A NEW AP­PROACH TO TOURISM ANAL­Y­SIS IS LONG OVER­DUE

The Star (St. Lucia) - Business Week - - UK IMMIGRATION - BY DAVID JESSOP

Since the mid-2000s the abil­ity of the Caribbean tourism sec­tor to gen­er­ate rapid eco­nomic growth has been widely ac­cepted by in­ter­na­tional fi­nan­cial in­sti­tu­tions such as the IMF, World Bank and the In­terAmer­i­can De­vel­op­ment Bank. This seems to have oc­curred at the point at which it be­came ap­par­ent that ser­vices ex­ports were start­ing to eclipse the ex­port of goods and com­modi­ties in much of the re­gion.

De­spite this, and the now wide­spread recog­ni­tion of the cen­tral­ity of tourism to the Caribbean econ­omy, de­vel­op­ment in­sti­tu­tions con­tinue to strug­gle to find sound data on which to un­der­take the anal­y­sis nec­es­sary to guide eco­nomic pol­icy.

This is largely be­cause the tools the re­gion uses to mea­sure tourism’s per­for­mance are still rudi­men­tary and un­re­li­able. So much so that de­ci­sions about pric­ing, tax­a­tion, com­pet­i­tive­ness, and the pos­si­ble im­pact that in­dus­try re­lated de­ci­sions may have on na­tional eco­nomic per­for­mance, are all too of­ten based on flimsy data.

The con­se­quence is that with­out ev­i­dence to the con­trary, politi­cians and in­sti­tu­tions have be­come used to equat­ing in­creases in vis­i­tor ar­rivals with eco­nomic growth; a be­lief that vis­i­tors are pre­pared to bear al­most any level of tax­a­tion; that air­lines are in some way re­spon­si­ble for the high cost of a Caribbean va­ca­tion; and that build­ing more ho­tel rooms au­to­mat­i­cally in­creases the rev­enues gov­ern­ments re­ceive.

In re­sponse, re­searchers, aca­demics and oth­ers have been strug­gling to ob­tain ver­i­fi­able statis­tics and in­for­ma­tion that might sup­port a bet­ter an­a­lyt­i­cal frame­work for pol­icy mak­ing to­wards tourism. Their hope has been that by do­ing so, gov­ern­ments and the in­dus­try can then de­velop facts-based re­sponses to is­sues such as sus­tain­ing com­pet­i­tive­ness, the in­ter­re­la­tion­ship be­tween vis­i­tor num­bers, tax­a­tion and earn­ings, and chang­ing eco­nomic cir­cum­stances in source mar­kets.

These are mat­ters of some im­por­tance as there are in­di­ca­tions that the re­gion’s tourism sec­tor may be per­form­ing less well than re­cent head­lines sug­gest. This month, for ex­am­ple, the World Tourism Barom­e­ter pro­duced by the UN’s World Tourism Or­gan­i­sa­tion in­di­cated that ar­rivals into the Caribbean have this year so far fallen by 8%. There are also other in­di­ca­tions that Caribbean tourism is on av­er­age less com­pet­i­tive than other parts of the world.

This sug­gests that new ap­proaches are re­quired to tourism anal­y­sis and data gath­er­ing, and the re­la­tion­ship of both to fore­cast­ing and pol­icy for­mu­la­tion.

Un­til rel­a­tively re­cently the in­dus­try rarely fig­ured in in­ter­na­tional fi­nan­cial in­sti­tu­tions econo­met­ric mod­el­ling or in their sub­se­quent rec­om­men­da­tions, largely be­cause of the ab­sence of a sub­stan­tial vol­ume of re­li­able Caribbean statis­tics. How­ever, this may be set to change as the grow­ing avail­abil­ity of big data and more so­phis­ti­cated al­go­rithms now make it pos­si­ble to pro­duce in­di­ca­tors in much shorter pe­ri­ods of time us­ing con­sis­tent in­for­ma­tion from mul­ti­ple non-Caribbean data sources.

Since 2015 the IMF has been pro­duc­ing, largely for in­ter­nal pur­poses, an in­dex of the nom­i­nal cost of a one-week beach hol­i­day in eigh­teen small and large Caribbean des­ti­na­tions.

