Morrison
Last week, the travel and tourist industry got a setback as the swine flu threatened to spread beyond Mexico where the outbreak began. Mexico's tourist industry which, like Jamaica's, is a pillar of economic activity, is now on a downward spiral as the tally of victims has risen among Mexicans and hundreds of American tourists have fallen ill after trips to that country. With travellers becoming skittish about picking up the virus, the European Union indicating it might halt travel to Mexico, airlines cutting flights and Carnival Cruise Lines bypassing Mexican ports, this tourism powerhouse may see its industry grind to a standstill.
The swine flu outbreak has compounded the damage caused by the upsurge in violent crimes by Mexican drug lords earlier this year. Already, hotel occupancy in Cancún has slipped to under 20 per cent when, normally, it would be over 80 per cent, and losses by the industry since the outbreak began have exceeded US$1.5 billion. These have put a huge dent in tourism earnings, one of the country's three leading sources of foreign exchange inflows. Beyond Mexico's dire situation, there are increasingly strong fears that the outbreak might affect travel globally and some airlines are now bracing for a fallout on the scale of the SARS episode.
Diverting vacation traffic
Meanwhile, tour operators have moved quickly to divert vacation traffic originally destined for Cancún and similar Mexican resorts to other Caribbean destinations. Jamaica and the Dominican Republic are well positioned in the short term to take up much of the slack and local hotels have been proactive in working with tour operators to make the transition smooth. The availability of airlift and easy connections to US and Canadian cities are big advantages, as is the appeal of local hotel brands. Most important is the competitively priced new hotel product of the Spanish chains that also operate in Mexico, their marketing muscle and links with key tour operators.
With the diversion of Canadian and US tourists now under way, some local hotels have begun to see a rise in their occupancy levels in what would have been a low period. Depending on the severity of the outbreak they might also get a boost to an anticipated tepid summer season, provided we can deliver quality services from our airports to hotels and to attractions and tours. These are all areas in which substantial investments have been made in recent years that now make it possible for Jamaica to absorb the diverted traffic.
Investments in physical infrastructure and resort development since the late 1990s were the results of a strategic plan by Government to target tourism as a growth area in which Jamaica held or could develop competitive advantage. Alongside this aggressive investment drive, reform of the JTB's organisational structure was undertaken to reinvigorate its marketing apparatus. By 2007, investment totalling over US$3.5 billion had been mobilised in roads, water supply systems, airports, hotels and attractions, while the massive expansion of the telecommunications system complemented this drive.
With new hotel products coming on stream tourist arrivals, which had stagnated in the second half of the 1990s, began to accelerate and Jamaica's growth rate was among the fastest in the region by the mid-2000s, as 500,000 more stopover visitors entered the island in 2007 compared with 2002. Regrettably, the investment boom and expanded visitor arrivals were not reflected in strong overall growth in the economy. While the inflows of foreign direct investment helped to boost the country's foreign reserves and employment in the tourism and construction sectors grew substantially, opportunities for deeper linkages with agriculture, manufacturing and various service sectors were lost. From open hostility on the part of some competing tourism interests to indifference by potential suppliers, the overall atmosphere turned out to be lukewarm, despite the efforts of JAMPRO to facilitate matchmaking between foreign investors and local suppliers.
Still, the tourism sector now has room capacity and critical supporting infrastructure to handle up to an additional three-quarter stopover visitors, or roughly 50 per cent. This is a platform on which to promote rapid growth in arrivals, increased employment and local production of goods and services by linkage sectors such as agriculture, attractions, craft and entertainment. A strong feature of these activities is that there are ideally suited to micro, small and medium-scale enterprises which must be given priority attention as avenues for employment creation and integration of tourism to host communities.
Stumbling block
The stumbling block in this period is the economic recession and particularly in the USA and Europe, our main markets. The sharp loss of momentum is evident from the fact that stopover arrivals increased by less than two per cent in the 2008/2009 financial year against an original growth target of 13.5 per cent. And were it not for explosive growth in the Canadian market we would have had a decline. Nonetheless, the task remains to aggressively hold on to market share in the USA and Europe in the next two to three years, when those economies are essentially going to be in the stall mode while securing continued robust growth in the Canadian market.
Smart use of marketing dollars is a sine qua non, as with scarce budgetary resources we have to find the best mix of public relations, advertising and promotions. In particular, maximum value has to be got from TV advertising, which is a most expensive venture.
Solidifying partnerships is perhaps the area where the best returns can be derived. And it is also the area in which the new entrants to the local industry can have the most decisive impact. What to my mind is the greatest priority in this period is for the resources of the Tourism Enhancement Fund to be used to bring idle landmark cultural heritage assets into our tourism product and thereby put people to work.
Dennis Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.