St. Maarten Tourism Budget Analysis Report (T.B.A.R)

Transcription

1 St. Maarten to the World Marketing St. Maarten Tourism Budget Analysis Report (T.B.A.R) An independent analysis of the island s tourism budget relative to other Caribbean destinations, and recommendations. Contents Contents Purpose of the TBAR... 2 Economic Impact of St. Maarten s Tourism Product... 3 The IMF s take on St. Maarten s tourism dependency... 3 St. Maarten Government Annual Tourism Budget... 4 Tourism Budget... 4 The Cookie Jar: Direct Tax Contributors to the Tourism Budget... 4 Positioning: Tourism Budget Relative to the rest of the Caribbean... 5 Industry Averages Where St. Maarten Ranks... 7 Key Competitors... 7 St. Maarten Tourism Budget Relative to Key Economic Indicators 8 Total Tourism Budget... 8 Budget to Visitor Expenditure... 8 Budget per air arrivals... 8 Budget per Capita... 8 St. Maarten September 2013 Budget Comparisons Conclusion... 8 Recommendations

2 The 2013 budget amendment debate included a discussion on why the tourism budget was cut by over 2.2 million guilders Purpose of the TBAR St. Maarten is an island economy that has for many years depended almost fully on tourism as its major source of foreign exchange and economic activity. According to the World Tourism and Travel Commission, Tourism comprises about 87% the island s GDP over the last 8 years, and the island is the most tourism dependent island in the Caribbean. St. Maarten has over the years made some interesting infrastructural investments such as having state of the art cruise and air facilities. However, while investment into the island s infrastructure has increased, the tourism budget spent marketing the island and creating new events and promotions for the island has remained stagnant, and even declined in the 2013 budget. While government has made many direct and indirect investments in improving the tourism product of the island, preliminary studies has shown that St. Maarten has not invested sufficiently in marketing the destination and has fallen behind in the rest of the Caribbean in its tourism bureau budgets. This report aims to expand this hypothesis and research factual evidence as to what the trends are among the Caribbean governments for tourism marketing spending and where St. Maarten ranks relative to these islands. This information is then used to determine at which levels the St. Maarten budget should be when juxtaposed to the other Caribbean destination competitors. After determining that plateau, recommendations can be made for reaching that level of tourism investment by realistic means of increased budget over a period of time. Recommendations made in this report based on the research can be used by various entities of government to determine whether an increase in St. Maarten s tourism budget could be viable for even the next 2014 budget. This would mean that there is sufficient evidence to suggest that St. Maarten tourism product is in jeopardy of falling behind that of key competitors in the region, something the island must avoid to ensure the long-term economic viability of St. Maarten. About the Author Rolando Brison has been involved with tourism from a very young age, when in 2001 at the age of 16 he won the first ever Caribbean Tourism Organization s (CTO) Youth Congress in Barbados. The following year, Rolando was elected chairman of the CTO youth congress in Bahamas. He would eventually go on to attain a Bachelors degree in Tourism and Recreation management at the InHolland University in Amsterdam. During this study, he returned to CTO, this time in the capacity of a Sustainable Tourism Researcher, completing research into pro-poor tourism and the sustainability of tourism in the Caribbean. Upon completing his studies, Rolando enjoyed a year s stint working in the office of Commisioner Heyliger, after which he took a position at Winair working amongst the management team primarily in the flight department, but often doing integral work in Strategic planning. He has since started his own marketing and consulting firm, St. Maarten to the World, with his goal of creating new ways in which St. Maarten can market its local products and tourism product to both new and existing markets around the world. 2

