Tourism: A fair and honest review

The following is an exerpt of a comment I recently posted on the Progressive Minds blog.  I feel the state of our tourism industry can be described with a fair and honest review, no spin necessary.  Spin only confuses people and takes away from the real efforts of those trying to improve our overall situation.  So, without further adu, here is my second quarter tourism report.

Efforts to boost air arrivals have been successful for the first quarter resulting in a net increase in visitors.  Business travellers have been increasing frequency of visits over the winter thanks to the lower cost airlines.  This increase has caused our traditional low season to start reaching for a high which is encouraging for future tourism development.
Due to new US passport regulations introduced in January, seasonal tourism numbers for April took a slight decline and we expect this decline to continue in the following months as Americans adjust to the new requirements.  Thankfully, the US immigration office has recently reconsidered their passport policy and opted to delay the requirement until October, only requiring travellers to have photo ID and proof of a passport application. This means that while we may be facing a slight decline in the months of April, May and half of June, we should see a resurgence in late June carrying through the summer for a good season overall.

 

Hopefully this added delay will give Americans time to adjust to the new requirements and we should expect another prosperous tourism season next year thanks to all the great efforts and hard work of our Tourism Ministry

Tourism may look good now, but where will we be in a few months?

While the Premier may be ‘excited’ by the increase in number of tourists visitors, I still remain unconvinced that this year will be a good year for tourism.  In the past I have written about the potential for the new US passport regulations to have an impact on our tourism industry.  Another issue that may have impact on this years tourism season are Ajustible Rate Mortgages and how they have affected the US housing market causing a reduction in tourism spending this year.

Today, there was an interesting post on one of my favorite economics blogs – http://bigpicture.typepad.com – that was suggesting potential tertiary market impacts caused by the slowdown in the housing sector.  One potential slowdown that was listed was airlines, which got me thinking further about travel.

Back in Feburary I wrote about the potential impact rising interest rates may have on the housing market.  This being that many Adjustable Rate Mortgages were given out by lenders when interest rates were low and now that interest rates have risen, those attractive low rate adjustable mortgages have turned into high rate ones which have stretched the budgets of many beyond their expectations.

This stretch has caused many to begin to try to put their homes on the market in hopes of selling prior to foreclosure.  This also means that the budgets of many individuals who rely on such mortgages are now stretched further then they once were.  When an individual’s budget is stretched, they’re more likely to cut out luxuries such as fancy vacations to destinations such as Bermuda (especially when adding the hassle factor of not having a passport) in favor of cheaper vacations.

Will the downturn of the American housing sector have a negative impact on our tourism market?  Perhaps.  Is it a good idea to get Bermudians all riled up in believing that tourism is going to be great this year?  Well I suppose an election is just around the corner.

Is a tourism crisis looming on the horizon?

The following was sent in as a letter to the editor that is to have appeared in last friday’s edition of The Royal Gazette.  Unfortunately I could not find it online so I cannot provide a link.

Who out there is still reeling from the shock of the Southlands hotel announcement? Does it make sense to destroy some of the last truly historic representations of Bermuda for all generations to come in order to build a nice fancy 5 star hotel? Is it worth the sacrifice of our environment? Is it worth the strain on our infrastructure? Is it worth the extra cars on our roads, the extra people in our streets and extra ex-pats on work permits? Worse, what happens when we start to see the impacts of the new US passport requirements introduced in January?

“We don’t have any unemployment” claims Immigration Minister Derrick Burgess in a Feb 28th Royal Gazette article. If we have no unemployment, how are the hundreds of jobs of this proposed hotel going to be filled?

“If we do not have the capacity as a community to meet the work force demands of the construction … management and operation of the development …, we simply place additional stresses on our social infrastructure in the area of affordable housing, increased traffic congestion, additional stress on our already struggling health care system, increased crime and so on” suggested director of professional and career education at Bermuda College, Dr. Euginie Simmons.

Where are all of these extra workers going to be housed? A 10 Storey Housing Complex has been proposed as part of the plan. This when there are now more then 583 people on the housing waiting list, do we not have bigger concerns on our hands? If we must use special development orders and build 10 Storey housing complexes, why are we not using them for our people first and foremost? Why are we not solving the crisis at hand rather then taking the piecemeal approach of building housing that is barely affordable for many Bermudians?

