if there were still some uncertainty about the impact of the global
crisis on the Jamaican economy, figures posted last week by the Jama ica
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
sto rm 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.
By; Dennis Morrison
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