data showing that US consumer spending fell for the second consecutive month in April, we should anticipate further slippage in arrivals of American tourists in the months ahead.
Leading indicator
Such an outcome should not be surprising, since the unemployment rate, which is a leading indicator of consumer spending, is expected to continue a steep climb into 2010. Moreover, the pressure on consumers in a tight economy to save more means that they will be looking for bargains and hence, heavy discounting will be necessary to attract travel bookings. Not only will the tourist industry be buffeted by declining arrivals, but its revenues are going to be squeezed.
The return of Mexico, which is planning to mount a multimillion-dollar campaign to restore its brand and bring visitors back to Cancun and other competing resort areas, is being anticipated. It is another factor that will make the marketplace more turbulent for Jamaica and other Caribbean destinations in the late summer. Hotels in Cancun have already cut rates by 50-70 per cent and are offering credit worth up to US$250 for food and other items.
According to a senior vice-president of Apple Vacations, one of the leading tour operators doing business in Jamaica, Mexico is already offering holiday packages that are 70 per cent and 50 per cent cheaper for May and June, respectively. As he says, there will be "a bonanza of good deals this summer".
In the meantime, Jamaica is benefiting from the diversion in tourist traffic from Mexico. We have, therefore, done better in April and are enjoying higher arrivals in May than were earlier anticipated. After this temporary relief, the difficult prevailing economic conditions will make it extremely challenging for the industry to achieve even the modest growth target of six per cent.
Still, there are some positive features of the tourism landscape which should provide encouragement as the industry confronts the difficulties. First, the Canadian market is sustaining its powerful momentum, recording growth of 27.7 per cent in the January - March 2009 period, after the extraordinary 23.9 per cent increase in 2008. From all indications, this market has potential for further strong growth, especially as, so far, Canada has weathered the economic storm much better than its powerful neighbour and the Euro zone region.
Positive responses
Second, the over 2,000 new hotel rooms by Iberostar, Fiesta and Riu, which have recently come on stream, will continue to spur interest in the destination, particularly in a market where consumers are going to be looking keenly for value. Other new products by Palmyra Resorts and Secrets are slated to come on to the market later this year and in 2010, adding more excitement to Jamaica's tourism offerings. Also, my impression is that improvements to our infrastructure are continuing to generate positive responses in the marketplace. These are factors that should enable the island to hold its own in a period of heightened competition.
Our heavy dependence on the US, which, in spite of the recent rapid growth of the Canadian market, still provides over 60 per cent of our visitors, remains an overpowering influence on the industry's prospects. At best, it will constrain the ability of the island to expand visitor arrivals over the next 18-24 months. The tourist industry cannot, therefore, be relied upon to offset the loss in foreign-exchange earnings by the bauxite sector and the falling inflows from remittances. Very likely, the returns from the industry will go down, even if we are fortunate to contain the slippage in arrivals.
At least, employment levels should not suffer major fallout since the additional jobs being created by the new hotels should help to offset job losses at existing properties. The buoyancy of recent years may not, however, return for some time.
<span style="font-style: italic">Dennis Morrison is an economist. Feedback may be sent to [email protected]. </span>
Published: Sunday | May 17, 2009
If there were still some uncertainty about the impact of the global crisis on the Jamaican economy, figures posted last week by the Jamaica Tourist Board (JTB) on visitor arrivals for March and the first quarter of the year leave no doubt that the tourist industry is hurting. The drop in arrivals in March reverses increases in January and February and diminishes the hope that the island would return to a growth path after three consecutive months of declines from October to December 2008. It also resulted in a growth rate of only 0.6 per cent for the financial year 2008-09 as against an original target of 13.5 per cent. When account is taken of the new rooms opened during the period, this meagre growth means that sections of the industry experienced significantly lower occupancy levels.
The double-digit decline in US tourists in March, even after normalising for Easter traffic and other special circumstances in this month last year, suggests that the move by American consumers to cut spending on vacations has taken effect. In fact, this was the fifth straight monthly decline since the downturn in US visitor arrivals began in July 2008. With recent economic data showing that US consumer spending fell for the second consecutive month in April, we should anticipate further slippage in arrivals of American tourists in the months ahead.
Leading indicator
Such an outcome should not be surprising, since the unemployment rate, which is a leading indicator of consumer spending, is expected to continue a steep climb into 2010. Moreover, the pressure on consumers in a tight economy to save more means that they will be looking for bargains and hence, heavy discounting will be necessary to attract travel bookings. Not only will the tourist industry be buffeted by declining arrivals, but its revenues are going to be squeezed.
The return of Mexico, which is planning to mount a multimillion-dollar campaign to restore its brand and bring visitors back to Cancun and other competing resort areas, is being anticipated. It is another factor that will make the marketplace more turbulent for Jamaica and other Caribbean destinations in the late summer. Hotels in Cancun have already cut rates by 50-70 per cent and are offering credit worth up to US$250 for food and other items.
According to a senior vice-president of Apple Vacations, one of the leading tour operators doing business in Jamaica, Mexico is already offering holiday packages that are 70 per cent and 50 per cent cheaper for May and June, respectively. As he says, there will be "a bonanza of good deals this summer".
In the meantime, Jamaica is benefiting from the diversion in tourist traffic from Mexico. We have, therefore, done better in April and are enjoying higher arrivals in May than were earlier anticipated. After this temporary relief, the difficult prevailing economic conditions will make it extremely challenging for the industry to achieve even the modest growth target of six per cent.
