Caribbean Tourism Report Q3 2009

Q109 Arrivals Fall After a dispiriting 2008, figures for tourist arrivals in Q109 indicate that the Caribbean is continuing to suffer from the global economic slowdown. Of the 14 countries reporting results, only three recorded positive arrivals growth. These lucky few were Cuba (2.0% y-o-y growth), Grenada (1.8%) and Jamaica (3.2%). However, while this performance is highly positive in comparison to regional trends, it remains well below the growth rates of 8-10% annually registered prior to the global economic slowdown. Indeed, many countries suffered heavily, with arrivals slumping by up to 20% y-o-y. Of these, the worst performing were Anguilla (-21.4%), St Maarten (-16.1%), and Barbados and the Cayman Islands (both contracting by 14.3%).

The Caribbean is suffering particularly heavily from the global tourism slowdown owing to its status as a relatively expensive destination - years of foreign exchange inflows means that prices are largely equivalent to those of North America. As a result, while high-end tourists are continuing to visit the region, lower-end tourists may be choosing to visit less expensive holiday destinations. Arrivals in Q209 will be crucial for the performance in the year as a whole, with the period between Easter and July traditionally high season for the Caribbean. After this point, hurricane season will weigh on arrivals yet further.

Focus On Jamaica Given its high crime rates, it comes as some surprise that Jamaica is proving more resilient than most other Caribbean islands during the tourism downturn. In 2008, Jamaica recorded arrivals growth of 3.9% y-o-y, making it one of the best performers that year. Moreover, this positive momentum carried on into 2009, with arrivals growing by 3.2% in the first two months of the year. However, while these initial trends are cause for optimism, we are cautious about their continuation, given the ongoing adverse economic environment. Moreover, while arrivals have been rising, tourist expenditure has not been keeping pace, with expenditure for the first two months of the year actually falling by 1.1% y-o-y.

Offers Received For Air Jamaica The Jamaican government's long-standing efforts to privatise struggling national carrier Air Jamaica received a boost in May, when two offers were received during the bidding process. Although the government will not reveal the identity of the two bidders, the timeline is tight, with the deadline for the privatisation being 30 June. However, this deadline has already slipped repeatedly, with the most recent deadline of 31 March being extended when no offers were received. It is a positive signal that bids have been received, given the current economic climate and the carrier's poor financial performance, with Air Jamaica having more than US$600 million in outstanding loans. With the tourism slowdown further weighing on the airline's value, some investors may hope to acquire it relatively cheaply. However, the government aims to maintain a 20% stake, ensuring that some state support will still be required.