CHAPTER 6: TOURISM AND TOURISM BUSINESS IN THE CARIBBEAN

Transcription

1 CHAPTER 6: TOURISM AND TOURISM BUSINESS IN THE CARIBBEAN 6.1 Background The Caribbean Region attracts tourists seeking an exotic romantic or family getaway, or a sunny break from the harsh cold winters of their countries. Offering year-round sunny, warm weather with cool breezes, tropical beaches, cultural carnivals, peace and tranquility, and exotic food; it s the perfect vacation location, especially for Europeans, Canadians and Americans. The Caribbean is a geopolitical construct that includes the following principal countries: Antigua and Barbuda, Bahamas, Barbados, Belize, Cuba, Dominica, Grenada, Dominican Republic, Haiti, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago, Anguilla, British Virgin islands, Cayman Islands, Montserrat, Turks and Caicos, Guadaloupe, Guiana, Martini, Puerto Rico, U.S. Virgin Islands, Aruba, Bonaire, Curacao, St. Eustatius, St. Marten, and Saba. With 16 independent countries, 6 semi autonomous Dutch territories, 5 British overseas territories, 3 French overseas departments, a commonwealth associated with the United States, and a U.S. territory, most islands are politically autonomous or are remote outposts of metropolitan countries. The Caribbean s focus on tourism brings about pros and cons. The pros embrace the notion of using tourism as a means to economic development. The tourism industry earns foreign exchange, provides job for citizens and revenue to governments. Proponents of tourism argue that the movement away from the cash crop economy that dominated the Caribbean since the colonial period and toward a tourism-based economy will build a much sounder economic foundation. Proponents also contend that tourism has made important social impacts on the Caribbean, such as bringing a renewed internal consciousness and celebration of indigenous Caribbean cultures and historic sites (CTO, 2005). They point to the many local arts and crafts trade that have been revived and made into lucrative local industries by tourist interests, the renovation of historic sites and monuments as tourist attractions, and the 58

2 development and support of local festivals and cultural events because of heavy tourist participation. Caribbean states have long been characterized as open, dependent economies with their export focus limited to few primary products in areas of agriculture and mining. These industries, which were the mainstay of regional economies for many decades, have failed to provide the economic stimuli needed to engender growth and development (McDavid, 2003). For some time now, tourism has replaced these stagnating industries as the engine of growth and has become one of the fastest growing sectors in many of the island state economies. The industry's key indicators have outperformed, on a worldwide comparison, those in other regions of the world (CTO, 2005). The sustainability of the industry requires regional governments to be more proactive in planning its growth and development. The enabling role of the state is critical in this process because the industry provides both positive and negative externalities which conflict with each other (Jayawardena and Ramajeesingh, 2003). Arguably, the state, through good governance, intelligent regulatory policies and planning, can minimize or even mitigate some of these inherent conflicts. 6.2 Tourism Development The tourist industry, however, is not only a source of new income. It also promotes the development of a wide range of enterprises that are allied to the industry. In this sense, it becomes a stimulus for indirect job creation, a support for poor regions within countries and a replacement for declining or lost industries. These allied industries usually represent an important source of indirect job creation. The impact of tourism activities, however, is not limited to job creation and foreign exchange inflows only. It also generates spin-offs in various areas within the economy. Projections by the World Travel and Tourism Council (WTTC) showed that the regional industry by the end of 2002, stimulated some US$34.3 billion in economic activities, contributed approximately 59

