Dol­lar-de­nom­i­nated tourism and ster­ling

Jamaica Gleaner - - THE BUSINESS OF TOURISM - David Jes­sop Hos­pi­tal­ity Ja­maica Writer

AS NOVEM­BER be­gins, many, if not most, Caribbean tourism min­is­ters, hote­liers, and oth­ers in the in­dus­try will be head­ing to World Travel Market (WTM) in Lon­don. This is the very large an­nual in­ter­na­tional trade fair at which, tra­di­tion­ally, buy­ers and sell­ers meet to strike deals for the year ahead.

The 2016 event and its col­lat­eral in­dus­try dis­cus­sions will be of par­tic­u­lar sig­nif­i­cance as the event comes in the wake of the United King­dom elec­torate’s June 23 de­ci­sion to leave the Euro­pean Union (EU), and more im­por­tant, from the per­spec­tive of the Caribbean, the re­cent and likely con­tin­u­ing col­lapse in the value of ster­ling.

By way of back­ground, it has be­come clear in the last few weeks that the UK gov­ern­ment may be head­ing for what has be­come known as a hard Brexit. This means that the UK, next March, may de­cide to with­draw from both the EU and its cus­toms union, end­ing its free-trade re­la­tion­ship with Europe while in­tro­duc­ing con­trols on the free move­ment of EU na­tion­als into and out of the UK.

Recog­nis­ing the likely im­pact on UK eco­nomic growth and the short- to medium-term im­pli­ca­tions for the Bri­tish econ­omy, the mar­kets have re­sponded by ef­fec­tively de­valu­ing ster­ling by around 17 per cent since the vote.

The con­se­quence has been, tak­ing the av­er­age UK bank rate for in­ter­na­tional pay­ments, that the pound has slid from US$1.54 in mid-Oc­to­ber 2015 to an av­er­age now on the same date in 2016 of US$1.18.

This is clearly not good news as far as Caribbean tourism is con­cerned; par­tic­u­larly for those na­tions that not only have a high de­pen­dence on UK vis­i­tors, but have been see­ing, af­ter a pe­riod of slow or no growth up to 2014, sig­nif­i­cant in­creases in UK vis­i­tor ar­rivals.

Ac­cord­ing to the Caribbean Tourism Or­gan­i­sa­tion (CTO) sta­tis­tics, the coun­tries ben­e­fit­ing the most from the 1.2 mil­lion Bri­tish vis­i­tors who trav­elled to the re­gion in 2015 were Bar­ba­dos, Ja­maica, the Do­mini­can Repub­lic, An­tigua, Cuba, St Lu­cia, Trinidad (pre­sum­ably mean­ing Tobago), Gre­nada, St Vin­cent, and The Cay­man Is­lands, in that or­der.

What CTO’s fig­ures also sug­gest is that coun­tries like Bar­ba­dos, St Lu­cia, and oth­ers in the OECS that have not sig­nif­i­cantly di­ver­si­fied their mar­kets or air­lift and still have a very high over­all pro­por­tion of UK vis­i­tors may suf­fer more than oth­ers.

NUM­BERS TO DE­CLINE

Although the in­dus­try sug­gests that for­ward UK book­ings re­main strong across this com­ing win­ter sea­son – when typ­i­cally, high-end Bri­tish vis­i­tors who are less likely to be af­fected by cur­rency fluc­tu­a­tions travel – there is a sense that from the spring of next year on­wards, mid­dle- and lower-end UK vis­i­tor num­bers may be­gin to de­cline if, as is likel, the value of ster­ling con­tin­ues to re­main weak.

Although at present anec­do­tal, there is grow­ing par­al­lel ev­i­dence in the UK me­dia and from the UK travel trade that there has been a surge in mid­dle-market stay­ca­tions and in week­end breaks in English cities and the coun­try­side.

Equally un­sci­en­tific, but an­other prob­a­bly re­li­able in­di­ca­tion of a likely de­cline in UK ar­rivals, is the re­ac­tion of the price-sen­si­tive Caribbean di­as­pora in Bri­tain. At a re­cent con­fer­ence un­re­lated to tourism, it be­came clear to me that not only was the col­lapse in ster­ling caus­ing con­cern about how fre­quently this im­por­tant group of vis­i­tors trav­elled home, but if they did, how long in the fu­ture they could af­ford to stay, and what may hap­pen to air fares as the in­put costs for UK avi­a­tion in­crease.

Re­cent com­men­taries from the IMF and other in­ter­na­tional fi­nan­cial in­sti­tu­tions sug­gest that in the short to medium term, the out­look for the UK econ­omy will worsen and that ster­ling may re­main weak for some years.

For all these rea­sons, this year’s WTM will be a lit­mus test of sorts.

It will pro­vide a first medi­umterm in­di­ca­tion when deals are be­ing struck between hote­liers and the air­lines and tour op­er­a­tors for 2017 and pro­mo­tional in­cen­tives agreed with gov­ern­ments and tourist boards of how those in­volved in UK out­bound tourism are think­ing about the fu­ture de­mand for dol­lar-re­lated mar­kets like the Caribbean.

CON­TRIB­UTED

Carol Hay of the Caribbean Tourism Or­gan­i­sa­tion pre­sent­ing the CTO In­dus­try Re­port at the World Travel Awards in Lon­don

David Jes­sop

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