Positive Signs in the Tourism Sector

With the global tourist industry now emerging from one of its toughest periods in recent decades the United Nations World Tourism Organisation (UNWTO) is forecasting a 3-4% increase in international arrivals in 2010 and a 2-4% rise in the Americas region. Assuming the forecast holds and the Jamaican industry maintains the resilience shown in the past two years the industry is likely to achieve stronger visitor arrivals this year, putting it in a position to stimulate economic activity locally.

The positive forecast for Jamaica is coming on the back of a 3.6% growth in visitor arrivals. Indeed Jamaica  outstripped the rate of increase of worldwide tourist arrivals in 2008 and for most years in the past decade. To better appreciate the trends and assess the prospects for the medium term we need to examine the market for tourists coming to Jamaica, the massive investments in room expansion and infrastructure development and the marketing of Jamaica as a preferred destination.

Jamaica’s tourist industry is dependent on the US, Canada and Europe for 95% of visitor arrivals, with the US alone supplying 60% of all visitors.  So the island was among the most heavily exposed destinations to the deep downturn in the US economy, given the sharp rise in unemployment and pressure on consumer spending. The expectation was that the industry would have experienced a significant decline in arrivals and overall activity.  This would have severely affected the local economy as the industry accounts for the leading share of goods and services, investment and, particularly, foreign direct investment, and is the largest single source of employment. As indicated in Figure 2, Jamaica’s tourist industry managed to withstand the global economic storm, registering growth in visitor arrivals of 3.9% and 3.6% in 2008 and 2009, in the face of declining arrivals worldwide, and in the Caribbean.  The stronger than projected performance helped to cushion the impact of the recession on the local economy, as direct output and employment in the industry and its purchases of related goods and services were maintained.

When the recession struck, the Jamaican tourist industry was in expansion mode with record investments in new hotels and attractions, highway and other infrastructure, and airport modernisation and expansion.  Some 5,000 new rooms had been built over the period 2003-2008, three times the number added in the previous five years. Most  of the expansion was  by European hotel chains which, through their integrated systems, brought increased airlift, greater marketing and promotion outreach, and expanded tour operator presence to the destination. It should be noted that the scale and pace of the new hotel developments elicited strong criticism from special interests within the local industry  who felt that the European chains would displace them in the marketplace.  Some environmental groups also opposed the new hotels on the grounds that they were not compatible with the sensitive eco-system.  The investors also encountered bureaucratic humbug in the planning approvals process.  The benefit to the local economy, though significant in terms of employment, was lessened by virtue of the high import content of the construction activity.  Local suppliers of furniture, other manufactured goods, and providers of professional and other services, contended that preference had been given to overseas suppliers.

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