The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas has lost the greatest tourism market share of any Caribbean nation in the post-recession years, an International Monetary Fund (IMF) report has revealed, with this nation ranked as the region’s most expensive.

An IMF working paper, ‘Revisiting tourism flows to the Caribbean: What is driving arrivals’, discloses that the Bahamas’ share of the tourism market declined by 3 per cent between 2007 and 2013 - the biggest drop in the Caribbean.

Only Barbados suffered a drop of similar magnitude, with those countries enjoying the greatest increase in market share being the low cost destinations of Jamaica and Barbados - (almost 2 per cent and 4 per cent growth, respectively).

The IMF paper’s findings will provide further ammunition to those already concerned about the Bahamas’ economic competitiveness in tourism and a whole range of industries, as it adds to the perception this nation is a high cost destination that is pricing itself out of the market.

The authors also gave an insight into the forces impacting Bahamian tourism, finding that “price and incomes” had “a significant impact” on visitor arrivals to this nation and the Caribbean.

Yet they noted that price was not a major consideration for the high-end market - the segment the Bahamas is concentrated in.

And the IMF paper also warned that “non-price factors” - experience quality, culture - needed to be superior to price to ensure visitors received value for money. This touches on yet another Bahamian concern.

“Using data covering the period 2000–2013 for 16 Caribbean countries, the paper finds that both price and income factors are found to have a significant impact on tourism arrivals and expenditure, although price elasticity is found to be statistically insignificant for high-end destinations. The number of airlines also has a statistically positive impact on arrivals and expenditure,” the IMF paper said.

“A simple static comparison of 10 Caribbean countries with 18 other beach holiday destinations in the world (including Cancun and Puerto Rico) in 2014 finds that the nominal cost of an ‘average’ beach holiday in the Caribbean is higher than in other parts of the world.

“The result suggests that non-price factors would need to be superior to ensure that the marginal cost of a holiday in the Caribbean does not exceed the marginal benefit.”

The Bahamas was ranked as the costliest destination of the 28 sampled by the IMF paper, which will come as little surprise to many in the resort and tourism industry.

Tribune Business recently revealed how Nassau was ranked as the fifth most expensive city in the world for hotel accommodation.

A survey of 150 cities by GoEuro, a Berlin-based travel search website, and its Accommodation Price Index ranked Nassau behind just New York, St Moritz (Switzerland), Macau in China and Miami when it came to the average price of hotel accommodations.

The IMF paper indicated that the Bahamas was the second most tourism-reliant nation in the Caribbean, behind Anguilla, with the industry accounting for 27 per cent of this country’s tourism receipts.

It showed how tourism arrivals to the Bahamas moved almost exactly ‘in sync’ with US GDP and unemployment growth rates, again not surprising given this country’s dependence on the US for 80-85 per cent of its visitors.

“Historically, economic cycles in advanced economies were transmitted rapidly to the Caribbean through the tourism sector, and this relationship persists today in countries dependent on arrivals from the US (the Bahamas, Belize, St. Kitts & Nevis) and the UK (Barbados, Antigua and Barbuda),” the IMF said.

“However, the great recession left a more profound impact. With output contracting sharply in the US, Canada and the UK, unemployment at elevated levels for many years, and US household net wealth depressed, tourism arrivals fell sharply after the crisis and have remained weak since.”

The IMF paper also showed how tourist arrivals to the Bahamas, which had increased by close to 10 per cent in the years 2002-2007, had fallen by a similar amount between 2008-2013.

And, while this nation’s tourism receipts (earnings) had risen by around 25 per cent between 2002-2007, they had shown zero to no growth between 2008-2013.

“The Caribbean share in the global tourism market has continued to decline, falling to about 2 per cent in 2013 compared to about 2.5 per cent in 2000,” the IMF paper said.

“However, within the Caribbean there are some notable exceptions, namely Belize, the Dominican Republic, and Jamaica, where performance has been resilient. As a result, there has been a shift in market share within the Caribbean.”

This shift has been towards the lower cost destinations and away from the likes of the Bahamas, which provides a potential taste of what may happen when Cuba fully opens to US travellers.

With its lower costs, greater hotel room inventory and appealing culture, Cuba would be well-placed to take market share from the Bahamas, especially as this country’s resort capacity has been declining in recent years.

“While tourism supply expanded in the early and mid-2000s, weaker demand for tourism after the global financial crisis pushed capacity rates down in many Caribbean markets and lowered incentives to invest in new tourism development,” the IMF paper said.

“In a few countries (the Bahamas, Barbados), room capacity has declined in recent years and overall, the number of flights to the Caribbean region dropped steadily.

“Airline companies are reluctant to reinstate or embark on new connections without guarantees that seats will be filled. This is a critical issue to small island economies, which are almost fully dependent on air transport access, and flight changes can have a large, disruptive impact on small tourism markets.”

The Bahamas is pinning its hopes on the $3.5 billion Baha Mar project to turn this situation around.