by Kari Grenade, PhD, Regional Economist and Macroeconomic Advisor
In this article, I examine short-to-medium-term prospects for the Tourism industry in the context of the Covid-19 pandemic, as well as offer some ideas for reshaping the industry to be more resilient and enriching to the lives of Caribbean people post Covid-19.
Short-term Outlook for Caribbean Tourism
Several factors combine to support a negative prognosis for the Tourism industry for the rest of 2020 and possibly well into 2021. I see the following as 2 of the most salient factors:
- Covid-19 Fears and Increased Travel Hassle
- In the absence of a vaccine, persons will naturally be fearful of travelling and vacationing. Even when a vaccine becomes available (hopefully within one year), persons might still be reluctant to go on a vacation to long-haul destinations such as the Caribbean, not necessarily because Caribbean countries might make it difficult for them to visit, but because of increased requirements of their home countries such as quarantine upon their return or a health certificate from the country/ies visited. Business trips to the Caribbean are also likely to decline because organisations and event planners are probably going to make greater use of technology. I also think that cruise travel will be affected due to Covid-19 fears and the likely increase in health checks and requirements that might dissuade potential cruisers. Two decades after the 9/11 event security checks are still in place when travelling. Just imagine the various health checks and requirements that will come about when travelling post Covid-19!
- Global Recession and High Unemployment in Major Tourism Source Markets
- The International Monetary Fund (IMF) estimates that the global economy will contract by 3.0% in 2020 (World Economic Outlook, released 14 April 2020). The IMF estimates declines in some of the Caribbean’s main tourism source markets as follows: Euro Area (-7.5%); UK (-6.5%); Canada (-6.2%); and USA (-5.9%). Economic recession will elevate unemployment in those countries. Already unemployment benefit claims are rising; for example, as at 9 April 2020, more than 17 million unemployment benefit claims were filed in the USA in the preceding 4-week period (Washington Post News Paper). In this context, it is reasonable to assume that vacationing and travelling will not be a priority for persons who might have otherwise taken a long-haul vacation to the Caribbean in 2020. Even if economic growth returns in the Caribbean’s main tourism source markets in 2021, there will be a lagged labour market effect, in other words, not every single person who would have lost his/her job in 2020 would find a new one in 2021, and even if jobs are found in 2021, vacationing to the Caribbean might still not be a priority then.
One could argue that many Caribbean destinations are high end and cater to high-income vacationers who might be unaffected by the unemployment situation. Perhaps, but it is important to point out that these high-income earners might have suffered losses in their wealth with the turbulence in financial markets. Standard and Poor’s (S&P) reported that by mid-March Americans had lost on average of US$22,313 as a result of stock markets’ volatility and an estimated US$7.3 trillion were wiped out from stock markets. Certainly, a dip in one’s wealth can cause them to delay their vacation to the Caribbean in the short term.
Considerations for the Medium Term
The Tourism industry will eventually rebound, but the rebound is not likely to be strong for some years to come. Indeed, the industry in major destinations in the Caribbean took about 5 years on average to get back to normal following the 2008/2009 global financial crisis. If the Covid-19 is contained in 2020, if a vaccine is found within the year or in 2021, and if airlines and cruise lines resume their respective services, the recovery of the industry could begin in the latter part of 2021. My assumption though is that any recovery that occurs in the latter part of 2021 would be tepid at best.
During the slow recovery phase (latter part of 2021 perhaps to 2023), countries should consider focusing on increasing electronic and virtual tourism/travel options to their destinations. Just imagine a virtual tour of Brimstone Hill in St Kitts or Harrisons’ Cave in Barbados or the under-water sculpture park in Grenada! Electronic and virtual options would benefit individuals as well as small and medium-sized enterprises in areas such as graphic design, IT, photography and the like.
Countries might also wish to consider taking a new approach to marketing and (re)branding that appeals to the psychology of travellers. It is quite possible that vacationers might be more inclined to engage in purposeful travel such as family retreats or to connect with nature (for the environmentally conscious) for example. Vacationers are likely to have specific agendas, as well as possibly shorter itineraries and booking windows. Caribbean destinations must find innovative ways to target such persons. Whatever the respective approaches, potential vacationers would have to be convinced that the health systems in destinations are on/near par with those in their home countries. Marketing messages must be able to give them some level of comfort in that regard.
Caribbean countries might also wish to promote staycations as well as travel within the region. Regarding regional travel, the messaging regarding adequacy of health systems would be important and cost of travel deemed sufficiently affordable.
The Covid-19 pandemic has reminded us how vulnerable the Tourism industry is and the attendant downside risks that are associated with investing in the Tourism industry and its related sectors. For sure, the region cannot continue with “business as usual” that involves environmental degradation due to tourism activities, maximum profits for hotel owners but minimal wages for the majority of workers, limited local ownership stake in the industry, and high susceptibility to natural and other shocks. Of necessity, the industry must be reshaped to be more resilient and also to prioritise long-term environmental sustainability as well as to better support high human development. Becoming financially self-sustaining is also a long-term imperative. In this regard, hotel owners for example, might want to consider listing their businesses on the respective regional stock exchanges and offering shares to regional investors as well as to hotels workers. In so doing, hotel owners would not only be expanding their financing options, but importantly also, creating opportunities to increase the wealth of ordinary workers and locals through ownership of assets.
Consolidations, strategic coalitions and outright mergers within the industry (within and across countries) might also become inevitable in order to take advantage of economies of scale and the sharing of risks. Indeed, Covid-19 presents the region with an opportunity to rethink its entire approach to tourism – policies, models, practices, financing, operational strategies, and importantly, how its value to our economies and societies can be more durable and better optimised. I therefore call on all tourism organisations within countries and the Caribbean Tourism Organisation to reimagine what sustainable tourism is/should mean for the Caribbean. This calls for innovation, smart solutions, and an infinite mindset (open mind) of all stakeholders; the words, “we have always done it this way” must be banished forever!
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