3 US$7 billion to GDP, accounted for US$17.3 billion of total exports and provided US$7 billion in total capital investment (WTTC, 2002). The size and diversity of the industry's contribution to regional economies suggest that the industry has now assumed greater importance and could be regarded as a leading instrument of development in the region. This is particularly so in light of the imminent dismantling of the region's preferential trading arrangements in sugar and bananas, and the deterioration in the terms of trade for bauxite and other primary products produced by the region Tourism has emerged as the engine of growth in many countries within the Caribbean region. The Caribbean has a higher proportion of total employment and percentage of GDP derived from tourism than any other region in the world, and is therefore by far the most dependent on this industry and its business. In 2005, approximately 97 percent of the world's tourism activities take place outside of the Caribbean; the region constitutes only about 3 percent of global tourism. In recent times, the Caribbean's main growth market has been Europe, even though Canada and the USA still remain the most important markets for the product (WTO, Jan 2006). The industry has become popular as a major alternative economic diversification strategy for small countries of the Caribbean and has proven to be a means of bringing improvements to the general standard of living, including the reduction of unemployment which remains a major problem in the region, the acceleration of growth in gross domestic product (GDP); the increase in foreign exchange earnings; and the attraction of capital investment. In recent years, the industry has been experiencing some of its greatest challenges from the impact of global competition and the events of September 11, 2001, among others (Hoad, 2003). The main issue facing regional tourism is its long-term sustainability, since it is vulnerable to natural and man-made events such as hurricanes and terrorism. 60

4 6.3 Trends The Wall Street Journal (Feb. 2006) reported that the number of tourists visiting the Caribbean rose last year but the pace of growth was half that of the previous two years. Based on the Caribbean Tourism Organization s (CTO) Annual report 2005, more than 42 million people visited the region in 2005, a 5% growth from 2004, including cruise-ship passengers and overnight hotel guests, with the strongest growth posted in the Dominican Republic and Cuba. The former received 3.7 million visitors, a 7% increase in tourists while the latter had 2.3 million tourists, a 13% increase. Tourism in Aruba and Curacao grew by nearly 2% while Puerto Rico and the U.S. Virgin Islands had gains of about 3%. Belize holds a small portion of tourist arrivals in the region, mainly due to the fact that it is a relatively young country in terms of independence and its emergence into the industry. Other factors include its location and the fact that it s not an island, and not among the cluster of Caribbean countries; limited international marketing and different product offers. Table 7 Stay Over Tourist Arrivals in Selected Caribbean Countries COUNTRY Antigua 193, , , , ,804 Aruba 691, , , , ,641** Barbados 507, , , , ,534 BELIZE 195, , , , ,634 Bermuda 274, , , , ,581 Cayman Islands 334, , , , ,801 Grenada 123, , , ,865 98,244 Martinique 460, , , , ,441*** St. Lucia 250, , , , ,939 St. Vincent 70,686 77,622 78,535 86,727 71,187* Jamaica 1,276,516 1,266,366 1,350,284 1,411,910 1,478,663 Trinidad 383, , , , ,451* Source: Caribbean Tourism Organization * Data for Jan-Sept ** Jan-Oct *** Jan-Nov 61

5 In the past ten years, Cuba has recorded the highest rate of growth in tourism arrivals of all Caribbean countries to become the third most popular tourism destination in the Caribbean region. In the process, tourism has become Cuba s most lucrative sector. With its expansion of infrastructure and promotion of its history and ecotourism, the country promises to continue to play a major role as a tourist destination in the Caribbean (Cervino and Cubillo, 2005) Caribbean tourism dropped following the Sept. 11, 2001, attacks in the U.S., but has steadily recovered, with the number of tourists growing by about 7% in 2004 and Last year, the region received nearly 20 million cruise-ship passengers and 22.5 million other visitors. The cruise ship total is 2% lower than the previous year because of route changes and other factors. In 2005, Caribbean tourism contributed some 15.4% to world GDP, 8.3% in overall employment, and 20.7% in total capital investment (WTTC, 2005). These indicators bear testimony to the proposition that the Caribbean has, over the years, come to rely on tourism as the major growth sector. High-volume mass tourism, where vacationers prepay travel packages on cruise ships or beach resorts, dominates the tourist industry in the Caribbean. In the last four decades, the number of possible vacation destinations has grown spectacularly as a greater number of islands have developed travel industries, and some have even created their own niches to attract particular types of visitors. 6.4 Cruise Tourism in the Caribbean Over the past three decades, Caribbean cruise ships have aggressively seized market share from resort hotels on the islands. Lured by the promise of all-inclusive, prepaid packages, brief stops on ports of call, limitless consumption and entertainment, more than 40% of tourists in the Caribbean's top nine destinations are now embarking on tourism that largely takes place in international waters, mostly unregulated and untaxed. According to the EIU, the Caribbean accounts for almost one-half of worldwide cruise traffic. As a result, cruise passengers far outnumber stopover tourists on several islands including the Bahamas and Cayman Islands. 62