3 Economic Impact of St. Maarten s Tourism Product Figure 1: Top 10 most tourism dependent islands in the Caribbean in terms of the industry s contribution to GDP As explained earlier, St. Maarten is one of the most tourism dependent countries in the Caribbean. Figure 1 to the left shows 10 Caribbean countries sorted in order of the contribution Tourism has to their GDP (World Travel and Tourism Council, 2013). As you can see, St. Maarten ranks as the number 1 country to which tourism has the biggest contribution to GDP. Similar WTTC studies also show the regional ranking for tourism s effect on jobs to be third highest (87% of jobs are through the tourism sector) and 2 nd highest in tourism foreign investment (71% of new money invested in the country is through the tourism sector). There is no denying that St. Maarten s economic performance is always hinging on the number of visitors coming to the island and how much they spend. This in turn attracts investors, provides job for the society and creates the means and justification for the improvement of infrastructure on the island. The IMF s take on St. Maarten s tourism dependency The International Monetary Fund has also written about the impact of tourism on the economy of St. Maarten. According to the IMF, it expects that St. Maarten will experience an average of 2.1% economic growth per annum over the next 5 years mostly due to the islands tourism product. The IMF however does caution that St. Maarten has already displayed lack of competitiveness in the region when compared to other tourism destinations (International Monetary Fund, 2011) and that this may hamper growth. In IMF reps discussions with various local government entities as per their mission on September 7-19 th in 2011, Minister of tourism Franklin Meyers at the time was quoted in having given the IMF indications of larger tourism budgets for years to come, and the IMF subsequently increased their expectations for economic growth of the island. That year was the first time in many years that the tourism budget was increased significantly, which we will analyze in greater details in later segments of this report (College Financiele Toezicht, 2012). Beyond weighty economic statistics it is increasingly understood that tourism offers an important range of benefits in education, environmental sustainability, natural amenity, opportunities in districts/communities and regions, and provides a sense of place along with national pride. However, realizing these benefits must be initiated by government policies, and the island government of St. Maarten has fallen short in that regard. For example, tourism is still not a subject in school, despite the impact tourism has on the economy. While some tourism dollars have directly been attributed to district improvement projects, tourism should be extended closer into communities to truly inspire national pride for the island. It is with this realization of the size of the impact the industry has on the island, that we look further at what St. Maarten itself invests in the tourism product of the island. Industry Diversification? The scope of this report is not to come up with alternative industries to supplement tourism. While it may be undeniable that the high tourism dependency is a very risky proposition for the island, other economic activities are difficult to realize due to the small size of the island and density of the population. The main two alternative industries in the Caribbean are Agriculture and Banking. The former accounts for only 0.4% of the island s GDP, so there may be room for expanding that sector. As for Banking, St. Maarten is not autonomous in its banking regulations, thus making it difficult for the island to adjust banking policies to compete with other islands like Anguilla and the Cayman Islands banking sectors. The IMF, WTTC and this author all agree that Tourism, at least over the next 5-10 years, will be the only means by which St. Maarten will enjoy economic growth and prosperity. 3