“The intention is to take Bermudian staff to Jumeirah hotels overseas as part of their training programme so they can learn and match the high standards of the luxury hotel chain”, suggested one Royal Gazette article on the project. Who are these Bermudians? Who will be paying for the travel and training? How are they going to be convinced to live in the desert in 118 degree heat in order to get trained on working here?

Top CEO’s know to ask themselves a very simple question whenever they are approached with a new idea of how to do things better. “What problem does it solve?” Ask yourself this same question, what problem does this hotel project solve? Is it possible we’re creating a solution for which there is no problem? So much so that it needs to be rushed without following proper planning procedure that could result in a development worse then Berkeley?

Why do we need a new 5 star hotel? Why do we need 300+ new suites when we only have a short peak season and many days out of the year our hotels struggle to fill rooms? Again, are we creating a solution for which there is no problem? Bermuda needs to do more about tourism itself long before it gets more new rooms. It needs to improve the level of service at our present hotels. We need a better nightlife, better daytime entertainment, more activities and events to draw people here. How are we going to improve the attitudes of those working in our service industry? A casino isn’t the answer, its nothing new, it’s been done before and will only bring more problems.

What happens if the new US requirement for American citizens to have a passport to reenter the country causes a major drop in our tourist figures? According to an August edition of the New York Times, only 27% of Americans are believed to have passports. What happens if the vast majority who would have chosen to take a Bermuda vacation instead opt to travel within the US rather then go through the hassle of getting a passport?

“This is going to have a tremendous negative impact” said Roger Dow, president of the Travel Industry Association, which represents the nation’s largest airlines, hotels, cruise lines and car rental companies. “We’re going to have a chaotic situation upon us.”

Last year, 20 percent to 30 percent of cruise passengers used passports as documentation, with the rest using birth certificates or driver’s licenses, said Brian Major, spokesman for the Cruise Lines International Association.

According to Bermuda4u.com, in 2006, 298,973 visitors arrived by air and 336,299 by cruise ship. What happens if some 70% or 235,000 cruise visitors and 209,000 air visitors decide to travel locally in the US rather then putting up with the hassle of meeting the new passport requirements? If even 30% of our visitors don’t show up and tourism represents some 12.6 percent of our $4.857 billion Gross Domestic Product (GDP) like it did in 2005, that represents nearly $175 million that won’t flow into our economy this year alone. If as many as 70% opt not to get passports, that is more then $400 million or an 8.4% drop in our overall GDP. That amounts to more then $6000 for each of the estimated 65,000 people on our island that won’t be flowing into our economy.

Dr. Brown may be very pleased with his ‘banner year’ of arrivals (note that the figure is measured in ‘visitors’ and not tourists), which are up some 23.2% this year. However, one must admit that some things may be out of his control. Let’s roll back a year. Do you remember what happened to the Club Med deal? What happens if we have a large downturn in actual tourist arrivals and very suddenly Jumeirah backs out like KJA did?

Will Southlands be as fruitful as the web that is being weaved around it? Does it make sense to destroy some of our last truly historic representation? Is it worth the sacrifice of our environment, the strain on our infrastructure, the extra cars on our roads, extra people in our streets and extra ex-pats on work permits? Will we truly face a tourism crisis when we start to see the impacts of the new US passport requirements introduced in January? Time certainly shall tell.

Tourism: Year in Review – Part 1

Now that the gazette has launched a better online search engine, I’m trying to sort my way through a bunch of articles focused on last year’s tourism.  Below are some notes I’ve made

Articles

Tourism Arrivals (from july)

“air arrivals were also up by almost ten percent”

“visitors stayed longer”

“first peak season in which all of the Island’s major properties were open for business, meaning there were more beds available and Bermuda did not have to turn visitors away as happened in previous high seasons.”

“Dr. Brown rightly raised a number of risk factors that must be considered carefully.”

These include crime, especially against visitors, complacency and inattention to detail, he said, adding: “Each of these in their own way will detract from the tireless efforts of many Bermudians to grow tourism.”

“Visitors simply have too many choices today, and it takes very little for them to decide against a place where they fear they may not be safe.”

Figures point to tourism boost, Senators hear

“20,345 visitors arrived on commercial airlines last month, compared to 18,743 last year.”

“November increased by 8.55 percent over the same period last year”

Tourism and hotels

“overall arrivals soaring 23.2 percent over 2005 with a total of 641,717 air and cruise visitors. More importantly, air arrivals rose ten percent to 298,973 visitors”

“Dr. Brown … announcing … upscale Southlands development … to … give the industry the same kind of jump start that the Atlantis resort did in the Bahamas .”