6 Table 8 Cruise Tourist Arrivals in Selected Caribbean Countries COUNTRY Antigua 408, , , , ,283* Aruba 487, , , , ,765* Barbados 527, , , , ,765 BELIZE 48, , , , ,331 Bermuda 179, , , , ,259 Cayman Islands 1,214,757 1,574,750 1,818,979 1,693,293 1,798,999 Grenada 147, , , , ,082 Martinique 202, , , ,416 94,446 St. Lucia 490, , , , ,431 St. Vincent 76,494 70,314 64,965 74,657 34,375** Jamaica 840, ,419 1,132,596 1,099,773 1,135,843 Trinidad 82,107 60,047 55,532 54,254 NA Source: Caribbean Tourism Organization * Data for Jan-Nov ** Data for Jan-Sept For Caribbean islands, the challenge now is to keep tourists on the islands. In order to attract overnight visitors, the solution has been to build large-scale infrastructure and resorts with intensely developed shorelines. Such is the case in the Dominican Republic and Jamaica, both of whom have invested resources in all-inclusive "enclave" resorts. However, creating these types of enclave resorts requires large-scale investment, the kind not available in most islands domestic capital markets. Hence, many Caribbean countries have financed the creation of resorts largely with foreign capital and foreign ownership. Noteworthy is the fact that foreign-owned hotel chains and resorts began investing heavily in the Caribbean in the early 1970s. 63

7 6.5 Tourism Policies and Development in the Caribbean According to UNEP (2002) the emergence of tourism s excessive dependence in the smaller economies of the Caribbean correlates directly with their size and limited human resource potential. Together, both of these factors served to inhibit the development of viable industries outside of tourism. Yet, tourism has assumed greater prominence in national development as it has become the fastest and single largest sector in these economies. The industry was catapulted into this role because traditional sectors, such as agriculture and mining, continued to stagnate over the last few decades. Most Caribbean nations are over dependent on tourism for economic growth. Braussoulis and Van der Straaten (2000) argued that tourism specialization is not an effective development strategy for small countries because the opportunity cost to the economy is very high. However, Grassel (2002) argued to the contrary. Using pooled cross-sectional data for some 29 Caribbean countries, the researcher found very significant correlation between growth in tourism and economic growth. In particular, it was established that small economies, which specialized in tourism, experienced exceptional growth when compared with their larger counterparts. As articulated by Wint (2002) the ratio of tourist arrivals to a country's population is a critical factor and one that has some influence over the industry's contribution to the economy. One could also argue that a higher ratio of tourist nights to host population would have a negative impact on the environmental sustainability. The Caribbean Tourism Organization (CTO) represents the interests of the Caribbean collectively in terms of marketing the Caribbean as a tourism destination. Consequently, the CTO has adopted a perspective for tourism, relating to the regional ability to maintain product quality, increase profitability, promote the region effectively, provide air access at competitive rates... gain the acceptance of the local populations... provide a secure environment... strengthen linkages between tourism and other economic sectors, and combine regional efforts to create a competitive force (CTO, 1999). In some Caribbean countries, government policy documents that articulate the need for sustainable tourism development, community participation, and a more equitable distribution 64

