Tourism officials warn ‘no V-shaped recovery’ ahead

Forecasting that tourism numbers in the region are unlikely to recover until 2.5 to four years, the Inter-American Development Bank on Monday warned the region’s tourism-dependent economies of the urgent need to boost innovation.

At the same time, the IDB said that the lockdown in Barbados earlier this year had reduced economic activity and delayed the island’s projected economic recovery.

In its first Caribbean Quarterly Bulletin for this year, the IDB noted that most global tourism reports were predicting a two to four year period for full recovery to 2019 levels.

“However, the Caribbean could either lead or lag the global recovery depending upon the specific circumstances in the main Caribbean source countries and in the Caribbean destinations themselves,” the IDB said.

The Imagining a Post-COVID Tourism Recovery report analyzes key drivers of tourism demand in the short term, including the evolution of the pandemic and the COVID-19 vaccine rollout, the economic environment of source countries, the split between business versus leisure tourism and airline capacity, among others.

Barbados is ranked as the 11th most tourism-dependent economy out of 166 countries globally for which data was available, according to the IDB.

This is based on a five-year average from 2015 to 2019 for the total contribution of tourism to total export receipts, gross domestic product and employment for each country.

Given the Barbados economic indicators, the IDB said overall the economic outlook for the economy remained uncertain.

“The first quarter of 2021 was challenging given the recent surge of COVID-19 cases. The lockdown in February not only reduced economic activity but will also delay the projected recovery. As a result, the government estimated a BDS$150 million loss in economic activity for the months of February,” the IDB said in its publication.

Zooming in on the island’s tourism sector, the IDB said it accounted for almost 40 per cent of economic activity and about 33.4 per cent of total employment, about 15,000 workers directly and an estimated 32,000 workers in tourism-related jobs and services.

“The quality of the island’s tourism product has improved over the years from the promotion of ‘sun, sea and sand’ to attracting diverse international investment,” the IDB said.

Prior to the COVID-19 pandemic, Barbados recorded six years of consecutive growth in tourism arrivals, peaking in 2019 when the island welcomed in excess of 850,000 cruise ship passengers and a record 693,000 stay-over visitors.

“In 2020, overnight tourist arrivals fell by 71.1 per cent and cruise arrivals fell by 63.6 per cent. Total visitor spending plummeted due to the decline in tourism activity in 2020. Real tourism expenditure was $413.2 million in 2020, compared to $1.416 billion in 2019,” the IDB noted.

However, the development financing institution pointed out that despite the dramatic fall in tourist arrivals, there was a glimmer of hope in the form of the Welcome Stamp initiative.

“Tourism performed slightly better than originally forecast, as Barbados attracted a number of longer-stay arrivals through the innovative Welcome Stamp programme, and by maintaining low contagion levels until December 2020,” said the IDB.

The IDB has warned that given the hit to tourism and the rise in debt, “Barbados needs to consider some significant risks going forward”.

The report said: “The risks relate primarily to developments in the global and domestic health crisis. The second wave of COVID-19 will have to be controlled on the island before economic activity and tourism can continue. A gradual recovery in tourism, however, depends on the lifting of travel restrictions and the willingness of tourists to travel to Barbados.

“Consequently, it depends on positive developments in the health crisis in the United States, United Kingdom, and Canada, the main source countries for tourism in Barbados. The debt-to-GDP ratio increased in 2020 as a result of the pandemic. The completion of the debt exchange in December 2019 was a milestone in the reform programme and contributed to lowering the debt-to-GDP ratio to 126.3 per cent of GDP in FY2019/2020.”

The island’s debt to GDP now stands at just over 150 per cent of GDP.

Acknowledging that the government has stated its commitment to an ambitious fiscal consolidation and recovery plan, the IDB pointed out that its rising financing needs have been met with a combination of external borrowing and the issuance of the Barbados Optional Savings Scheme, which was expected to fuel a rising debt to GDP ratio.

“Successful implementation of the BEST programme will hopefully limit the long-term scarring of the supply of tourism operators and prepare them for an eventual recovery,” said the IDB.

Olga Gómez, Tourism Lead Specialist at the IDB, said “Over the longer term, Caribbean countries must spur innovation and reinvigorate their tourism offerings”.

“It is no longer enough to depend on the lure of splendid beaches. Tourism destinations need to invest in improving their competitiveness, aligning their tourism products to the broader local and global economic trends, and exploring new and traditional emerging market segments such as global nomadism or nature-based tourism,” said Gómez.

The report pointed out that vaccinations were of paramount importance to both preserve lives and establish the basis for a recovery in tourism, and therefore a general economic recovery in those countries that depended on the tourism sector.

“In summary, it is unlikely that a ‘V-shaped’ recovery will occur. The most likely scenario is a recovery timeframe between 2.5 to 4 years to return to pre-COVID-19 levels of tourism arrivals and expenditures. Volatility in the path to recovery is likely as well. In the meantime, affected firms and workers will need continued support,” the IDB report said.
(marlonmadden@barbadostoday.bb)