Caribbean Tourism Report Q1 2007

New This Quarter Cricket World Cup To Boost Arrivals The 2007 ICC Cricket World Cup is to be held in the Caribbean between March and May 2007, which should boost tourist arrivals to the region. Estimates place the number of tourists expected to visit the region for the World Cup at around 100,000. They are expected to spend in the region of US$250mn on accommodation, transportation, entertainment, food and beverages and souvenirs. As such, we would anticipate tourist arrival growth of around 7-8% in 2007, with risks to the upside. We expect the spillover effects of greater tourism to be felt beyond the nine host countries, as tourists extend their holidays on other islands, or seek accommodation outside the host nations.

The region has sought to attract visitors by waiving its current visa regulations for the duration of the World Cup. Known as the Caricom Single Domestic Space, a region-wide visa has been introduced to facilitate intra-regional travel. The visa costs USD100 and is valid within all Caricom countries. This does not merely apply to tourists but also to Caricom residents, who will be able to travel freely within Caricom from 1 February to 15 May 2007. Caricom governments view this as a trial run for proposals to make such an arrangement permanent within Caricom, which would significantly increase intra-regional tourism.

December Figures In Line With Our Estimates Preliminary arrival figures for December 2006 indicate that total arrivals for the year were in line with our estimate of 22,340,000. Although figures for all countries have not been received yet, the Caribbean Tourism Organisation (CTO) highlighted strong performances by Bermuda, the Cayman Islands and the UK Virgin Islands, which recorded y-o-y growth of 29.0%, 26.8% and 20.7% respectively. According to the latest available figures, the best performers in 2006 were the Cayman Islands, Grenada and Bermuda, increasing 46.4%, 15.1% and 12.9% respectively.

Focus On Cuba In this quarterly update, we have chosen to focus on Cuba. The Cuban government has stated that the number of tourist arrivals to Cuba in 2006 fell by 80,000, from 2.2mn in 2005. We believe that this decline stems from concerns regarding political stability in the island, following the illness and temporary replacement of Fidel Castro in August 2006. However, it has become clear that an established succession plan had long been in place, and the transition to the leadership of Castro's brother Raul has taken place smoothly. As such, we expect tourist arrivals to recover in 2007 as political concerns recede. However, a key downside risk to this scenario would be the death of Fidel Castro, which has the potential to spark unrest in the communist state.

New Airline Merger Ends Loss-making Rivalry A commercial alliance between privately-owned Caribbean Star and Liat (owned by the governments of Antigua, Barbados and St Vincent) came into effect on 1 February 2007, pending the eventual merger between the two companies. From 1 February the two airlines have been operating a merged flight schedule. All pre-dating reservations will be honoured, and staff have been proactively contacting passengers in order to ensure that there is no confusion regarding the merged schedule.

The new airline will be known as Liat, The Star of the Caribbean, and will continue to operate the same routes as the individual airlines. The merger ends destructive competition between the two airlines, which operated the same routes in a market too small to accommodate both. Both had been making heavy losses, and the merger should ensure that flight duplication and capacity wastage will be phased out.