THE RECENT MOUTHING of the Government tourism officials would suggest that Barbados has never attracted the level of United States visitors being recorded so far for 2015. Between 1956 and 1973, the US was our major source market. The Canadian market took over for the period 1974 to 1979. After which the US resumed until 1993. Ever since then, the UK market has been the major source market. It is impossible to do justice to the reasons in this article for the changes over time.
At its peak, over the seven-year period 1984-1990, the average annual US arrivals was 156 583 compared to 128 762 over the period 2008-2014. Almost 25 years later, Barbados is receiving almost 28 000 less visitors from the US per year.
There have been some encouraging increases in monthly arrivals out of the US so far for the year. It is however more important to identify the reasons for the performances, rather than allow all and sundry to make pronouncements about what is going to happen for the rest of the year.
The excitement from some tourism officials is understandable in an environment where underperformance has been the norm. But demonstrating an understanding of the numbers is more critical, especially if an assessment of the future is being offered.
There is no doubt that the presence of Sandals has contributed to the improved numbers out of the US. This effect will last for a year and so it must be factored into any analysis going forward. There are other factors that have to be considered by analysing both demand and supply side causes in the market.
In relation to the British market, a notable seven-year peak occurred between 1999 and 2005 when arrivals started to exceed the 200 000 mark for the first time. The average annual arrivals reached 208 415 compared with 187 123 for the period 2008-2014. It is clear that Barbados is almost 21 000 visitors below its peak in the British market when the two periods are compared.
Uneven growth
As far back as 1997, Barbados’ leading tourism research analyst Peter Whitehall observed that “in the past decade the tourism industry has experienced significant periods of uneven growth of arrivals. In addition, there are a number of worrying signs such as a recent decline in the number of rooms offered to tourists, the inability to attract significant investment by foreign hotel chains and a possible erosion of customer service. This contrast with significant expansion by some of Barbados’ competitors in the region, such as Aruba, the Dominican Republic and Jamaica”. These comments seem equally appropriate in the year 2015.
In spite of the foreign direct investment that has flowed into the Caribbean economies over the last 20 years, the Barbados hotel plant has remained unattractive, especially to major foreign hotel chains. The unattractiveness is summed up in inadequate rates of return on the investments. Notwithstanding that Barbados’ receipts per arrival are comparable to the rest of the world, the tourism sector, in particular the hotel sub-sector, carries a high cost structure. The latter serves as a deterrent to investors.
Such an observation may explain why the Government gave in to the pressure from Sandals for the extraordinary concessions. However, one hotel cannot make an industry. To this day, hoteliers are crying out for similar treatment but have only received duty concession on alcoholic beverages.
In an environment, where revenue in the hotel sector has taken a battering from fluctuating tourist arrivals compounded by discounting of room rates, the sector’s bottom line has worsened in the face of rising costs. This is reflected in the fact that the tourism sector is responsible for almost half of the rising loan delinquency in the commercial banking sector. This delinquency is assessed in the context of the seasonal nature of the sector, which demands that the higher room rates and average monthly arrivals in the winter season have to be exploited from a business perspective. The major costs in the sector, except labour, do not vary substantially by season and so it is expected that profits have to be maximised during the winter season.
There is an obvious danger in using tourist arrivals during the winter season in particular to make forecasts for the entire year. To do so reveals a naivety at best and at worst it demonstrates a lack of understanding of how the industry works. Tourism is more than arrivals, it is a business in which workers earn income and management pursues profit while satisfying tourists.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email:mascoll_clyde@hotmail.com