INDUSTRY COMMENTARY

CLICK - Cayman's Lodging Industry Cybercommerce Kiosk (Part I)

by William M Conolly 

Monday, December 1, 2003

There are only a few developing countries that have resources other than their natural beauty, wildlife and an identifiable culture heritage-yet these assets are increasingly in demand by discerning travelers around the world. The importance of the tourism industry as a driving force of any emerging economy for the near future becomes more eminent as it accounts for approximately 30 percent of the world's trade in services.

However, our industry is faced with a myriad of complex barriers that have further impeded sustainable growth at almost every level. These barriers are as a result of increasing world conflicts such as the 9/11 catastrophe in the United States, the Afghanistan assault, and the Iraq war, preceded by the beginning of a global economic recession and what may be termed as a wall street "meltdown" of wealth and later followed by the medical threat of Anthrax, SARS and Mad Cow diseases.

Here in Cayman, like the rest of the Caribbean, short-term fallout in air arrivals has had a dramatic effect on the local tourism industry. Unlike a number of our neighbours however, occupancy continues to decline leaving many to point fingers and wonder what government is doing about it. 

The unfortunate thing about pointing a finger is that while one finger is pointing forward, the other three are usually pointing at oneself. So yes, there is plenty of blame to pass around. Starting from poor decisions of the last and current Ministry, inexperience leadership in the DOT (other than cruise tourism and a deputy that is doing two jobs), CITA, which was supposed to be a powerful force by amalgamating the CIHCA and CTA but seems to have no voice for its accommodation members other than a quiet whisper during one of the many PR photo opportunities with the Director, the private sector for being reactive rather than proactive, and yes myself for not speaking out earlier or leading the charge to affect a change.

As we look around us, there is an increasing number of red flags that are sounding the alarm. Hotel closure, low occupancies, hotels for sale, staff downsizing, and service reduction. To wait any longer will cause irreparable long-term damage to our economy. 

It is time for government and the private sector to act and act aggressively. Real solutions, not marketing 'band-aid' stunts. While it is important to note that it may be difficult to immediately quantify the long-term impact that the 9/11 atrocity compounded by the destination's missed opportunities and a passive marketing approach, will have on our local industry, the magnitude of this crisis can only be measured by the speed in which we recover.

The following was written some time ago but still very much applicable as a contribution to the solutions required.

As we continue to implement our recovery plan, it is important to focus on what the challenges are:

The fear of flying. Consumers lack confidence in the safety of air travel and will opt to drive to nearby vacation spots. They will avoid flying if at all possible, for some time until they overcome the traumatic shock of the terrorist attacks. 

Some people have deliberately avoided flying with American carriers or avoid staying in brand resorts that are US affiliated in fear that these are the most likely targets for terrorist attacks. 

Recovery will not be imminent unless there is a high priority to ensure the vitality of the airline industry.

Increased security at airports has become a "new way of life", resulting in long delays at check-in counters, baggage information, Customs and Immigration process, as well as terminal access points.

The impending recession. Over the past three years, the Caribbean and indeed the Cayman Islands experienced a decline from 5.1 percent to 4.3 per cent in its market share and growth. Prior to this incident, the local industry was already experiencing an eroding GOP and a dismal year-to-date occupancy. 

Because the US is the largest economy in the world in terms of GDP and is the leading Tourism power in terms of domestic tourism, international receipts and spending, what happens in America tends to have a profound effect on economies around the world. 

The global economy was already in a "down mode" and the terrorist attacks further eroded consumer confidence in using discretionary income especially on leisure travel. 

USA outbound travellers only represent about 13 percent of total world travellers, however of these about 80 percent of our clientele come from America and specifically the northeast corridor (including Pennsylvania, New York and DC)

We must now measure where we are in our recovery process and evaluate what further actions need to be taken for a faster recovery.

• How has this affected (short and long-term) our industry?
• How do we maintain and protect our future arrivals and market share?
• What is our contingency plan to encourage additional stayover arrivals?
• What are the Regional Marketing initiatives that relate to these same issues?

The changing needs of the consumer can be seen by the recent appeal for the All-Inclusive product and the resuscitated high quality timeshare product. 

These two sectors have reacted imperiously to the consumer demands and their success is evident in their significant growth of market share compared to the rest of the industry. 

Timeshare is considered the fastest growing vacation and Real Estate industries in the world with an excess of US$ six billion in volume sales. 
For the Cayman Islands however, timeshare represents less than 10 percent of the total number of resorts which may be a contributing factor in why overall stay-over tourism is down 20 percent 

The timeshare sector has been the only sector in stay-over tourism which has continued to show about a three percent growth per annum over the past three years.

The all-inclusive product is an untapped market, which the Cayman Islands has continued to shy away from. For years, it has been perceived that the Cayman Islands Department of Tourism's position on the all-inclusive concept is somewhat misguided. Segments of this market already mirror the client profile that the destination now receives as visitors. 

All-inclusive resorts do not necessarily relate to beach access denial or a decline in restaurant patronage. It is believed that this market segment has not been pursued because of fear that it would infringe on the residents' right to use all beaches as mandated by local laws. 

In an effort to negate the typical generalisation of this niche market, strong parameters must however be established prior to the negotiating process. 

For example, establishing an agricultural program whereby farmers would receive soft loans to promote the breeding of livestock such as chicken and beef in addition to produce items. 

As an island, it is to be assumed that seafood would be readily available; however most of the fishermen fish as a hobby rather than as a means to provide for the local demand. 

The short-term solution is to establish strong alliance with neighbouring countries such as Cuba, Jamaica, and Honduras where seafood can be purchased relatively inexpensively, until such time that a fish farm is established for lobsters, shrimps and snappers. 

This also can be designed as a tourist attraction and established as part of the current Turtle Farm. A dine-around program would also eliminate the fear that restaurants would not be frequented by this type of clientele. 
Further contributions to the economy would be seen by the wholesale purchases of other operating necessities from companies like Jacques Scotts liquor, Kirk's and Foster's Food Fair, not to mention the large amount of promotional dollars that the All-Inclusive market spends on advertising. 

It is fair to note that during the negotiations, it is equally important to consider the social implications like education and housing that would be required for staff, as well as the environmental implications. However, in light of the growing appeal regionally and a recent assessment of the market that indicates a strong demand for this product in the Cayman Islands, it is time that the destination develops a committed strategy to respond to this demand. 

In so doing, it would provide a good product variety for the destination and it may very well be the catalyst for 'rebooting' the arrival figures for Stay-Over Tourism.

Other than timeshare, the only other major contributor has been a dramatic increase in cruise visitors to our shores. While cruise tourism has been the fuel of our economic contributions during these very challenging times, it also has created a larger problem for the long-term sustainable growth of tourism in our islands.

TO BE CONTINUED

Mr Conolly is the President & CEO of Premiere Hospitality Management & Consultants, with more than 25 years of professional experience in managing resorts, condominiums, timeshare villas, and destination marketing, and holds a Master's Degree in Tourism & Hospitality Management.

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