4 St. Maarten Government Annual Tourism Budget St. Maarten government allocates funds each year from its annual budget to market the island of St. Maarten. These funds go directly towards the international efforts to attract more tourists to the island. It is not clear to the author what determination is used to decide what funds go toward the tourism budget. One hypothesis its first basis is comprised from combination of the Timeshare Tax and Hotel Taxes that are collected by the island government. Tourism Budget Year Budget ,005, ,005, ,007, ,007, ,195, ,599, ,178,200 Figure 2 St. Maarten Tourism budget since 2007 (Naf). The Tourism budget of the island has been stagnant for many years. From 2007 until 2011 the Tourism budget has been relatively the same. The first increase in tourism budget came in It may be coincidence that it came at the heels of the IMF review of St. Maarten in 2010 predicting growth in tourism and the economy for St. Maarten s future, or by initiative of the Tourism Minister Meyers at the time that this growth can only be realized with increased tourism investment. Coincidence or not, it had appeared St. Maarten was on the right track in 2011 and 2012, until this year s 2013 budget had been passed with over 2.2 million guilders being cut from the Tourism bureau budget item. It was by far the biggest cut from the cabinet of the minister of tourism, economic affairs, traffic and telecommunications. No explanation is given as to why the cut was done or how strategies have been adjusted in wake of the cut, only to say that in an effort to bring the island government budget in balance, the {Minister Cabinet} has slimmed down on promotional projects (St. Maarten Parliament Draft Budget Archive, 2013). The budget items for that cabinet can be found in Appendix A: Budget cuts for The Cookie Jar: Direct Tax Contributors to the Tourism Budget Historically speaking, it seems that the budget was closely tied to the receipt from the Hotel and Timeshares business on the island. Each respectively paid a hotel or timeshare tax based on what was collected from the guests staying at these establishments. In the 2013 Draft budget of St. Maarten, the figures for revenues earned from Hotel and Timeshare taxes were disclosed. Figure 3 shows the these figures compared to the tourism budget dating back to 2007 (St. Maarten Parliament Draft Budget Archive, 2013). Year Hotel Tax Timeshare Total Earned Tourism Budget Dif. Budget/Tax ,552,000 5,386,000 8,938,000 9,005,400 67, ,956,000 4,822,000 8,778,000 9,005, , ,603,000 4,969,000 8,572,000 9,007, , ,815,000 4,201,000 8,016,000 9,007, , ,913,000 4,451,000 8,364,000 10,195,200 1,831, ,406,526 4,509,950 8,916,476 11,599,200 2,682, ,406,536 4,509,950 8,916,486 9,178, ,714.0 Figure 3: A comparison of Hotel and Timeshare tax receipts totals to the Tourism Budget, in Naf. Source: St. Maarten 2013 Draft budget. In 2007, the budget and tourism hotel tax earned was almost identical. Then, each year the difference between the budget and revenues grew significantly not due to the increase of the budget, but more so due to a decrease in tax receipts after the 2008 economic crisis. It may or may not be the case that the tourism budget was established to be close to what the hotel and timeshare tax receipts are, but it does serve as a good bearing as to what the minimum amount of tourism budget should be for St. Maarten. This in itself does not paint a mediocre picture for the size of the budget. The budget for 2013 is still slightly higher than what it has averaged in the past. However, when we begin to compare the budget to other islands one sees why organizations like the IMF expected for years that St. Maarten would spend more on tourism. 4

5 Positioning: Tourism Budget Relative to the rest of the Caribbean In marketing, one of the key components of ensuring how your product will fare in the market is positioning. Position is defined by Zikmund as The process of comparing your product not just by what the product itself entails, but by the ways in which your competitors are marketing theirs. This allows the marketer to see beyond just the scope of ones own product offering (actual product), but also to see what the product is perceived to be in the market (perceived product). (Zikmund, 2001) The key point of that statement highlights something that CNN Tourism Advertising Solutions and Knowledge (CNN TASK) group has highlighted in their research for many years: that destinations like St. Maarten must also ensure that it is constantly aware of what other islands are doing to raise the perception of their islands being the preferred Caribbean tourism destination (CNN TASK Firm, 2013). Even if the island s product (i.e, beaches, infrastructure, service, pricing etc) are all better than our competitors, if a perceived product is created by competitors to be superior to St. Maarten, the market place will dictate that our product is actually inferior. This means all of the investments put in building tourism infrastructure, policies and programs would be for naught if that product is perceived in the market to be less appealing than the rest. And the number 1 way to create good positioning in the Caribbean market is marketing, primarily by means the funds made available to marketing the destination. It is important regardless of how attractive the island may be, that government s role in funding Destination Marketing Organizations like our St. Maarten tourism board remains a top priority simply because it is a top priority of every other competing destination. As explained by CNN TASK Group travel and tourism specialist Anitta Mendiratta, Ultimately, through their (Government s) destination marketing and promotional efforts, the NTO must ensure that the Brand and Marketing Strategy for the destination are directly aligned to, and supportive of, the greater Tourism sector mandate for economic growth and development, which in turn must drive that of the cross-sectoral national/regional mandate (Mendiratta). In other words, all sector of government must have an understanding of the importance of keeping the islands investment in tourism in such a way that the island can continue to compete as a tourism destination. With that premise, much effort has been spent collecting tourism budget data from islands across the Caribbean as well as other key indicators including arrivals, expenditure, and population. The following page will display the table of collection of economic indicators in the Caribbean to see what St. Maarten s positioning as a destination is compared to the rest of the Caribbean. Strategy is to a Tourism sector what sheet music is to an Orchestra. It is the direction, the focus and the framework. But is it merely paper ink on lines with huge promise and desire to create something beautiful until brought to life through the hands, heart and eyes of the Conductor. For the Tourism sector that Conductor is the government of the destination, the source of vision, inspiration and disciplining direction which turns passion into proud, purposeful, clearly positioned tourism marketing and experience excellence. Anitta Mendiratta, CNN 5

