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Weathering The Economic Storm By Leveraging The Strengths Of The Hospitality Sector – Issues And Solutions


The hospitality sector plays a crucial role in the economic welfare of Barbados. The tourism industry in Barbados generates over US$1 billion in revenue each year and accounts for approximately 14 percent of the nation’s total output. Thousands of visitors flock to the island on an annual basis to experience its white sand beaches, indigenous culture,


nightlife, and acclaimed


restaurants.


European visitors, specifically from the United Kingdom, represent the bulk or 40 percent of total arrivals to Barbados followed by the U.S. and Canada which account for an estimated 25 percent and 14 percent, respectively.


Barbados offers its visitors a vast array of accommodations from the quaint, limited service apartment-style hotels to the 3 to 5 star full service resorts to the ultra exclusive private luxury villas. During 2006 and 2007, the island experienced tremendous growth in tourist accommodations most notably in the high end condo and villas sector. However,


like other Caribbean nations,


the tourism industry of the island was impacted by the global economic downturn that began in 2008. Hotel operators saw declines in occupancy levels and responded by dropping their rates, while many developers were forced to put their projects on hold.


Economic green shoots in sight Signs of a modest recovery in the sector, however, commenced in 2010 as tourist arrivals began to improve. Arrivals from Canada and the U.S. recorded the largest percentage growth rates of 17 percent and 13 percent, respectively. The improvement was attributable to increased airlift capacity via low fare carriers from Canada and the


U.S., coupled with intensified marketing efforts. Arrivals from the UK market declined in 2010 but to a lesser degree when compared to the previous year. In 2011, the overall upward trend in arrivals continued to strengthen during the first half of the year and is expected to persist for the remainder. For the first 10 months of 2011, arrivals to Barbados increased by 8 percent year-on-year.


Despite the growth in arrivals, hotels and other tourist accommodations continue to face numerous


challenges, namely that of reduced


average visitor spend. Other challenges faced by hoteliers are high operating costs, specifically food and beverage, energy, labor and insurance costs, and the inability to perform regular scheduled property maintenance due to the competing necessities of operating and financing costs.


Additionally, the reduced earning capacity


limited the ability of these hoteliers to finance renovations and reposition dated properties. The lack of maintenance is also limiting the ability of many properties to raise daily rates and increases the likelihood of negative publicity on social media networks. Uncertainty of recovery and the general weakened capacity for further financing has challenged the debt and equity financiers to find new ways to support new and existing clients through these troubled times.


The extent of the economic recovery in Barbados and the Caribbean is reliant on the speed of the recovery of its main source markets, USA, UK, Europe and Canada. With the possibility of Europe entering a mild recession due to the debt crises of a few of its nations, Barbados and the Southern


In the face of these challenges, the Government of Barbados has sought to develop direct airlift and trade agreements with new markets including China. Currently, 55 - 65 million Chinese travel abroad each year and these numbers are forecasted to increase to 100 million by 2015. Diversifying its major source markets, continually improving connections to major US/ UK hubs and simplifying entry requirements for travelers,


including


simplifying or eliminating visa requirements, will create opportunities for continued growth within the hospitality sector.


Some potential strategies to further drive revenue growth that may prove cost effective include hotel operators leveraging new online technologies in their marketing strategies including monitoring


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Caribbean’s pace of recovery are expected to be slower than their northern Caribbean counterparts whose major markets are the US and Canada which are improving at a healthier pace. The level of financial support the U.K provides will also be a key factor on the impact of the U.K tourism dollar.


Moreover, in November 2010, the U.K. government changed its system of levying an Air Passenger Duty (APD), which places countries into one of four bands with tax increases determined based on the distance from the UK. The Caribbean was placed in band C, the second highest tax category, where passengers can be charged up to 55 percent on the cost of their ticket.


Some analysts and


lobbyists have since determined that there is a direct correlation between the introduction of the APD and a subsequent reduction in arrivals from the UK.


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