Tourists increase but spending low in United States Virgin Islands

By Sasha Harrinanan Thursday, December 8 2011

Tourism-dependent economies in the Caribbean are still feeling the effects, three years on, of the global financial crash and lingering economic crisis that were triggered by the questionable decisions of some international banks, insurance companies and investment firms to invest in or loan money to people within the the United States’ sub-prime home mortgage market.

Tourist arrivals to the Caribbean actually increased in 2010, with 23.1 million more people choosing to stay “over-night” versus taking a cruise and spending a few hours at a port of call.

This has not, however, translated into a return to pre-2008 incremental spending by tourists.

The United States Virgin Islands (USVI) are a prime example of this.

Located close to fellow US territory, Puerto Rico, and one of the Leeward Islands, the USVI consists of three main islands. Saint Croix, St John and St Thomas, along with the much smaller Water Island and several other minor islands.

During the recent Caribbean Media Exchange (CMEx) conference in St Thomas, USVI Commissioner of Tourism Beverly Nicholson-Doty, said per visitor expenditure have decreased even as arrival numbers increased over the last year.

In addition, many of the people who do take a Caribbean vacation spend less time here than did prior to the global financial crisis. The drop in spending is likely due to the origin of USVI visitors and their new economic mind-set, with many now choosing to save rather than spend and others just not having the “extra” money to spend on souvenirs and special tours while on vacation.

“More than 90 percent of USVI visitors come from the United States (while) the Danish visitor represents approximately two percent of total arrivals...For the US traveller, personal income increased by $48.1 billion and disposable personal income increased by $30.2 billion in October of this year. Six in ten Americans or 57 percent are confident they will take a holiday trip this year, which is up from 50 percent in 2010,” Nicholson-Doty said. The commissioner also noted domestic leisure trips were projected to increase by 2.4 percent by year’s end (2011) and that airline passenger demand rose 4.4 percent year-on-year as of June 2011.

Nicholson-Doty said this indicated a “slight uptake” in the US economy which has not yet translated to consumer confidence and its by-product - consumer spending.

The USVI Commissioner of Tourism was speaking last Friday at the opening session of the 20th CMEx conference, which was held from December 1 to 5 at Frenchman’s Reef and Morning Star Marriott Beach Resort.

CMEx is the acronym for the Caribbean Media Exchange programme, which was established in October 2001.

The CMEx mission “is to support and develop the ability of the media, government, the travel and tourism industry and communities to consider the importance of tourism in sustainable development, while lending a hand to the communities involved by sharing relevant expertise, financial and in-kind assistance,” as stated on the cmexmedia.org website.

Nicholson-Doty reminded CMEx20 delegates of just how important incremental spending by visitors actually is to tourism-dependent islands like St Thomas. She broke down the economic impact of tourism on the Caribbean, using statistics compiled in the Caribbean Economic Impact Study and released by the Caribbean Hotel and Tourism Association (CHTA).

“The Caribbean remains ‘the most travel and tourism-intensive region of the world,’ with tourism having an economic impact equal to 14 percent of GDP, 13 percent of employment, 12 percent of investment and 17 percent of exports. Travel and tourism directly or indirectly employs 2.2 million Caribbean people,” Nicholson-Doty said.

The commissioner also said the CHTA study found that seven of the ten countries most tourism- dependent countries in the world are in the Caribbean. In ten years, travel and tourism are expected to account for $70.7 billion of the Caribbean’s gross domestic product (GDP) by the year 2021, up from $48.6 billion this year.

To help ensure the USVI gets access to that pie and to address concerns raised by the general state of the airline industry, the territory’s Department of Tourism has negotiated new direct flights from the US and Canada.

Namely, flights from Denmark, non-stop service from Toronto with Air Canada, increased service out of Miami with American Airlines and service from Boston and San Juan with JetBlue.

Nicholson-Doty said these new airlift arrangements represented more than 200,000 additional seats for to the territory over the next year (2012).

However concerns were raised by USVI residents last Tuesday, when news broke that American Airlines (AA) had filed that day for Chapter 11 bankruptcy in the US.

AA said the decision was taken “in order to achieve a cost and debt structure that is industry competitive and thereby assure our long-term viability and ability to continue delivering a world- class travel experience for customers.”

Although the airline was quick to reassure customers and tourism officials alike that operations would continue as normal at AA and American Eagle, concerns were raised at CMEx20 about possible reductions in seat numbers/flights to USVI and other Caribbean nations.

Nicholson-Doty also mentioned the AA situation, saying it was actually good news for the airline and therefore the region.

“The recent filing for Chapter 11 protection by American Airlines; the predominant legacy airline within the Caribbean, is sure to create concern. However what analysts are saying is that this move would strengthen American Airlines’ market position,” Nicholson-Doty said.

The USVI Commissioner of Tourism then posed some questions about the loss in cruise ship market share to the Mediterranean and other destinations.

“Worldwide, the cruise industry has an annual passenger compound annual growth rate of 7.38 percent from 1990 to 2015. Nevertheless, the Caribbean is losing market share to emerging cruise destinations in the Mediterranean and elsewhere.

As a region how do we address the complaint from cruise lines that the Caribbean has nothing new to offer? How do we help build demand for the region? How can we compete with emerging destinations?” Nicholson-Doty asked of the tourism stakeholders and media representatives present at CMEx20 in St Thomas. The commissioner challenged those present to help find the answers and then to publicise them for the benefit of the entire Caribbean.

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