6 Figure 4: Positioning of Caribbean Tourism Budgets Million Spending ratios Expenditure Country Air arrivals Cruise/Sameday Expenditure Tourism Budget By Arrivals By expenditure Population Per Pop. St. Maarten 443,136 1,512, $5,004,000 $ % 75,000 $ Bonaire 70, , $925,000 $ % 16,541 $ Anguilla 61,998 56, $819,000 $ % 14,000 $ Turks and Caicos 264, $3,100,000 $ % $ Trinidad 371, , $4,117,000 $ % 1,344,000 $ 3.06 Dom. Rep. 4,124, ,539 4,209.1 $59,031,359 $ % 9,745,000 $ 6.06 Antigua 229, , $ 4,250,000 $ % 88,000 $ St. Vincent 72, , $1,557,000 $ % 97,000 $ Aruba 825, ,424 1,235.8 $23,595,000 $ % 105,000 $ Jamaica 1,921, ,619 2,001.1 $38,561,000 $ % 2,715,000 $ USVI 691,559 1,858,946 1,021.3 $20,916,377 $ % 106,000 $ Barbados 532, ,747 1,036.4 $22,137,000 $ % 276,000 $ Guadeloupe 623, , $8,137,000 $ % 409,000 $ Puerto Rico 3,737,142 1,191,055 3,598.2 $101,088,000 $ % 3,641,000 $ St Kitts/Nevis 106, , $3,238,000 $ % 55,000 $ BVI 330, , $11,580,000 $ % 32,000 $ Dominica 76, , $3,045,000 $ % 155,000 $ saba 12,327 10, $274,000 $ % 2,500 $ Curacao 341, , $10,121,000 $ % 60,000 $ Bahamas 1,370,028 3,803,122 2,014.2 $73,331,000 $ % 368,000 $ Martinique 478,060 74, $15,962,000 $ % 398,000 $ Caymans 288,272 1,597, $21,487,000 $ % 23,000 $ Greneda 106, , $4,179,000 $ % 103,000 $ Saint Lucia 305, , $18,679,000 $ % 170,000 $ Montserrat 5, $430,000 $ % 5,000 $ Bermuda 232, , $35,299,000 $ % 64,806 $ Economic Indicators (see Appendix B for sources) Air Arrivals: Number of people who came by air Cruise/sameday: Arrivals by cruise or just one day Expenditure: Total tourism receipts in USD Millions Tourism Budget: the Us Dollar value of the tourism budget for the respective country Spending Ratios By Arrivals: This ratio compares how much is spend on the tourism budget relative to the number of air arrivals to the island. This shows the dollar value per air arrival contributing to the tourism budget By Expenditure: This ratio uses the total visitor expenditure in relationship to the budget, and shows what percentage of expenditure goes back to Tourism marketing Per Population: The budget divided by population; what each residents virtually contributes to the tourism budget 6

