Time to think strategically about tourism

A short while ago the former Minister of Tourism of the Bahamas, Vincent Vanderpool-Wallace, wrote a challenging commentary in which he set out the reasons why the region’s tourism sector is underperforming, and also suggested some radical ideas as to how the region might stimulate long- term sustainable growth.

The former Minister and Secretary General of the Caribbean Tourism Organisation (CTO) prefaced his remarks by noting that it does not take much to recognise that if hotel occupancy across the region presently averages 60 per cent annually, and tourism represents around 15 per cent of regional GDP that, if hotel occupancy could be encouraged to reach 90 per cent, then tourism’s contribution to GDP could rise to as much as 50 per cent.

In his on-line commentary he observes that if new ways can be found to stimulate visitor arrivals, tourism can bring economic recovery, growth and employment more rapidly than any other economic sector. This unique capacity of tourism to lift an economy is a phenomenon that Cuba first understood in the early 1990s and was again recognised in 2007 by the US and the UK after the global financial crisis.

Mr Vanderpool-Wallace points out, however, that the Caribbean has for the most part done the opposite. Unlike the movement of goods – where nations large and small continue to aggressively negotiate away trade barriers to create growth – when it comes to tourism and the movement of people across borders there has been, as he puts it, ‘a veritable explosion’ of increases in departure taxes, air passenger duties, security fees and passenger facility charges.

This means, he argues, that those coming from nearby feeder markets, who logically are more likely to visit, are actively discriminated against, as the overall price of their ticket contains the highest percentage of tax, as travel taxes are fixed for all. The inadvertent effect is for the Caribbean to have a policy that dampens demand for short trips, damaging the opportunity the region might have to encourage travel from the markets in the US and the regions that are potentially easiest to grow.

The former Tourism Minister proposes two solutions.

The first is to have Caribbean leaders agree a formula that rapidly removes all travel taxes and visas for travel within the region. This would, he suggests, stimulate travel, make the region more competitive as a destination and encourage airlines to increase airlift. There is, he suggests, already sufficient international evidence that any loss in revenue would be more than offset by an increase in travel and a general related increase in Government’s tax take as a result of increased visitor spend in market.

The former Minister’s second big idea is to bring tourism into the ambit of external trade negotiations by the region becoming the first group of nations in the world to focus on the reciprocal elimination of departure and other taxes between, in this case the Caribbean region and its major source markets.

Mr Vanderpool-Wallace’s ideas are welcome, creative, and thoughtful, and offer solutions to the current malaise that the regional tourism industry is experiencing.

The strategic approach he proposes is exactly what is required. If Caribbean Governments are to respond well to the challenge of growing tourism and addressing global competition, they need to think differently, understand where short term policy responses such as increasing visitor taxation will lead, and come up with ideas that grow business rather than cause it to contract.

In the rush to find short term band-aid economic solutions has been little recognised that taxing services has the effect of degrading competitiveness at just the moment when the enhancement of comparative advantage should seen as central to generating growth. This is especially so in relation to tourism, the Caribbean’s key export.

Tourism ministers apart, most in Government in the Caribbean have still to recognise that the Caribbean is not unique as a warm water destination and that it is competing globally. They have yet to be convinced that increasing taxes on travel and tourism will particularly damage the nearest feeder markets; will disincentive the airlines; will move visitors offshore to the cruise ships; and eventually will make all but top end destinations and properties unviable.

The former Bahamas Tourism Minister’s proposals require detailed consideration. They should form a part of a broader strategic dialogue involving all Caribbean Governments plus their key external partners.

There is a pressing need for the Caribbean to convene a high level strategic discussion to address these issues with those from outside able to put all of this in the context of global competition. If achieving the frankness normally required at such gatherings is not achievable in the Caribbean, there are a number of institutions providing a neutral environment in North America or Europe where public and private sector players and academics could be brought together.

It is time, as Vincent Vanderpool-Wallace’s recent commentary suggests, to start thinking creatively about the stimulating growth in the region’s premier industry.

David Jessop is the Director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org