“The overall growth in tourism has largely been driven by the surge in cruise arrivals, which increased 36 percent to a record 336,299 in 2006”

“air visitors outspend cruise visitors by an estimated ratio of ten to one”

“visitors’ estimated average spending, cruise visitors contributed just $37.6 million compared to the estimated $320 million air visitors will have spent in 2006.”

“some increase in the number of hotel beds is needed, and this is the impetus for Southlands, the new city hotel and the Golden Hind redevelopment. Before that happens, there will be some 300 beds added at Tucker’s Point, Belmont Hills and Newstead, while Ariel Sands and the Wyndham are also being renovated.”

“what’s wrong with the Southlands development?”

“this plan might be acceptable if there were no other hotel sites available. But there are. From Lantana in Sandys to Club Med in St. George’s there are sites available for redevelopment which will remain vacant even if Southlands is approved.”

“Government … rezone[d] land already slated for tourism at Loughlands — through … a special development order — for housing.”

“There is a risk that an over-supply of hotels is as dangerous as an under-supply, and managing growth and avoiding a glut is just as important as avoiding one.”

Bermuda tourism is in ‘secular decline’ says S&P

Bermuda’s tourism industry is in “secular decline”, unrelated to the damage caused to it by Hurricane Fabian or the September 11, 2001 terror attacks in the US, according to global financial analysts Standard & Poor’s (S&P).

S&P’s findings were related to the longer term

predicted … Island’s Gross Domestic Product (GDP) per head … will continue to rise at an annual rate of 2.7 percent, in real terms, this year and next.

inflation, as measured by the Consumer Price Index (CPI), will continue to rise at 3 percent through 2008.

Standard & Poor’s, which is based in New York, is an international provider of financial intelligence and analysis. Among its numerous lines of business, it issues sovereign creditworthiness ratings, for 113 countries. The S&P report, commissioned by the Bermuda Government, upgraded the outlook for the Island from “stable” to “positive”, as was revealed last month.

“The downturn in tourism reflects a secular decline, not just attributable to September 11, 2001 or due to the vagaries of hurricane damage, which also hit other island vacation destinations.” … “Performance of the US economy is key for Bermuda, as more than 80 percent of air and 90 percent of cruise ship arrivals originate in the US,” the report states.

The decline in tourism has led to the closure of one-third of Bermuda’s hotel capacity since 1989 and has hurt the heavily protected retail sector.

Government figures released last month showed the Island’s GDP per capita for 2005 was $76,403 per head — the highest in the world according to the Central Intelligence Agency World Factbook. S&P has predicted that that figure will be just short of $90,000 by the end of 2008.

The danger of inflation is limited by the Bermuda currency’s 35-year-old fixed parity with the US dollar, S&P adds. “With the dominance of US dollar transactions in the international business and tourism sectors and Bermuda’s dependence on imports (principally from the US), inflation has generally tracked US trends,” the reports states.

“Since a slight up-tick in 2004, owing to public sector wage increases, inflation has run at 3.1 percent per year, and is projected at 3 percent in 2007 and 2008.”

Expect inflation to stay at around 3%, predicts S&P

 

Letters to the editor

“upon entering Bermuda at the airport to greet visitors, there was an entertainer who sang so sadly and looked so sad, one would assume he was moaning as opposed to singing.”  said Milan A. Segall of New York City in this letter to the editor.

note: “Many of my business partners” – we do get many business tourists these days

“On Good Friday I took a visitor over to Dockyard on one of the morning ferries. ” wrote Anne Pearson of Bailey’s Bay, To my amazement nothing was open — there was nothing for tourists to see, buy or eat. No shops open, no museum or Commissioner’s House for them to look around. We came across two elderly lady tourists who were most distressed advising that the public toilets were not only locked but also bolted!”

Thoughts

Perhaps we need more focus on accessible guides on what there is to do?   I heard from a friend that Google has this really cool service where you can send a text message to a google number and it will respond back with directions or information.  Imagine if we did similar for Bermuda?  Put details about Bermuda in a central directory that people can look up digitally via their cellphone.

Do we have enough focus on business tourism?   A great many of our visitors these days are business focused.  Are we missing opportunities to host conferences, retreats and other business oriented opportunities?  Incentive vacations.