7 Industry Averages Where St. Maarten Ranks Figure 4 contains an exhaustive list of information, but perhaps taking averages of the key indicators is a good place to start in looking at where St. Maarten really ranks relative to the Caribbean in terms of its tourism budget. Tourism budget averages St. Maarten ranks very far behind the industry average in every respect. The island s tourism budget is 73% less than the industry average of 18.8 million, shows the contribution per capita to be at $71 less per resident, $24 less per air arrival and 75% less visitor expenditure goes back towards the tourism budget. Key Competitors Caribbean Average SXM Difference $ Difference Tourism Budget $ 18,879,336 $ 5,004, $ (13,875,336) 73% Per capita $ $ $ (71.21) 52% per air arrival $ $ $ (24.01) 68% divided by visitor expenditure 2.96% 0.74% -2.22% 75% Figure 4 shows an extensive list of Caribbean islands. While everyone in the Caribbean competes at one level or another for the same tourism dollar (or euro) and are thus all competitors, it is easier to narrow down who the key competitors are to see what they are doing in comparison to St. Maarten. It is also illogical to expect St. Maarten to compare to all of those countries due to various key differences between the industries on those islands and St. Maarten: Geography: The location of the island is a key driving factor in tourism numbers. Particularly in the case of American visitors, the closer proximity the island has to the mainland US, the more that market is willing to travel to St. Maarten. Also being a US territory helps particularly in Puerto Rico, as residents of the US do not need passports to travel to this destination and are still within their country s borders. Geography would exclude countries like Bahamas, Puerto Rico, Turks and Caico and Bermuda from being key competitors to St. Maarten. Tourism product: Certain niche markets of tourism St. Maarten cannot currently compete with as the product is either non-existent or still being developed. Eco-Tourism is a very good example of this, as St. Maarten is not particularly known as an Eco-Tourism destination. This means islands like Dominica, Bonaire, Saba and St. Lucia that have niche tourism markets are not considered key competitors to St. Maarten. Dependency on tourism: Some islands simply do not depend on tourism as much as St. Maarten. Trinidad, for example, has a relatively small tourism budget, but that may be due to it being more interested in investing in its many other more lucrative industries including Oil and Natural Gas. Based on these factors above the following are the key competitors to St. Maarten, and how our tourism budget ranks relative to those islands. Country Air arrivals Cruise/Sameday Expenditure Tourism Budget St Kitts/Nevis 106, , $ 3,238,000 Greneda 106, , $ 4,179,000 Antigua 229, , $ 4,250,000 St. Maarten 443,136 1,512, $ 5,004,000 Curacao 341, , $ 10,121,000 BVI 330, , $ 11,580,000 USVI 691,559 1,858,946 1,021.3 $ 20,916,377 Barbados 532, ,747 1,036.4 $ 22,137,000 Aruba 825, ,424 1,235.8 $ 23,595,000 Figure 5 Key Caribbean competitors performance in air and cruise tourism, and their tourism budgets and tourism expenditures 7

8 St. Maarten Tourism Budget Relative to Key Economic Indicators Total Tourism Budget The total tourism budget of St. Maarten amounts to just over 5 million dollars this. This is the 15th largest tourism budget in the Caribbean. This in itself is not a great comparison; the budget needs to be compared not only on size, but on other elements that would better describe a relative comparison between St. Maarten s budgets and that of other islands. Budget to Visitor Expenditure This ratio uses the total visitor expenditure in relationship to the budget, and shows what percentage of expenditure goes back to Tourism marketing. This measure is by far the one that paints the bleakest picture as to St. Maarten s positioning in the Caribbean. Figure 4 shows that St. Maarten ranks lowest in the percentage of visitor expenditure that comprises the tourism budget. In St. Maarten, while visitor expenditure exceeded over 674 million dollars, only 0.74% of this visitor expenditure is represented Budget Tourism Budget Budget by visitor expenditure Budget per air arrival Budget per Capita Overall Rank (out of 26) 15th largest lowest 2nd lowest 13th largest in the St. Maarten tourism budget, the lowest in the Caribbean and more than 2 percentage points lower than the Caribbean average of 2.96%. In order to be at Industry average, St. Maarten would have to raise its budget to million dollars. Budget per air arrivals This ratio compares how much is spend on the tourism budget relative to the number of air arrivals to the island. This shows the dollar value per air arrival contributing to the tourism budget. In the case of St. Maarten, despite having one of the busiest airports in the Caribbean, these air arrivals contribute very little to the tourism budget. St. Maarten has the 2nd lowest amount invested in tourism marketing when relative to air arrivals, behind only Trinidad, which has oil, manufacturing and natural gas industries. Again, to be the most tourism dependent island but have such a low amount of the returns going back into tourism marketing is not a best practice for tourism. Budget per Capita In countries highly dependent on tourism, the population generally is at least moderately aware of the importance of the industry to their island. Just as other per capita calculations are used as sound indicators in economics and social studies, a per capita indicator of what the tourism budget is if divided among the population also shows some interesting results. St. Maarten does not rank nearly as poorly as in other rankings when the budget per capita is taken into account, but is still far below the average in the Caribbean. Tourism budget per capita is at $66.72, with the Caribbean average at $137.93, making St. Maarten in the 13 th ranked in the middle of the 26 countries surveyed. Again, many of the islands that fall behind St. Maarten are much less dependent on tourism than St. Maarten, thus the per capita investment is likely to be spread across various industries. Budget Comparisons Conclusion By every measure, St. Maarten ranks shockingly far behind not only its key competitors, but to the entire Caribbean as a whole. It is amazing that St. Maarten has even been able to maintain such a high number of air arrivals despite such a low tourism budget, but all indicators show that St. Maarten may simply not be living up to its true potential as a tourism destination. Complacency in the tourism industry is one of the most dangerous habits to keep, as travel patterns can change within instants. For an island as dependent on tourism as St. Maarten, to be so far behind in almost every way on tourism spending is something that needs to be reviewed by policy makers in government. 8

