The View from Europe
By David Jessop
 
A few days ago in Washington DC, Dr Alan Greenspan, the Chairman of the US Federal Reserve up to 2006, addressed the Caribbean Tourism Organisation’s first Annual Caribbean Tourism Summit.
 
In a series of informal exchanges in front of conference participants, Dr Greenspan, a man whose views can still move markets, told his interlocutor, Sir Dwight Venner, the Governor of the East Caribbean Central Bank, that the long term the trend for Caribbean tourism was positive. The industry’s fortunes would follow rising living standards in prosperous geographically close states and the Caribbean would remain a desirable destination for the northern hemisphere.
 
However, Dr Greenspan suggested that in the shorter term, tourism’s fortunes were inextricably linked to growth in the global economy and by extension the short to medium term economic outlook in the region’s major markets.
 
Oil prices were likley to continue to rise as they were largely a function of a decrease in global reserves of oil. As investment in new production had diminished and demand increased, such reserves were now only running parallel to production. The consequence was that prices had risen and the investment community had placed a high value on holding investments in oil, the former Federal Reserve Chairman suggested, for periods of up to a decade and a half. The consequence was that changing demand and speculation may lead to continuing instability resulting in sudden price falls occurring against an overall continuing upward trend in the price of oil.
 
In the context of tourism, Dr Greenspan said that such instability would for example result in an ever increasing price for aviation fuel until such time when aircraft manufacturers had incorporated new technologies into engines enabling them to operate at much higher temperatures and greater fuel efficiency. He also suggested that that the US Dollar would decline relative to the currencies of developing countries because productivity gains in the developed world through research limited growth compared with nations like China and India that would continue to prosper and grow more rapidly through the import of technologies.
 
In one sense Mr Greenspan’s views were good news for the Caribbean. If as he suggested the region can sustain its comparative advantage through a global economic downturn, it is well placed to avail itself of an upturn. However, his macro-economic optimism sits uneasily with growing industry doubts about whether Caribbean Governments and institutions will be able to agree and sustain the measures necessary for tourism to survive a recession.
 
Industry leaders have been indicating their concerns about this for many months arguing that unless the seriousness of the short term challenges facing the industry are recognised by government and a regional and sustainable policy response adopted and implemented rapidly, the region, which is four times more dependent on tourism than any other part of the world, will suffer serious consequences. 
 
In a recent address, Ralph Taylor the Chairman of the Barbados Tourism Authority, a highly successful hotelier and a former President of the Caribbean Hotel Association summed up the issues that urgently needed to be addressed.
 
There was he said an absence of regional vision. This has led to a lack of consensus on core tourism issues. He illustrated this by citing the continuing failure of Governments to develop a regional airline strategy; the absence of a regional marketing fund at a time of increased global competition between destinations; the lack of a strategic approach to investment in the sector; and a consequent failure to maximise revenues in foreign exchange, employment and taxation.
 
The rising cost of oil now made it imperative that these matters were addressed, Mr Taylor said, as low global consumer confidence was creating and extraordinarily difficult economic environment for travel and tourism.
 
Jet fuel was seventy five per cent higher than a year ago, airlines were cutting services, they were cancelling orders for new equipment, laying off staff, and introducing swingeing fuel surcharges. At its worst American Airlines which delivers sixty per cent of visitors to the Caribbean had already announced significant cuts to its regional services and more were expected as the year goes on.
 
Mr Taylor proposed a number of solutions which for the most part are echoed by others throughout the industry. A sustained and positive vision of the industry is required by Government. Tourism has to be recognised as the region’s best economic resource and embraced fully. Rather than dealing with industry issues on an episodic basis when crises occur and then failing to sustain the resulting initiatives, both the industry and government need, he believes, to create a regional marketing fund; embrace new technology; encourage the development of attractions; promote the development of airlift from new markets in continental Europe and elsewhere; develop a proper hub and spoke system so that international and regional carrier timetables are well integrated; recognise the need to adopt new approaches to the rapidly changing role of travel intermediaries; and consider the implications of the arrival of low cost carriers in the region.
 
Strikingly, over the last three decades Caribbean tourism development has occurred virtually unplanned. Rather it is an industry that has evolved, led largely by the comparative advantage the region has in its location and natural beauty and the private sector’s recognition of this. In response Government has largely seen its role as regulation and has happily increased the number and variety of taxes and fees that the industry and its customers pay in the belief that foreign visitors will continue to visit and that there will be no consequent negative impact on domestic politics.
 
However, all of this could change quickly if the industry goes into decline and unemployment and government revenues from tourism become an issue. 
 
For this reason it seems that finally the benign indifference that has characterised many Government and regional institution’s attitude to tourism may come to an end. 
 
In the Bahamas and Jamaica there is clear recognition at the highest levels of government that the industry’s fortunes are central to the national and regional economy. There is also a real sense that the types of problems that Mr Taylor alluded to must be addressed in an holistic manner making use of for instance accounting models that enable all governments to understand better the true impact that the industry now has on regional economic development. Beyond this there is a growing awareness that the problems facing the industry need to be projected into the international arena most particularly where they relate to economic development, taxation, aviation, training, and to climate change.
 
In Antigua on July 2 an opportunity will arise for Caribbean Heads of Government to consider in detail the challenges facing the industry. There Caribbean Heads will address how the fundamentals that relate to Caribbean tourism industry are changing. 
 
It is to be hoped that out of this encounter, policy level responses will emerge that guarantee a sustainable future for the region’s premier industry.
 
David Jessop is the Director of the Caribbean Council and can be contacted at [log in to unmask]
Previous columns can be found at www.caribbean-council.org
June 27th, 2008


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