8 of the benefits arising from tourism, has not been realized in practice. The problem appeared to reflect a general lack of understanding of the principles underlying responsible or sustainable tourism development. In addition, policies in the Caribbean do not support some issues such as the creation of life enriching experiences that would encompass focusing on attractions, culture, heritage, events, and festivals as the vital demand generators, and thereby re-position the hotels as support services. For example, people visit a destination because of what it has to offer. The depth of the product in the Caribbean goes beyond just the sun and beaches. However, polices fall short in recognizing the art, history and culture of the countries, as the problem exists of packaging and marketing these worldwide. It was therefore recommended that more emphasis be placed on "quality experience" development, the creation of packages to provide value, and enhancing access to points of interest within destinations. (Gunn, 2002) - Tourism in Jamaica has developed primarily in the form of resort enclaves. As a result, although local people have considerable opportunity for employment in the industry, their participation in tourism development and investment activities as well as in accessing the product (affordability and availability) appears to have been limited. For example, in Jamaica two organizations - although indigenous - dominate the hotel sector and, in many Caribbean destinations, ownership and control of the hotel sector are in the hands of foreign investors which are increasingly likely to be large multinational corporations. Also the notion of allinclusive product, which tends to encourage visitors to remain on property, has implications for restraining tourist spending, the attendant multiplier effect, and the numbers of persons who actually benefit from tourism. Moreover, it was stated that the "homogenization" of the tourism product and image are real concerns that must be addressed if the benefits from tourism activity are to be optimized. (Karagiannis, 2003) - Government investment in the infrastructure of tourism zones has been an essential element in tourism s take-off. In Cuba, the government has also taken a role managing inbound tour operations by providing multiple services through state enterprises. In the case of cruise tourism, however, government policy has been circumvented to the role of investor in services and infrastructure for large multinational corporations (Wood, 2003). In the Bahamas, for example, governments have attempted to extract a significant contribution to the local 65

9 economy through the passenger head tax, but these initiatives have been strongly resisted by the industry. With heavy competition, other islands have been similarly reluctant to institute revenue extraction policies. - New emphasis placed on the development of eco-tourism is evident especially in Guyana, Belize and Suriname as well as Dominica, the Dominican Republic, Cuba, Trinidad and Tobago and St. Lucia Issues affecting Caribbean Tourism Development Resource management is a particularly important issue, given the small size of most Caribbean destinations. It is important to understand the pressures that tourism places on water supply, waste disposal and infrastructure, and the need for sound resource management practices. Simple examples exist of damages to the reef by cruise ships or divers that degrade the coral. The government, knowing all of this, must act to prevent high economic leakage and to facilitate the responsible development of the industry. Lack of a common vision often hampers the development and growth of tourism in an economy. In the Caribbean it is often common to find differences on the issues of tourism, such as the type of tourist, the target number of tourists desired, the type of tourism to be developed and expectations of tourism. In addition, Caribbean tourism continues to confront two major obstacles - destruction and revenue loss from hurricanes and the lack of adequate air-lift (air transport) to many key destinations. However, regional officials continue to innovatively address these issues. 6.6 The Role of Government More and more discussions on the "public sector s role in optimizing the tourism potential for the destination is reaping greater importance. The Barbados government is taking up the slack in investment and development where the private sector has been reluctant, according to Barbados tourism minister, Noel Lynch. He expressed that "Where the private sector is not 66

10 taking the risk, the government believes it should play an entrepreneurial role. Once there is transparency and there is an existing role for government, nothing is wrong with that. Governments and the private sector cannot operate the same way. Governments must act with the private sector." (Caribbean Media Corporation news agency, Bridgetown, Oct 04) In the Caribbean, the role of government in the industry would be defined by developmental issues, such as macroeconomic stability, good governance, international competitiveness and their strategic objectives. These notwithstanding, there are several important reasons why governments in the region have to intervene in the market. First, tourism products in the Caribbean are public goods. So, it is either technically infeasible or very costly to exclude any one group from consuming these goods. It is in the best interest of society for both locals and tourists to enjoy the consumption of these public goods. To achieve this objective, it is more feasible for government to intervene in the market and provide spending closer to the social optimum to deal with environmental, cultural and social pollution of the industry. Second, because of the negative externalities of the industry, government has to intervene in order to achieve some degree of distributive equity. This involves educating and training people so that they can participate in the industry. This kind of intervention serves to reduce conflicts between equity and efficiency goals. And, third, the nature of tourism to some degree determines the pattern of growth. More attention has to be given to market imperfections and to specific interventions that are needed to correct market distortions. Wahab and Pigram (1997) pointed to the example of Hurghada, on the Red Sea, in Egypt, where the overdevelopment of the tourist supply resulted in a price war that drove down prices of tourist services to a minimum. This would suggest that state involvement in the regulation and control of the industry may be a prerequisite to achieve a derived, and not market driven, growth rate. In many countries, governments have intervened in the marketplace through the ownership and operations of tourist ventures. In Jamaica, the acquisition of hotel properties came through government's intervention in the financial sector, which was on the verge of imploding in the 67

