Tourism is the key to the Caribbean’s economic recovery

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In a recent presentation to the Jamaica Chamber of Commerce (JCC), director of Tourism Donovan White quoted Minister of Tourism Edmund Bartlett as follows.

“It’s an enormous job that is ahead, because it is a new tourism that is emerging globally. It is going to require a new understanding, indeed a reimaging of tourism as we know it.”

The COVID-19 pandemic has dealt a devastating economic blow to the global tourism industry. The World Travel and Tourism Council (WTTC) – the global organisation that has helped the industry recover from past crises – estimates that tourism represented 31 per cent of Jamaica’s “total” economic GDP in 2019. They include in their calculation of the direct contribution of tourism, the activities of restaurants and leisure industries directly supported by tourists.

The overall figure, at roughly three times the direct impact alone, reflects the wider “indirect” impact on GDP of capital investment of tourism-related industries and supply chain effects on local business, as well as the “induced” effects from spending by those employed in the local tourism sector.

The Caribbean is of course the most tourism-dependent region of the world. Jamaica’s projected tourism decline for calendar 2020 will be similar to the estimated global decline of roughly 60 to 80 per cent. Put simply, if Jamaica was earning US$10 million a day in 2019 in tourism revenues (US $3.64 billion, of which US$3.48 billion was from 2.68 million stopovers, with a little over 1.5 million cruise passengers contributing the remaining US$156 million), we are likely to earn roughly US$3.5 million a day in 2020, cutting the country’s overall foreign exchange earnings roughly in half due to our high dependence on tourism.

The Jamaica Tourist Board estimates around 350,000 people depend on tourism for their livelihoods (the WTTC similarly estimates over 400,000), of which 170,000 are direct. The immediate impact of the pandemic was the forced layoff of 153,000 workers, or 90 per cent of the direct tourism labour force, which doesn’t include a similar or even more severe impact on the indirect workers. Their survey also said 93 per cent of respondents wanted to return to their jobs “because their livelihood depended on it “.

IDB economist Henry Mooney, in his June paper “Extreme Outlier: The Pandemic’s Unprecedented Shock to Tourism in Latin America and the Caribbean”, has used a five-year average (2014 to 2018) of the total contribution of tourism to export receipts, GDP, and employment to create an index to rank the region against 166 countries worldwide.

He explains, “We knew countries in the region were highly vulnerable to this particular crisis. To try to quantify that vulnerability, and better understand the potential implications for Jamaica and other IDB members, my team developed a new measure of susceptibility to related shocks: the Tourism Dependency Index (TDI).

“After ranking over 160 countries in the world on this measure, we found that about a dozen of the 20 most vulnerable countries in the world to a shock to tourism were from the Caribbean. By far, the most affected region in the world.” Jamaica was ranked number 17 globally, one of the nearly one dozen Caribbean countries in the top 20 most vulnerable, and at number 10 in the Latin American and Caribbean region out of 35. The most vulnerable Caribbean country was Aruba, with The Bahamas at number 5, and Barbados at number 14.

Mooney adds, “We compiled data on tourism arrivals (both air and sea) for Jamaica, Barbados, and The Bahamas, to see how this shock might compare to previous periods. What we found was shocking: during the global financial crisis—coinciding with one of the sharpest single year contractions of GDP in Jamaica’s recent history—tourism arrivals fell by at most 5 per cent, year on year. We expect the shock to be an order of magnitude larger in 2020. A loss of between 50 and 80 per cent relative to previous years.”

He sums up by noting “Jamaica is basically a natural resource exporter. From an economic perspective, just as Saudi Arabia exports oil, Jamaica exports sun and sand. These two activities look nearly identical in terms of implications for the balance of payments and economy. When external demand dries up, the implications are immediate and extensive”.

Mooney notes, however, “Unfortunately, tourism in Jamaica is highly seasonal, with the peak season in Q-4 and Q-1 representing the bulk of arrivals. So the impact on GDP for early stages of the crisis, particularly the lowest season during Q-2, is not representative of the full year’s impact. Similarly, and as with most external demand shocks, companies and households tend to adjust their behaviour slowly at first, as they could not have expected the shock to last as long as it has or will. They used savings, credit, and other buffers to smooth consumption and investment initially, and tried to honour contracts that they had already entered into. But as the crisis has gone on, and balance sheets of both households and enterprises have suffered, these buffers are no longer available, and changes to consumption and investment decisions will be amplified in the second half of the year. Taken together, we would expect outcomes specifically related to the tourism sector to be worse later in the year, than earlier on.”

The urgency of the need for further action to help the tourism industry is certainly understood at the global level. In a historic first, last week, at a World Travel and Tourism Council (WTTC) meeting, G20 global tourism ministers met with over 45 top travel industry CEO’s to come up with a collaborative 24-point action plan to save the embattled tourism industry and 100 million jobs annually, through, among other things, eliminating travel barriers and introducing an international testing protocol at departure.

WTTC President and CEO Gloria Guevara noted “it is the first time so many travel and tourism CEO’s and leaders have been invited to sit in the same forum as G20 tourism ministers to establish a tangible plan to save the travel and tourism sector”. In future articles we will look in more detail at this global plan, and what is required to reimagine Caribbean tourism to enable the region’s economic recovery.

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