How Caribbean Tourism is Faring

02 April 2004 7:00am

At a time when world tourism has recorded a 1.2 percent decline in arrivals, year-end estimates showed Caribbean arrivals up by 7 percent in 2003, compared to 2002. This places tourist arrivals marginally above those achieved in 2000, which was the last “normal” year (prior to 9/11) for global travel). And, although winter tourist arrivals in 2003 remained below those for 2001, summer arrivals exceeded those for both 2001 and 2002. This performance was despite the impacts of the war in Iraq and SARS. Indeed, March 2003 was the only month in which arrivals were below those for the same month in 2002.

Most of our destinations have reported growth in their tourist arrivals in 2003, with increases of more than 10 percent recorded by Antigua and Barbuda, Belize, Bonaire, Cuba, Cozumel, the Dominican Republic and St. Maarten.

Increased arrivals, in both the winter and summer seasons, were reported from all of the major markets in 2003, with both the United States and Canada market also showing increases over 2000. Tourist arrivals from Europe in 2003, however, were still below those for 2000.

According to recent reports from Smith Travel Research (STR), average room rates increased by 6.6 percent in 2003, and by 8.5 percent in December 2003 compared to 2002. STR however also reported a small (0.3 percent) decline in 2003 room occupancy, although their December 2003 occupancy figure was up by 4.7 percent. (See table 7).

Travel Prospects 2004>/b>

The perception of stability and safety in the Caribbean, the improving global economic climate, the strong Euro and Canadian dollar and (in the short term) the icy spell being experienced by our northern neighbors provide favorable conditions for the continued good performance of the Caribbean tourism sector. Additionally, the English cricket tour will, as it has done in the past, benefit those destinations hosting matches during their visit. Against this backdrop, and coupled with positive feedback both from the market-based travel trade and from within the region, the outlook is for a good 2004 winter season. Furthermore, despite the possible dampening effect on travel to the region due the coming summer Olympics and the likely resurgence in visitation to competing destinations, CTO projects a 3-5 percent growth in tourist arrivals to the region in 2004.

Cruise:

The Caribbean continued to record strong growth in passenger visitation, with an estimated 10 percent increase in 2003. While the winter season remains the peak period for cruising, significant increases were also reported in the late summer period. However, although good performances were reported by most destinations, those closer to the US have continued to grow faster, benefiting from the increasing number of ships home porting in the Florida and Gulf of Mexico Ports.

Reports from CLIA assert that the North American cruise industry is on track for still another record year in 2004, with several of its member lines including Radisson Seven Seas, Costa, Cunard, Crystal and Silverseas, reporting huge increases in call volume and bookings for European and Caribbean itineraries. Crystal cruises, for example, reported that bookings for Wave Week ending January 26 were 108 percent higher than bookings for the same week last year while bookings for the last four weeks were 83 percent higher than the same period in 2003.

The United States Market

Economy

The economic recovery in the US continues to show considerable staying power as indicated by several new reports. In January, the New York-based Conference Board reported that their Consumer Confidence Index rose to its highest level since the summer of 2002. The percentage of people who expected better business conditions and improved employment in six months ahead also rose with the expectations of the index climbing to 108.1, its highest level May 2002. If this level is maintained, real consumer spending should remain at a strong year-over-year increase of about 5 percent. Although the University of Michigan released its own survey in early February showing some downward movement in consumer sentiment, we consider this to be a blip rather than a trend, reflective of current concern about job losses.

Federal Reserve Board Chairman Alan Greenspan projected strong economic growth. Greenspan anticipates a 4.5 to 5 percent rise in GDP for 2004, the fastest rate since 1984, and the Fed is leaving interest rates alone, at least for the near-term. In other economic news, the Commerce Department has reported that consumer spending rose in both November and December, better than the government had previously estimated and better than in the fall when spending was flat. Separately, the government also reported that construction spending in December rose to its highest level ever.