9 Recommendations Premise of Recommendations This report has noted whereas: This report was created to analyze the St. Maarten tourism budget and how it compares to the rest of the Caribbean The importance of the tourism sector to the island is undeniable, with St. Maarten being ranked number 1 most tourism dependent island in the Caribbean Tourism contributes 83.4 % of total GDP This report highlights the importance of positioning for any tourism destination, and as remarked by CNN TASK Group, the crucial role governments have to play in maintaining top positioning The tourism budget of St. Maarten has not increased since at least 2006 with the exception of 2011 and 2012, after which it was reduced once again in 2013 to previous levels St. Maarten has the lowest tourism budget by visitor expenditure; the 2nd lowest in budget per air arrival; 13th lowest in budget per capita despite being the most tourism dependent Various organizations, including the International Monetary Fund, highlight the key to St. Maarten s growth to the improved performance of its tourism sector over the next 5 years With this as the premise for recommendations, the recommendation is being made for a gradual, self-sustainable, longterm increase of the St. Maarten Tourism budget to better position the island to what the industry standard is in the Caribbean, and ensure continued competitive performance for the island s vital tourism product. This would help realize the estimates that the IMF has for economic growth of the island over the next 5 years. St. Maarten Tourism Budget Increase The recommendation is to create a budget increase to a total of 110% that would entail no more than a 10% increase from induced budgetary inflation per annum, with other programs being put in place to account for further increase. The new tourism budget would be at $10,500,000 dollars per year by the end of the 5 years, estimated for the 2018 budgetary year. Time frame of 5 years is chosen partly because that time frame is in line with IMF data concluding that growth is forecasted for the island over the next 5 years, providing it can continue to improve its tourism product and increase its activities in developing markets like Asia and South America. some pickup is anticipated over the medium and long terms if needed reforms are promptly implemented. With the current regulatory framework and policy uncertainties exerting a significant drag on activity, growth potential will be heavily influenced by the pace of implementation of reforms to improve competitiveness, wage and price flexibility, and the business environment. On the other hand, both countries have upgraded their tourism development strategies (International Monetary Fund, 2011) 9