11 mid-1990s. In other countries, however, state ownership of hotel properties was necessitated by the desire to save jobs and to prevent the unemployment rates from climbing to levels that were politically untenable. The entrepreneurial role of government in tourism, however, has been changing. Since the early 1990s the industry has been operating in an economic environment in which state ownership declined dramatically. In spite of this, there are several areas which may continue to remain in the domain of the state. These include the natural parks, heritage sites and beaches (Boxill, 2004). In general, the role of the government in tourism is motivated by the sector's potential to contribute significantly to the enhancement of human and economic development. The noninterventionist role of the government, which can assist in achieving these objectives, should be limited to legislation and regulation, planning and coordination and stimulation. However, this contradicts the fact that government is increasingly being asked to regulate in order to protect the environment and to establish and maintain quality and safety standards. Butcher (2004) pointed out that, as a predominantly private sector driven industry, development decisions by tourism enterprises are profit-oriented, resulting in preference for investments only in profit centers. Various government ministries have significant relationships with tourism on matters such as immigration, labour, transportation, building and construction permits, etc. which can greatly impact the growth of tourism (Henry, 2004) Thus, because of the great complexity of the industry and of its products, it requires coordination and cooperation, which arguably only governments have the capacity to organize. Thus coordination is necessary both within and between government tourism bodies and the private sector in order to develop effective tourism strategies. According to Mill and Morrison (1985), governments can stimulate tourism in three ways, provide financial incentives; sponsor research; and engage in marketing and promotion. Financial incentives can take many forms and can include low interest loans, duty exemption and/or the granting of tax-free holidays to the industry. In situations where there is scarcity of 68

12 domestic investment funds, government can provide tax exemptions on profits and guarantee the repatriation of funds. To enhance human development it would be more appropriate if governments were to target small hotels, great houses and small communities with a view to providing financial and other forms of support. The limited degree of excludability and the high externalities make government an ideal agent to sponsor tourism research. In the Caribbean, there is the need for research to move away from beach tourists to other groups that yield benefit to a wider cross-section of society and provide a greater depth to the tourism product, so that it becomes less vulnerable to external economic and political events. Government's promotion and marketing should be based on research and be directed at those areas that can be most beneficial. Obviously, the size of the advertising elasticity would determine how government would redirect its promotional and marketing dollars. Because of the importance of tourism to the region, it is incumbent on governments to orient tourism growth towards meeting the socio-economic objectives and environmental needs of the region. According to Wahab and Pigram (1997), it must coincide with the destination's value system, cultural integrity, and satisfy the needs of the local population. In the Caribbean, governments have been providing subsidies to counteract external and internal shocks. They also have been providing guarantees and assuming risks. The scope of public actions continues to be massive, even though they are articulated and coordinated in different and new ways (Page and Getz, 1997). In spite of this, it can be argued that the regional industry will be controlled and shaped, to some extent, by the multi-lateral and bilateral funding agencies and other supranational organizations, as the region is still dependent on international aid and structural adjustment programmes. Policies pursued by governments in the region will continue to be circumscribed by the influences of external organizations. Such influences are expected to determine the nature and direction of the regional industry. 69

13 6.7 Tourism as a sustainable development strategy for the Caribbean Caribbean countries are acutely aware of tourism's problematic effects on local communities and have attempted to embark on a model that addresses these problems. But, these countries have been only partially successful. The most feasible and economically viable solution rests upon adopting a diversified strategy for developing their tourist industries. This has meant investing in both luxury beach resorts, cruise passengers, budget and academic travel visitors, ecotourism, family émigré visits as well as cultural and heritage tourism. The challenge for Caribbean countries is to effectively implement a mix of strategies suitable to their own tourism strengths so as to make it possible to solve the dilemma of tourism as development or development for tourism. The Caribbean sub-region remains the world s most tourism-dependent region with the sector accounting for approximately 25% of all exports and services, and contributing 31% to the region s Gross Domestic Product. Tourism related services in the Caribbean employ over half a million persons. The projected annual 4.6% growth in stay over arrivals leading up to the year 2010 is expected to generate the need for 222,000 hotel rooms, an increase of over 20% Regional challenges to be addressed The challenges anticipated for the regional industry consist mainly of competing effectively, and enhancing its position in terms of its tourism product and service levels. Tangential to this issue is that of the likely migration of workers to more favourable markets, leaving a shortage of labour and possibly compromising the consistency of service quality. Also Tourism foreign exchange earnings have contributed to the development of the infrastructure of the Caribbean, to increased levels of education and training, the introduction of advance technology and more recently, the protection of the environment through the advent of eco-tourism. Tourism to the Caribbean is a boost to foreign investment, financial reserves and the general economy, but there is also a threat to the sustainable development of the industry when viewed from the perspective of the World Trade Organization's global agreements. Further, the general agreement on trade in services (GATS) - a multilateral 70

