Business exposure to COVID unsettled
RAYMOND CAMPBELL, partner and head of advisory at KPMG, estimated the size of Jamaica’s 12-month loss in tourism earnings postCOVID-19. It ranged from a low of US$437 million to a high of US$1 billion.
These estimates were calculated from base earnings of US$3.77 billion. Expressed differently, he projected that the country’s tourism earnings would fall because of the pandemic between 11.59 per cent and 26.56 per cent.
Campbell’s estimates “do not include the COVID-19 crisis-management period when travel restrictions are in effect and earnings are significantly compromised”.
Those estimates appear overly optimistic when compared with the IMF’s. The Financial Gleaner reported on May 22 that “tourism is projected to fall by more than two-thirds, or by over US$2.12 billion, to US$995 million”, citing data from the Fund. Bottom line: local tourism earnings are expected to fall sharply because of COVID-19, whichever numbers are used.
The entertainment industry will also suffer a big revenue loss. The Minister of Culture, Gender, Entertainment and Sport estimated that the local entertainment industry “has taken a $26 billion hit since it was locked down in March to slow the spread of the novel coronavirus”. She said that all industry segments were affected.
Add to those losses Jamaica’s two international airports in Montego Bay and Kingston. They are owned by the Government but now operate under concession agreements. They will see declines in revenue.
Airports Council International, which called for urgent relief for the aviation industry last month, according to MultiBriefs, said it expects airport revenues to fall by 50 per cent this year as a response to passenger numbers falling by a similar amount. The estimated global loss for 2020: US$97 billion.
“While larger passenger hub airports will see the most significant share of revenue losses thanks to the coronavirus, leading to a daunting road ahead while trying to recover to pre-virus levels, it is the smaller airports, which have lost a larger share of passengers and are left in a more precarious position.”
Last Wednesday, this newspaper reported that horse racing will return to Caymanas Park on June 20. This will be three months after concerns around the coronavirus disease forced the closure and brought the local industry to a standstill on March 21.
CONTINGENCY PLANS
Caymanas Park is owned and operated by Supreme Ventures Racing & Entertainment Limited, SVREL. That company is a subsidiary of the publicly owned lottery company, Supreme Ventures. Based on the latter’s first-quarter 2020 report to shareholders, SVREL’s revenue loss can be estimated at $1 billion during the lockdown.
The estimated revenue losses in the tourism and entertainment industries, plus those for the local airport operators and SVREL, are huge. They also share things in common. Few appear to have had any contingency plans or insurance protection to protect themselves against the disruption of their businesses.
In the case of SVREL, for example, even though COVID-19 is referred to as a ‘significant event’ in the notes to its