10 GDP i(millions of Dollars) Tourism Budget (x$1000) This growth therefore would cause an increase in tourism budget that is in line with the estimated economic growth for the islands between 2013 and As can be seen by Figure 6 below, while previous budgets were primarily stagnant while GDP growth was experience (blue line), proposed growth is directly correlated to the growth in GDP over that same period of time (red line) GDP Current Budget Proposed Growth 4500 Figure 6 Tourism budget growth relative to GDP The precise values of what the tourism budget would be each year with the recommended changes would be as follows: Year GDP (US Millions) $ $ $ $ $ $ New budget (1000's) $ 5,099 $ 6,179 $ 7,259 $ 8,340 $ 9,420 $ 10,500 Positioning result of Budget Increase The following table shows how this would change St. Maarten s positioning within the Caribbean: Tourism budget averages Average Former Tourism Budget SXM New Proposed Budget for SXM Current Rank New Rank Tourism Budget $ 19,090,721 $5,005,000 $ 10,500,000 15th largest 13th largest per resident $ $66.72 $ th largest 8th largest per air arrival $ $11.29 $ nd lowest 11th lowest divided by visitor expend. 2.99% 0.74% 1.56% lowest 7th lowest 10

11 Source of Funds for Budget Increase It would be irresponsible to simply recommend a budget increase without also allocating sources from which government can expect to justify budgetary increases to tourism. This report recommends 4 methods for increasing the investment government makes in tourism each year as the recommendations mentioned above: $1.00 Destination Tax A slight increase in direct contribution from some air and sea arrivals would to deter airlines or travellers, but would contribute significantly to the total tourism budget. A $1.00 Destination Tax at the airport and harbor that goes directly to the marketing funds of St. Maarten can be implemented immediately and would account for an increase in available tourism funds by 2.2 million dollars a year. Budget increase of 10% per annum This would be a budget increase relative to tourism growth as a result of added initiatives and projections for increased tourism and GDP by the IMF. Assuming tourism is able to increase by 10% (the industry average in aruba for tourism growth relative to their budget increases), that in itself would justify an increase of 10% per annum on the budget. 10% of 5 million dollars is $500k per year to a total of 2.5 million by year 5. Tourism training programs. The education budget is one of the largest spending ministries of the island, yet no programs are in place for using some of these education funds towards tourism marketing training. The fact that St. Maarten has no tourism training programs is astonishing considering that the island is the most tourism dependent of the Caribbean. Up to $600,000 per year can be allocated from the Education Budget and transferred to the tourism budget for training programs. This would be just a 0.5% share of the education budget. While this isn t necessarily tourism board marketing, it will affect the overall appeal of the island for positive marketing from not just the tourism sector, but also public and private sector stakeholders. This money should be handled by the tourism authority and used to use free training programs at the St. Maarten University for anyone working directly in the Hotel, Hospitality and Tourism sectors. The tourism reps we hire to do work for us can be used to do such training sessions at particular times in the year making more efficient use of them, as well as using local tourism professionals. These programs would specialize in expanding the international marketing skill of both private and public sector tourism professionals in marketing the destination and its tourism attractions abroad. Figure 7 Source of funds for tourism budget increase 11

12 Private sector tourism mutual funds The private sector has never directly engaged in marketing the island collectively, save for their membership of organizations like SHTA and other smaller organizations. The idea here is to allow return on investment and tax incentives to motivate the business community to literally invest in tourism marketing. The idea is to create a mutual fund that local companies can invest up to half a million dollars which would go towards local tourism improvements. Companies would invest a certain amount and buy "shares" of the mutual fund based on their investment. The total pool of funds will be added to the tourism budget each year and would be managed by the St. Maarten Tourism Authority to ensure minimal overhead and costs to the management of these funds. Like other tourism funds, they will be used to invest in tourism marketing for the island. The process would follow a typical Mutual Fund cycle: Investors Private Sector investors, particularly tourism sector Figure 8 Mutual Funds Cycle stakeholders. Fund Manager The St. Maarten Authority will assign a fund manager for this specific purpose. The fund manager task is less than the typical fund manager as no actual investments need to be made by the fund manager; the investments are done by the tourism board as a whole. Instead, the fund manager monitors tourism indicators to create recommendations to the director of tourism for dividend payouts to investors of the tourism mutual funds Securities The tourism industry of St. Maarten itself would be considered the security. The performance of this stock will be based on tourism arrivals, tourism spending, new tourism investments, infrastructural investments and total marketing value of the island s tourism spending. ROI Return on investment models will be created based on the aforementioned economic indicators. The fund will adhere to any minimum or maximum return clauses that might be implemented. This recommendation in itself has the potential to completely revolutionize the way in which government is able to market the island. It creates a vested interest in tourism success across a great cross section European Union Development funds and grants. There are various development funds in Europe that stand untapped by the tourism sector in St. Maarten. Some Pro-Poor tourism sector initiatives, tourism sector job creation and international internships networks are all tourism initiatives that European Union development funds may be eager to allocate grants for. The goal is to find just $200,000 a year in grants. A grant liaison can be assigned by the tourism authority to continue to monitor existing grants and seek new tourism funding opportunities. Further regulation of the Tourism Budget After year 5, each year the budget should be adjusted based on growth figures. If tourism number goes up by x%, then the budget should be immediately increased by a factor of that percentage (example: 5% tourism growth results in 10% increase in budget for following year). This would add incentives for tourism reps to continue to do their best to attract more people to the island as well. 12