14 agreement under the World Trade Organization, aims to abolish restrictions on foreign ownership and any other measures put in place by many Caribbean territories to protect the tourism sector. This agreement seeks to give foreign companies the same benefits as local companies. GATS' removal of the restrictions against foreign ownership has strengthened foreign corporations' ability to transfer staff from one country to another, and enables them to use trademarks, create and operate branch offices and, more importantly, to repatriate their earnings to their mother companies abroad. Furthermore, globalization of tourism can affect the employment rights of staff who already fear exploitation by expatriates. Tourism officials are working to develop business from the non-traditional markets, particularly Latin America and Africa. This brings the need for the development of language skills in the industry. It also brings to bear the issue of cultural diversity and the implications for service delivery. These are the current developments along with the need to promote the status of the industry. Especially, the design of regional training and development initiatives to address these and other challenges facing the industry; and a curriculum reform at the primary and secondary school levels that will help to promote the industry as a viable career option for workers and at an early stage, help to develop the right skills and attitude in the future labour force. To address some of these issues, the Caribbean as group initiative under the Association of Caribbean States (ACS), with its Special Committee of Sustainable Tourism, seeks to achieve effective development of tourism, addressing issues such as cooperation among members and definition of the different types of products available. It also seeks to establish criteria for sustainable tourism destinations. Their goal is to ensure that destinations can attract visitors but, at the same time, do so in a way that would not harm the physical environment or the communities that surround them. ( The development of several projects is also high on the Sustainable Tourism Committee's agenda. One is a study of the problems facing coastal ecosystems and how these can be solved through sustainable tourism. Also in the works is a language training project for less developed countries in the Caribbean. Another project will focus on analysis of multidestination tourism within the region. The Committee will analyze transport as it relates to 71

15 tourism. One of the aims of this will be to improve transport to help tourism, including the development of alliances among carriers. The building of an Information Centre is also among the ACS Sustainable Tourism plans, as is integral technical assistance to member countries, and protecting the environment with emphasis on the Caribbean Sea. Also in the horizon is cooperation with the Pan American Health Organization to develop a health programme in the region to analyze what can be done to foster cooperation among member states to fight problems like AIDS. The idea is that for the region to remain attractive as a tourist destination, issues of health and education must first be addressed. In the longer term, confidence in the future of Caribbean tourism should allow certain major investments in the region to move ahead in spite of the industry's current weakness. However, underlying problems, including competition from cruise ships and from lower-cost destinations, will remain serious. 6.8 Conclusion The reality is that tourism has changed drastically within the last decade, becoming more competitive, as travelers become more discriminating and sophisticated, demanding a higher quality tourism product and expects a broader array of specialized travel services. The changes in technology and the increased use of the internet, has given travelers the ability to obtain information about more destinations. Consequently, Caribbean countries must move in the direction of providing more specialized services such as: - More foreign language-speaking airline personnel, tour guides, maitres d hotel, waiters, telephone operators, hotel concierge, reception desk, room service and cashier personnel. - Availability of foreign language tour cassettes on sightseeing buses and in museums, menus, hotel safety, laundry, security and instruction forms and aircraft evacuation guides for local airlines. 72

16 - Universal symbol directional signs in airports and bus terminals and public facilities such as museums - Increased currency exchange facilities - Special cuisine to accommodate religious considerations or personal preference. Of course to be able to address these issues, broad policy changes would be required and a serious, cooperating, environment between the private and public sectors. 73