Finally, an upbeat report on manufacturing from the Institute of Supply Management provided welcome news from a sector that was hardest hit by the recession.

Travel Performance and Prospects

Tourist arrivals from the United States to the Caribbean increased by around 6 percent in 2003 when compared to same time in 2002. Robust growth was registered for both the winter and summer period. Since 2001, Americans have shown a preference for short-haul destinations. The Caribbean has benefited from this, as well as from a more competitive pricing position against the United Kingdom and Continental European destinations. The stronger pound sterling and Euro have made travel to Europe more expensive than Caribbean destinations whose currencies are pegged to the US dollar.

A recent survey by ASTA/Fodor’s place the Caribbean in the top 15 destinations for winter 2004, the main competitors for this market remain US domestic destinations of Florida, La Vegas, Hawaii and New York, and international destinations, London, Paris and Rome. The Cammisa report “Travel Industry Indicators”, raised similar sentiments and noted that the improved economic outlook for the US will continue to stimulate the expansion of Americans’ travel to preferred destinations, among them the Caribbean. Cammisa also noted trends towards strong growth in the high end travel market for winter 2004.

The data in table 3 shows that generally good performances were reported by most destinations, with fifteen destinations registering increases for their reporting periods in arrivals in 2003. Eight of these destinations namely, Anguilla, Antigua and Barbuda, Aruba, Belize, Cancun, The Dominican Republic, St. Maarten and The US Virgin Islands reported increases above 5 percent for their reporting period.

The Canada Market

Economy

In spite of SARS and the scares over mad cow disease, Canada’s economic picture continues to be generally positive although concerns over the Loonie’s strength against the US dollar (currently valued around C$0.76) have troubled the Canadian Manufacturing sector. Canadian exports have slowed as a result of the Loonie’s rise and staying power and manufacturers are pleading, so far unsuccessfully, with the Federal Government to intervene.

The Loonie’s impact on the balance of trade has also affected the employment picture and the jobless rate remained at 7.4 percent in January when only 15,000 new jobs were added, some 25 percent below forecast. Housing continues to be one of the brightest notes in the Canadian economy and the Toronto Star reported the “Building Boom Breaks Record.” Building permits issued in 2003 totalled C$50.8 billion reflecting eight consecutive years of increases.

Travel Performance and Prospects

Estimated arrivals from Canada to the Caribbean increased by a record 21 percent in 2003 when compared to 2002. This increase was due primarily to the performance of Cuba (+30.2%) and the Dominican Republic (+31.6%) for their reporting period. Other smaller destinations for Canadian also registered encouraging growth for their reporting period albeit on small numbers, among them Bonaire, Curacao and St. Maarten.

Tour operators and the retail travel agency sector are reporting strong business for the winter season, spurred on by the very cold weather affecting the length and breadth of Canada and the stronger purchasing power of the Canadian dollar. Travel to Cuba, the Dominican Republic and Mexico continues to dominate. Air Canada’s two daily flights to Barbados have thus far met with limited success. BWIA, however, reports good business to the Eastern Caribbean including Barbados and strong bookings for its new flight from Toronto to Tobago.

The European Market

Travel Performance and Prospects

Year-end estimates for 2003, suggest that overall tourist arrivals to the Caribbean from the European region increased by 12 percent when compared to 2002. Some 11 destinations achieved growth in excess of 10 percent for their reporting periods, namely Anguilla, Antigua and Barbuda, Aruba, Belize, Bonaire, Curacao, The Dominican Republic, Grenada, Jamaica, St. Lucia and The US Virgin Islands.

Some 25 percent of all arrivals to the Caribbean originated from the European region, with France, the United Kingdom, Germany, Italy, The Netherlands and Spain being the most important markets for the region. There are emerging European markets in Sweden, Switzerland and Belgium especially. The Spanish speaking destinations have been able, due to favourable pricing, and room stock managed to attract long-haul charter tour operators in these markets. The following analysis and tables provide some details on the performances of selected European markets to the Caribbean for 2003.