13 Appendix A 13

14 The Caribbean Tourism Organization (CTO) Wrold Travel and Tourism Council (WTTC) Central Intelligence agency World Factbook Appendix B: Figure 4 Tourism Data Methodology Figure 4 s tourism data was gathered by existing data submitted from governments around the Caribbean to various tourism organizations that they are members of. These organizations that have made their information available to the author are as follows: CTO is the region s tourism development agency, has over 30 country members, including Dutch, English, French and Spanish, as well as a myriad of private sector allied members. The CTO s vision is to position the Caribbean as the most desirable, year round, warm weather destination. Its purpose is Leading Sustainable Tourism One Sea, One Voice, One Caribbean. The stats resource portal of CTO, contains some of the most up to date tourism figures. Some data may not always be accurate from CTO, therefore they would always be crosschecked with other data sources The World Travel & Tourism Council (WTTC) is the forum for business leaders in the Travel & Tourism industry. With Chief Executives of some one hundred of the world's leading Travel & Tourism companies as its Members, WTTC has a unique mandate and overview on all matters related to Travel & Tourism. WTTC works to raise awareness of Travel & Tourism as one of the world's largest and influential industries, and thus a lot of the data collected from WTTC sheds light on the effect the industry has on the GDP or each country The World Factbook is a reference resource produced by the Central Intelligence Agency of the United States with almanac-style information about the countries of the world Some of the best industry data in the world can be sourced for free from this CIA's factbook database online. A great area to cross check data from other sources. An added value service to clients, the TASK Group works directly with its clients, both new and established, to create impactful, strategic solutions beyond advertising. It is a team set to provide excellence in strategy and media solutions for the world s tourism and economic development hot spots. CNN TASK group may not particularly be a great source for statistical information, but is by far the industry leader in research mthods and innovative industry movements, ad also give insight into new media in tourism and travel. All of the above sources resulted in data that could be crosschecked and verified. In some cases, conflicting data required contacting the NTO s of the governments directly, in which case data was sent by fax or . Data indicators were as follows: Air Arrivals: The number of people who came by air and stayed for at least one night Cruise/sameday: Arrivals by cruise or just one day Expenditure: Total tourism receipts in USD Millions Tourism Budget: the Us Dollar value of the tourism budget for the respective country 14

15 Appendix C: Works Cited International Monetary Fund. (2011). Retrieved from IMF Reports Website: College Financiele Toezicht. (2012). Retrieved from CFT's Official Website: CNN TASK Firm. (2013). Retrieved from St. Maarten Parliament Draft Budget Archive. (2013). Retrieved from SXM Parliament's Website: World Travel and Tourism Council. (2013). Retrieved from Mendiratta, A. (n.d.). COMPASS - Insights into Tourism Branding. CNN Task Group. Zikmund, W. G. (2001). Effective Marketing 3rd edition. In W. G. Zikmund, Effective Marketing 3rd edition. 15