Still, there are some positive features of the tourism landscape which should provide encouragement as the industry confronts the difficulties. First, the Canadian market is sustaining its powerful momentum, recording growth of 27.7 per cent in the January - March 2009 period, after the extraordinary 23.9 per cent increase in 2008. From all indications, this market has potential for further strong growth, especially as, so far, Canada has weathered the economic storm much better than its powerful neighbour and the Euro zone region.
Positive responses
Second, the over 2,000 new hotel rooms by Iberostar, Fiesta and Riu, which have recently come on stream, will continue to spur interest in the destination, particularly in a market where consumers are going to be looking keenly for value. Other new products by Palmyra Resorts and Secrets are slated to come on to the market later this year and in 2010, adding more excitement to Jamaica's tourism offerings. Also, my impression is that improvements to our infrastructure are continuing to generate positive responses in the marketplace. These are factors that should enable the island to hold its own in a period of heightened competition.
Our heavy dependence on the US, which, in spite of the recent rapid growth of the Canadian market, still provides over 60 per cent of our visitors, remains an overpowering influence on the industry's prospects. At best, it will constrain the ability of the island to expand visitor arrivals over the next 18-24 months. The tourist industry cannot, therefore, be relied upon to offset the loss in foreign-exchange earnings by the bauxite sector and the falling inflows from remittances. Very likely, the returns from the industry will go down, even if we are fortunate to contain the slippage in arrivals.
At least, employment levels should not suffer major fallout since the additional jobs being created by the new hotels should help to offset job losses at existing properties. The buoyancy of recent years may not, however, return for some time.
Tourism under pressure
Published: Sunday | May 17, 2009
Dennis Morrison, Contributor
If there were still some uncertainty about the impact of the global crisis on the Jamaican economy, figures posted last week by the Jamaica Tourist Board (JTB) on visitor arrivals for March and the first quarter of the year leave no doubt that the tourist industry is hurting. The drop in arrivals in March reverses increases in January and February and diminishes the hope that the island would return to a growth path after three consecutive months of declines from October to December 2008. It also resulted in a growth rate of only 0.6 per cent for the financial year 2008-09 as against an original target of 13.5 per cent. When account is taken of the new rooms opened during the period, this meagre growth means that sections of the industry experienced significantly lower occupancy levels.
The double-digit decline in US tourists in March, even after normalising for Easter traffic and other special circumstances in this month last year, suggests that the move by American consumers to cut spending on vacations has taken effect. In fact, this was the fifth straight monthly decline since the downturn in US visitor arrivals began in July 2008. With recent economic data showing that US consumer spending fell for the second consecutive month in April, we should anticipate further slippage in arrivals of American tourists in the months ahead.
Leading indicator
Such an outcome should not be surprising, since the unemployment rate, which is a leading indicator of consumer spending, is expected to continue a steep climb into 2010. Moreover, the pressure on consumers in a tight economy to save more means that they will be looking for bargains and hence, heavy discounting will be necessary to attract travel bookings. Not only will the tourist industry be buffeted by declining arrivals, but its revenues are going to be squeezed.
The return of Mexico, which is planning to mount a multimillion-dollar campaign to restore its brand and bring visitors back to Cancun and other competing resort areas, is being anticipated. It is another factor that will make the marketplace more turbulent for Jamaica and other Caribbean destinations in the late summer. Hotels in Cancun have already cut rates by 50-70 per cent and are offering credit worth up to US$250 for food and other items.
According to a senior vice-president of Apple Vacations, one of the leading tour operators doing business in Jamaica, Mexico is already offering holiday packages that are 70 per cent and 50 per cent cheaper for May and June, respectively. As he says, there will be "a bonanza of good deals this summer".
In the meantime, Jamaica is benefiting from the diversion in tourist traffic from Mexico. We have, therefore, done better in April and are enjoying higher arrivals in May than were earlier anticipated. After this temporary relief, the difficult prevailing economic conditions will make it extremely challenging for the industry to achieve even the modest growth target of six per cent.
Still, there are some positive features of the tourism landscape which should provide encouragement as the industry confronts the difficulties. First, the Canadian market is sustaining its powerful momentum, recording growth of 27.7 per cent in the January - March 2009 period, after the extraordinary 23.9 per cent increase in 2008. From all indications, this market has potential for further strong growth, especially as, so far, Canada has weathered the economic storm much better than its powerful neighbour and the Euro zone region.
Positive responses
Second, the over 2,000 new hotel rooms by Iberostar, Fiesta and Riu, which have recently come on stream, will continue to spur interest in the destination, particularly in a market where consumers are going to be looking keenly for value. Other new products by Palmyra Resorts and Secrets are slated to come on to the market later this year and in 2010, adding more excitement to Jamaica's tourism offerings. Also, my impression is that improvements to our infrastructure are continuing to generate positive responses in the marketplace. These are factors that should enable the island to hold its own in a period of heightened competition.
Our heavy dependence on the US, which, in spite of the recent rapid growth of the Canadian market, still provides over 60 per cent of our visitors, remains an overpowering influence on the industry's prospects. At best, it will constrain the ability of the island to expand visitor arrivals over the next 18-24 months. The tourist industry cannot, therefore, be relied upon to offset the loss in foreign-exchange earnings by the bauxite sector and the falling inflows from remittances. Very likely, the returns from the industry will go down, even if we are fortunate to contain the slippage in arrivals.
At least, employment levels should not suffer major fallout since the additional jobs being created by the new hotels should help to offset job losses at existing properties. The buoyancy of recent years may not, however, return for some time.
<span style="font-style: italic">Dennis Morrison is an economist. Feedback may be sent to [email protected]. </span>
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