What’s the Tourism Forecast? Sunny with a chance of Clouds.

TRAVEL IS BACK!!! That was the word coming out of Caribbean Marketplace in San Juan, Puerto Rico in early October; from World Travel Market in London early November and from the World Travel and Tourism Consul (WTTC) Global Summit held in Riyadh, Saudi Arabia November 28th to December 1st. There is general consensus across the Travel and Hospitality industry that the recovery has gained momentum and the 2019 pre-covid arrival benchmarks should not only be met, but exceeded in 2023.

In November, the United Nations World Tourism Organization (UNWTO), reported that “International tourism is on track to reach 65% of pre-pandemic levels by the end of 2022”. January to September 2022, Europe led the global recovery with 477 million arrivals which was a 126% increase over 2021 and 81% of pre-pandemic levels. Over the same period, the Americas saw an increase in arrivals of 106% compared to 2021 which was 66% of the 2019 pre-pandemic levels; two sub-regions of the Americas - the Caribbean and Central America both reached 82% of their 2019 pre-pandemic arrival levels. Tourism arrivals in the Caribbean have been especially good in 2022 and the region has in fact, led the Americas in the recovery.

The robust recovery of tourism globally, is also reflected in other sectors of the travel and hospitality industry, specifically air travel and the accommodation sectors. For the period January through August, air seat capacity in the Americas had reached 76% of 2019 levels and by Thanksgiving (November 24, 2022), the Transportation Security Administration (TSA) checkpoints’ numbers in the United States had reached 94% of 2019 levels.

In the accommodation sector, as per industry publication ‘Hospitality On’, 3rd Quarter results for major hospitality groups like Accor, Hilton, Marriott and Hyatt indicate that they are back on the road to profitability. The CEO of Marriott International - the largest hotel company measured by number of rooms - reported that their 3rd Quarter performance was outstanding with significant increases in indicators like Revenue per Available Room (REVPAR) up 36.37% and adjusted Net Income up 68.4% over the 3rd Quarter 2021. Also in the accommodation sector, Skift® is reporting that “Airbnb Posts Best Quarter Yet on Relentless Travel Demand”, referring to the 3rd Quarter.

In the cruise sector, cruise lines are reporting record bookings in the 4th Quarter. For example, MSC Cruises reported their best month of bookings ever in October and Royal Caribbean Cruise Lines reported that Black Friday 2022 was the single largest booking day in the company’s 53-year history.

The particularly good tourism arrival performance in the Caribbean underscores why the region has led the Americas in tourism recovery. At the end of October 2022, the region had already recovered 87% of its 2019 stopover arrivals. From January to October 2022, the United Stated Virgin Island (USVI), Puerto Rico, the Dominican Republic and Curacao had recovered over 100% of their year-to-date (YTD) 2019 arrivals. Cancun, which is the Mexi- Caribbean had also recovered over 100% of their 2019 YTD numbers while Aruba was a close 97% recovery over the same period. With such a strong performance in the Caribbean region, some islands have already moved from recovery mode to growth mode.

At this time the arrival forecast for most of the Caribbean is sunny and bright. Could there be intermittent clouds gathering on the horizon? What could change this positive forecast?

The biggest cloud on the horizon is the challenging economic environment in the major source-markets for the Caribbean. There is high inflation in some of these markets, coupled with major disruptions in the global supply-chain. In addition, there are increasing energy prices which are exacerbated by the Russia-Ukraine conflict.

The Federal Reserve in the USA and other Central Banks are using the tool of “increased interest rates” to temper the stubbornly high inflation. The major concern that the economists have with this “toolkit” is the risk of tipping these economies into recession. Recession in the major markets would be a problem for the Caribbean - the region that can least afford any hiccups - in this season of robust tourism recovery. Most nations of the region are dependent on tourism to make a significant contribution to the Gross Domestic Product (GDP).

Indicators are trending in the right direction in the USA, the Caribbean’s largest source- market. Gas prices are the lowest they have been in a year, unemployment remains low and inflation is trending down. If these trends continue and are replicated in the other major source-markets, then the Caribbean should see explosive growth in tourism arrivals for the immediate future and beyond. The question is...are we ready?

For years now, destinations have been using arrival numbers (stopover and cruise) as a measure of their tourism performance. Earnings have also been used but using gross earnings from tourism as a measure can be misleading. Internationally, tourism earnings are calculated by multiplying the number of visitors by the per person expenditure.

In the case of the Caribbean, these gross earnings can be misunderstood as these figures include payments to all service providers such as accommodation, food and beverage, transportation and attractions as well as taxes and fees on airline tickets and the like. Given that scenario, what percentage of these earnings make it to the country’s coffers? How much is available to these governments that can be used to prepare these destinations for future rapid tourism arrival growth? Are water systems, electricity grids and communication systems robust enough to cope? Do beaches and attractions have the carrying capacity to handle the increased numbers? In all of this, are there adequately trained staff available within the sector? On a given day when an island is full to capacity with stop-over visitors and there are 3 or 4 mega-cruise liners in port, can the transportation network and the attraction sector cope?

Tourism is good for the Caribbean especially in the areas of employment (providing jobs) and generating foreign exchange. However, tourism development has to be properly planned and effectively managed if the true benefits are to redound to the destinations and its citizens.
A tourism product that is properly planned and managed can be truly beneficial to a destination but over-tourism can also be detrimental, particularly to a smaller island destination.

As we begin 2023, the forecast for Caribbean tourism is sunny and bright however, we need to be aware of the intermittent clouds on the horizon.

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