David Jessop | New technology disrupting Caribbean business
Will innovative or new technologies become a threat to vested interests in the Caribbean?
In many parts the world, innovative technologies are helping create new markets and add value by disrupting existing business networks in a manner that the existing market may not expect.
The effect usually is to increase competition, reduce prices and restructure a market to find new consumers, but in ways that also alter the behaviour patterns of an existing market, threatening entrenched interests.
Typical examples of this are the electronic taxi-hailing services of which Uber is the best known, and Airbnb, which enables individuals to rent out their usually privately owned properties to visitors.
Both developments are led by the high penetration of mobile usage and broadband access; both demonstrate cross-border asset sharing, a new aspect of economic globalisation; and both are already proving disruptive to existing business models,
This is because in nations where these services are available, they are causing significant numbers of consumers to abandon the often ultraconservative vested interests that operate near cartels on high-cost taxi services or, in Airbnb's case, are enabling visitors to stay at locations other than hotels in order to have a more authentic experience of being in a destination.
Some newer technologies have already touched the region and are now taken for granted. They include externally owned and run booking engines for hotels, flights and car hire, and sometimes locally based sites offering the discounting or the selling-up of vacation add-ons. In addition, Amazon and eBay and international courier services have made goods available in many countries in the region, obviating some travel for shopping to the US; and online direct and indirect marketing using social media is displacing traditional models of selling vacations and destinations.
In a quite different way, another innovative and potentially disruptive technology that is developing rapidly, and is of particular relevance to small islands and discrete locations, is the all-electric vehicle. EVs, as they are known, have already begun to be imported into the region in the form of cars and vans for general use.
In Barbados, for example, a young company, Megapower Limited, is selling and operating EVs. It imports the all-Electric Nissan LEAF, builds and manages solar carports, and is in the process of establishing, with some difficulty, a growing network of strategically located charging stations across the island. Its owners observe that Barbados, with its relatively short driving distances, flat terrain and sunshine, make the island, and some others in the Caribbean, outstanding locations for EVs.
Challenge vested interests
In a tourism-related example, Cayman Automotive is shipping electric cars to Cuba for use on Cayo Largo, a tourist island about 50 miles south of Havana that is being developed as a fully eco-friendly tourist destination. The vehicles will service the destination's seven hotels, which are linked by a single paved road; and on Cayman itself, EVs are now available for rental alongside hybrids and standard vehicles from Budget-Rent-A-Car, which has been promoting an emissions-free choice to visitors as helping to protect the islands's natural environment.
Moreover, in the near future, the related battery technology that makes this possible will become hugely disruptive. As the range and power of such vehicles increase and demand grows, Caribbean governments will find themselves caught between their professed desire to be greener and the very high import duties they now charge on EVs and related equipment.
At that point, they may find any prior reluctance to show leadership or vision and to become first movers will see media attention and visitor imagination rapidly overtaken by other more flexible competitor destinations.
These commonplace examples are, however, just the start of other forms of disruptive innovation that the region may have to accommodate.
They include bitcoin, which sees itself as a transmittable global digital currency beyond the control of individual states, but which has also been associated with criminality; three-dimensional printing which, when scaled up, is capable of constructing buildings and even producing in situ replacement body parts or battlefield weapons; and big data that in future will be brought together from multiple global sources to enable marketing to the individual of almost anything on a personally tailored basis.
There is also a real possibility of passenger-carrying electric aircraft that in theory could do away with pilots, and driverless vehicles.
While each poses a challenge and all are already exist or are being trialled, the present focus remains on Airbnb and Uber-type taxi services.
This is not just because taxi drivers have political clout and can find willing politicians prepared to defend the status quo, or because hoteliers may place pressure on government to impose equivalent levels of taxation on those who rent out their properties.
Rather it is because they challenge vested interests of just the kind that are present in most countries in the Caribbean. In the region, they are in politics, in government, in much of the private sector, and in the unions; and in many respects, when it comes to competition and lighter regulation, remain unreconstructed, despite much of the rest of the world, including some socialist countries having accepted a more liberal economic environment.
The rise of disruptive technology also raises questions about the type of tourism destination some parts of the Caribbean might become, and about the extent in the medium term small nations can meld new technologies that visitors come to expect, in ways that provide local advantage. They also cast doubt on Governments' ability to compromise between local political pressures, the possible erosion of their tax base, and changing trends in visitor demand.
To understand how challenging a failure to embrace disruptive innovation may be to tourism, one only has to look at the critical online comments in relation to the non-appearance of an Uber taxi service in Puerto Rico, or the decision by the city of Paris to tax Airbnb rentals.
They and other examples in India, the United Kingdom and elsewhere demonstrate how vocal consumers can become when they are seeking to attract an online audience to place economic and political pressure on a destination to change its approach.
This suggests also that in the Caribbean the tourism industry or governments may wish to consider pre-emptively the effects of the disruptive, as the global prevalence of these technologies increases.
These are all matters to be considered now, rather than to be left to the future and chance. It is about knowing how and when to respond when new technology becomes the normal in the minds of consumers, whether local or overseas.
David Jessop is a consultant to the Caribbean Council.