Thursday, August 16, 2012

...unless and until we fix whatever is wrong with our tourism industry (and fix it urgently) ...the economic and social dislocations currently being experienced in The Bahamas will continue unabated

What needs to happen in tourism

CFAL Economic View

The Ministry of Tourism’s ‘Islands of The Bahamas Arrivals Report’ released earlier this year contains some very useful and informative data on the tourism industry in The Bahamas, and a lot more information on the economic performances of those countries from which our visitors originate.

The report, compiled by the ministry’s research department, provides a summary of total visitor arrivals to The Bahamas for the year 2011, in what appears to be a record-breaking total of 5.234 million.  That figure is broken down further to show that only 1.29 million of those visitors (or about 25 percent) arrived by air.

There is something troubling about that figure when it is taken into account that about 25 years ago The Bahamas was boasting total air arrivals in the region of 1.5 million.  What is more troubling is the fact that we are in the midst of the worst recession ever experienced in a modern Bahamas and the agency which oversees our most important industry appears to be offering no concrete solutions.

Almost 75 percent of the report outlines the economic challenges facing the United States as a result of the crash of the housing market there, and the subsequent financial meltdown.  The rise in unemployment, particularly in the northeastern states, is highlighted perhaps to remind us that the reason for the poor performance of our local economy is tied to employment levels in the U.S.  It is also noted that Texas, contrary to popular belief, generates more tourists for The Bahamas than many of the northeastern states.

Similar information is provided on Canada and the western European nations whose citizens also visit The Bahamas, although not in such great numbers as the Americans.  Again, the intent is presumably to inform us that it is the global slowdown in economic activity that is adversely affecting our visitor arrivals (by air) and consequently contributing to the slow economic growth figures.

Those examples, or more appropriately arguments, would have been more persuasive had we not been made aware from other sources that air arrival tourists were up and growing impressively in our competitor destinations, such as Jamaica, the Dominican Republic, Cuba and Cancun, Mexico.  Some mention of the costly and perhaps unsustainable subsidies to the industry in the form of ‘companion airfare’ is given as a successful policy response to the crisis.

For more than half a century tourism has played a pivotal role in the economic development process of this country.  It has accounted for most of the foreign direct investment, more than 50 percent of direct and indirect employment, and has provided the necessary level of foreign exchange inflows to not only fund our insatiable import appetite but also to support the important one-to-one peg between the U.S. dollar and the Bahamian dollar.

Changes needed

In other words, unless and until we fix whatever is wrong with our tourism industry (and fix it urgently), the economic and social dislocations currently being experienced in the country will continue unabated.  Large numbers of skilled and semi-skilled Bahamians will join the unemployed labor force. Unable to meet their debt commitments, they run the risk of losing their homes and other assets acquired during better times.  Unable to provide the needed level of support for their immediate families, the inevitable household tension could rip families apart.

What is needed is a recognition of the importance of the tourist industry to The Bahamas in general and to the partial solution to the current economic crisis in particular.  In the short-term, attempts to stimulate other less important parts of the economy or programs to diversify production from our main service provider simply will not create the number or types of jobs sufficient to absorb the unemployed.

The tourism plant, in terms of existing and planned hotel rooms, needs some form of re-tooling to ensure it is functioning at its optimal potential.  We know for instance that the costs of labor and utilities are out of line with our competitors, placing the country at a pricing disadvantage.  Those areas need to be addressed, perhaps by permitting the hotel operators to produce (hopefully more efficiently) their utility needs rather than relying on the inefficient state-owned corporations.

Above all, we need more air-arrivals since that category of visitor spends more than 10 times what is spent by their cruise counterparts, making a larger contribution to employment and output in the country.  The Bahamas at this time in our history needs a fresh, focused and comprehensive plan to increase the number of air arrivals in order to produce the required number of jobs and to begin the process to effectively reverse the unemployment trend.


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Aug 15, 2012