The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian tourism industry is undergoing “a metamorphosis” that will start to reverse the 2.4 percentage point decline it has suffered to its share of Caribbean stopover visitors since 2007.

Robert Sands, Baha Mar’s senior vice-president of external and governmental affairs, told Tribune Business he was “cautiously optimistic” that the Bahamian tourism/hotel sector had “seen its worst days”.

His confidence that the Bahamas will start in 2014 to reverse a two-three year decline came after Moody’s, the Wall Street credit rating agency, expressed concern about this nation’s continued loss of tourism competitiveness.

Moody’s, in its latest country analysis on the Bahamas, noted that 2012 stopover visitor numbers were still 7 per cent below the pre-recession peak.

And, with stopover visitor numbers down 7.3 per cent year over-over-year for the first eight months of 2013, the rating agency said the Bahamas was continuing to lose market share to cheaper Caribbean rivals.

Drawing on Caribbean Tourism Organisation (CTO) statistics, Moody’s said the Bahamas’ share of total Caribbean stopover visitors had slipped from 10.2 per cent in 2007 to 9.1 per cent in 2010. And this number had fallen even further to just 7.8 per cent in 2013, a loss of 2.4 percentage points share in six years.

Over the same period, the Dominican Republic saw its share of Caribbean stopover visitors grow from 26.6 per cent in 2007 to 27.5 per cent in 2010, and then jump further to 30.2 per cent last year.

Cuba, too, saw a similar pattern of growth, with its Caribbean stopover share increasing from 14.4 per cent in 2007 to 16.9 per cent in 2010, and on to 16.8 per cent in 2013.

Jamaica, regarded as a relative economic basket case, also saw its Caribbean stopover share increase slightly over those six years - from 11.4 per cent in 2007 to 12.1 per cent last year.

“The Bahamas has been losing market share to other Caribbean destinations, and the loss is more pronounced if destinations in Mexico are factored in,” Moody’s warned.

“The erosion of the country’s competitive position explains why tourism revenues have yet to recover to 2007 levels.

“In addition, average daily tourist revenues are down, as hotels and airlines continue to offer discounts to attract consumers. Tourism earnings have been depressed also by shorter visits and lower spending per visitor.”

None of this is good news for a Bahamian economy where tourism is the largest industry. The seeming loss of competitiveness will also raise concerns about whether this might be exacerbated by Value-Added Tax’s (VAT) pending introduction on July 1, given that many fear the tax may increase the sector’s already-high price levels.

Mr Sands, in response, acknowledged that the Caribbean’s highest tourism growth rates had been achieved by the “mass market destinations” that offered “a lot of variety” in the hotel product mix.

“From a Bahamian perspective, it’s fair to say we have to continue to emphasise the value aspect of our products and services,” he added, in a nod to the ‘value for money’ concept.

“For the Bahamas to continue to compete, that price/value relationship has to continue to be emphasised.”

The Baha Mar executive added that another factor behind the Bahamas’ market share loss was the closure of hotels such as the Nassau Beach, and subsequent loss of room inventory, which meant the Bahamas had “a smaller base attracting less customers”.

Mr Sands, though, expressed optimism that Baha Mar’s $2.6 billion Cable Beach expansion, together with the re-opening of the Grand Lucayan’s Reef Village and Family Island-based tourism projects, would narrow the ‘product gap’ with the likes of the Dominican Republic.

“There’s no question in my mind that with Baha Mar coming online, both from a quality product and price/value relationship perspective, and with the Melia becoming all-inclusive within 12 months, that will add to the dynamics that will put the Bahamas in a position to regain and increase its market share,” Mr Sands told Tribune Business.

“One is always concerned when you lose market share, but the Bahamas is going through a metamorphosis as we speak. We will see tremendous change and transformation in New Providence, see some of that in Grand Bahama, and are going to see some of that in the Family Islands.

“I am cautiously optimistic for the future,” Mr Sands added. “That this decline, which has been for almost two-three years, we’re going to make our way out of it and head north rather than south.

“I am cautiously optimistic that we have seen the worst days, and that better days lie ahead of us.”

Moody’s agreed with Mr Sands’ outlook to some extent, adding that the tourism industry and wider Bahamian economy should benefit from the improved US outlook.

With US consumer confidence improving, and the jobless rate falling, the rating agency said: “Over the last decade, growth dynamics in the Bahamas have become increasingly linked to the US economy, while changes in the US unemployment rate have exhibited a correlation with fluctuations in tourist arrivals in the Bahamas.”

And Moody’s also agreed that Baha Mar and other resort projects were “expected to improve the quality and variety of the Bahamas’ tourism product”.

But, while noting that Baha Mar would increase the Bahamas’ total hotel room inventory by 10 per cent when completed, and create thousands of jobs, Moody’s reiterated concerns that it might ‘cannibalise’ or split the high-end visitor market with Atlantis.

“Its overall economic impact remains ambiguous, as additional capacity may cannibalise the market share of existing hotels and casinos,” the rating agency said.

“The key question is whether the new resort will be able to attract a different tourist demographic compared to the existing family-oriented offerings, and if it will enhance the Bahamas’ tourism competitiveness in promising new markets such as Asia Pacific and Latin America.”

Emphatically rejecting Moody’s concerns, Mr Sands told Tribune Business: “We are adamant on our position on that. We will complement Atlantis.

“We are going after two different market segments, and we will diversify the areas we generate business from. There’s no question that Latin America, South America, Europe, parts of North America and Asia Pacific are going to be new areas of development, from which all the Bahamas will benefit.”

“We’re opening up new opportunities for growth,” Mr Sands added. “We are satisfied there should be no cause for concern. Atlantis is family-focused, adult friendly. We’ll be adult focused, family friendly.”