In­spired by the ‘Big Mac In­dex’, it mea­sures the price of a bas­ket of typ­i­cal ex­pen­di­tures dur­ing a beach hol­i­day based on three-star ho­tels, taxi fares, bev­er­ages, and meals, but does not in­clude air travel costs. De­spite some short­com­ings, the fig­ures clearly demon­strate that the nom­i­nal cost of an av­er­age one-week beach hol­i­day in the Caribbean is con­sis­tently higher than on av­er­age else­where in the world.

The im­por­tance of this and its pol­icy im­pli­ca­tions emerged in a re­cent webcast, ‘A Week on the Beach’, led by the econ­o­mist Marla Dukha­ran.

In­spired by the ‘Big Mac In­dex’, it mea­sures the price of a bas­ket of typ­i­cal ex­pen­di­tures dur­ing a beach hol­i­day based on three-star ho­tels, taxi fares, bev­er­ages, and meals, but does not in­clude air travel costs

The on­line broad­cast, which can be seen on YouTube, in­di­cated that at a staff level the IMF is now work­ing to­wards de­vel­op­ing a more so­phis­ti­cated un­der­stand­ing of tourism in ways that will even­tu­ally al­low the find­ings to be built into fu­ture eco­nomic mod­el­ling. To achieve this, the Fund staff in­tend mak­ing more use of ‘big data’ and are now team­ing up with TripAd­vi­sor and oth­ers, util­is­ing their data and an­a­lyt­ics to sup­port the de­vel­op­ment of a more so­phis­ti­cated anal­y­sis.

What, in out­line, the ‘Week on the Beach’ ex­changes re­vealed was that, on av­er­age, a Caribbean three-star ho­tel costs more than in al­most all other beach des­ti­na­tions; the Caribbean is 30 to 50% more ex­pen­sive than Cen­tral Amer­ica and Mex­ico; the Asia Pa­cific re­gion is still the cheapest re­gion in the world; the av­er­age cost of a week in Cuba is com­pa­ra­ble to Cen­tral Amer­ica and sig­nif­i­cantly lower than in other sam­ple Caribbean coun­tries; the num­ber of flights rather than air­lines pos­i­tively im­pacts on com­pet­i­tive­ness; the num­ber of rooms a des­ti­na­tion has may not be sig­nif­i­cant; and the over­all find­ings were largely con­sis­tent over the four-year pe­riod sur­veyed.

It also in­di­cated the im­por­tance of ex­ter­nal fac­tors.

Dur­ing the webcast, Ni­cole Lafram­boise, the Deputy Divi­sion Chief, for its Western Hemi­sphere south­ern divi­sion ob­served that a 1% in­crease in the ex­change rate could lead to a 0.16% de­cline in ar­rivals, and that this and other in­flu­ences re­quired gov­ern­ments and the in­dus­try to con­tain ex­change rates and costs, par­tic­u­larly at the lower more price-in­elas­tic end of the tourism mar­ket.

The ex­er­cise still has short­com­ings. For ex­am­ple, it is hoped that in time a sep­a­rate methodology can be de­vel­oped to value the com­pet­i­tive­ness of all-in­clu­sive ho­tels and cruise ships, and an ap­proach cre­ated that can quan­tify less tan­gi­ble im­pacts, such as crime.

The IMF hopes to cre­ate even­tu­ally a much big­ger tourism re­lated ma­trix to sup­ple­ment ex­ist­ing Caribbean tourism in­di­ca­tors to in­form all as­pects of the IMF and World Bank anal­y­sis and fore­cast­ing for the re­gion.

This new big data led ap­proach should be wel­comed, par­tic­u­larly if it en­ables the re­gion and those be­yond to un­der­stand what is re­ally hap­pen­ing to Caribbean tourism and how it re­lates to, and helps ex­plain, Caribbean eco­nomic per­for­mance.

Apart from en­abling ex­ter­nal de­vel­op­ment agen­cies to bet­ter ad­vise — they still have very few ex­perts on the sec­tor — it should also en­able more thought­ful voices in gov­ern­ment and the in­dus­try to demon­strate why de­ci­sion mak­ing on tourism must be seen in the round and is about much more than sim­ply try­ing to bal­ance the bud­get.

Are pol­i­cy­mak­ers bas­ing their de­ci­sions on in­ac­cu­rate tourism data?

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