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The impact of the US economy on Jamaica's tourism industry
Dennis Morrison
Wednesday, October 17, 2007
ACCORDING to the Caribbean Tourism Organisation (CTO), up to the middle of 2007 vacation business from the US market to most foreign destinations was weak. It was also the case with respect to domestic destinations.
Dennis Morrison
This weak demand and the new passport requirement for US citizens travelling by air significantly affected Jamaica's stop-over visitor arrivals, as it did a number of other Caribbean destinations.
Recent statistics published by CTO indicate that while the region registered substantial growth in business from Canada (8 per cent) and Europe (4.5 per cent) for the winter months, US business slipped by 5.0 per cent.
In the cases of the Bahamas, Jamaica and St Lucia, the decline was in double digits, while for several other countries it was in single digits. The heavy dependence of the Jamaican industry on the US market meant that the fallout in arrivals from that source had a major impact on the island's overall performance during these months.
Published data from the Jamaica Tourist Board show that the impact of the US passport requirement may be reduced in the period ahead. In the month of January 2007 when the requirement took effect, stop-over arrivals to Jamaica from the USA went down by 9.6 per cent and this was followed by declines of 14 per cent, 12.5 per cent and 15 per cent in February, March and April respectively. But US arrivals fell by lower rates of 7.3 per cent and 6.0 per cent in May and June respectively, even before the temporary waiver of the requirement granted for the summer period took effect.
As a result of the heavy fall in US business, overall stop-over arrivals to Jamaica decreased by 3.7 per cent for the January to April period, compared with the corresponding period of 2006, and for the first half of the year the rate of decline was less at 2.9 per cent. Record growth in arrivals from the Canadian and European markets played a big part in moderating the extent of the fallout. Indeed, arrivals from Canada climbed by over 27.7 per cent, while those from Europe were up by 13.6 per cent. Based on the general economic outlook and, in particular, the strength of the Canadian dollar and the euro, the robust demand for travel from these markets can be expected to continue in the immediate term.
From all indications the US passport issue should play a lesser role in the coming winter as the backlog of applications is reported to be out of the way. The outlook for that economy is, however, not encouraging. Most important is the weakening of consumer confidence linked to the slump in the housing sector. Since this sector accounts for nearly a quarter of the US economy, it is expected that the problems it is experiencing will continue to be a drag on economic growth.
The problems in the housing market caused by the increased level of defaults among sub-prime mortgage borrowers are being reinforced by the decline in real earnings for non-management workers. On the other side, however, middle-upper and upper income households are showing strong consumer spending patterns. The US economy is also still exceeding projections in terms of the number of new jobs being created. Moreover, the larger-than-expected cut in interest rates by the US Federal Reserve is intended to ease the credit crunch and slow down the slippage in the housing market and its impact on the overall economy.
The importance of the US economy and travel market to the Caribbean tourism industry cannot be overstated. While not being affected by the passport requirement, the US Virgin Islands nevertheless saw its visitor arrivals from the USA go down by 4.4 per cent for the January-June period. And Puerto Rico also recorded lower arrivals.
Least affected by the turbulence caused by the passport requirement and slower US economy have been the luxury or upscale end of the vacation business.
As indicated earlier, consumer spending by middle-upper and upper income groups is still strong, and this inclues spending on travel, but Europe and other destinations are providing stiff competition to the Caribbean, particularly for summer travel. This means much work has to be done to ensure strong growth in an environment of greater uncertainty in our major market and heightened competition from other destinations.
Dennis Morrison
Wednesday, October 17, 2007
ACCORDING to the Caribbean Tourism Organisation (CTO), up to the middle of 2007 vacation business from the US market to most foreign destinations was weak. It was also the case with respect to domestic destinations.
Dennis MorrisonThis weak demand and the new passport requirement for US citizens travelling by air significantly affected Jamaica's stop-over visitor arrivals, as it did a number of other Caribbean destinations.
Recent statistics published by CTO indicate that while the region registered substantial growth in business from Canada (8 per cent) and Europe (4.5 per cent) for the winter months, US business slipped by 5.0 per cent.
In the cases of the Bahamas, Jamaica and St Lucia, the decline was in double digits, while for several other countries it was in single digits. The heavy dependence of the Jamaican industry on the US market meant that the fallout in arrivals from that source had a major impact on the island's overall performance during these months.
Published data from the Jamaica Tourist Board show that the impact of the US passport requirement may be reduced in the period ahead. In the month of January 2007 when the requirement took effect, stop-over arrivals to Jamaica from the USA went down by 9.6 per cent and this was followed by declines of 14 per cent, 12.5 per cent and 15 per cent in February, March and April respectively. But US arrivals fell by lower rates of 7.3 per cent and 6.0 per cent in May and June respectively, even before the temporary waiver of the requirement granted for the summer period took effect.
As a result of the heavy fall in US business, overall stop-over arrivals to Jamaica decreased by 3.7 per cent for the January to April period, compared with the corresponding period of 2006, and for the first half of the year the rate of decline was less at 2.9 per cent. Record growth in arrivals from the Canadian and European markets played a big part in moderating the extent of the fallout. Indeed, arrivals from Canada climbed by over 27.7 per cent, while those from Europe were up by 13.6 per cent. Based on the general economic outlook and, in particular, the strength of the Canadian dollar and the euro, the robust demand for travel from these markets can be expected to continue in the immediate term.
From all indications the US passport issue should play a lesser role in the coming winter as the backlog of applications is reported to be out of the way. The outlook for that economy is, however, not encouraging. Most important is the weakening of consumer confidence linked to the slump in the housing sector. Since this sector accounts for nearly a quarter of the US economy, it is expected that the problems it is experiencing will continue to be a drag on economic growth.
The problems in the housing market caused by the increased level of defaults among sub-prime mortgage borrowers are being reinforced by the decline in real earnings for non-management workers. On the other side, however, middle-upper and upper income households are showing strong consumer spending patterns. The US economy is also still exceeding projections in terms of the number of new jobs being created. Moreover, the larger-than-expected cut in interest rates by the US Federal Reserve is intended to ease the credit crunch and slow down the slippage in the housing market and its impact on the overall economy.
The importance of the US economy and travel market to the Caribbean tourism industry cannot be overstated. While not being affected by the passport requirement, the US Virgin Islands nevertheless saw its visitor arrivals from the USA go down by 4.4 per cent for the January-June period. And Puerto Rico also recorded lower arrivals.
Least affected by the turbulence caused by the passport requirement and slower US economy have been the luxury or upscale end of the vacation business.
As indicated earlier, consumer spending by middle-upper and upper income groups is still strong, and this inclues spending on travel, but Europe and other destinations are providing stiff competition to the Caribbean, particularly for summer travel. This means much work has to be done to ensure strong growth in an environment of greater uncertainty in our major market and heightened competition from other destinations.
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