Much is being written about the expansion of hotel rooms now and projected for the immediate future. This expansion, almost entirely by Spanish hotel interests, is quite remarkable. But the enthusiasm it has aroused, I fear, is deluding some people into believing that this will be a massive financial windfall to the country. To put the matter in its true perspective, I set out below some of the pertinent data on the real value of tourism.
NET EARNING VALUE
Tourism is being given greater credit for its foreign earnings than is the case in reality. What is of value to Jamaica is the net foreign exchange receipts which is the amount remaining in the country after expenditure on imports of goods and services that cannot be obtained locally. The net retention is 34 per cent of gross receipts. For every US$1 of receipts Jamaica retains only US$0.34.
This places the net earning value of tourism at a distant third when compared with the net receipts of bauxite/alumina or remittances. Indeed, the net receipts of tourism are 32 per cent of remittances and 55 per cent of bauxite/alumina earnings.
These data are taken from a study conducted in 1997 and may have since changed, positively or negatively, but not sufficiently to alter the base of the argument.
The question that will naturally arise is how can this low percentage of net receipts be improved?
This brings us to the major import categories for tourism.
A study done by Dr. Omri Evans shows the extent of leakage by way of imports. The study shows that 57 per cent of total imports of linens, towels and sheets are imported; 49 per cent of carpets and drapes; and, 45 per cent of electrical items. The reasoning given by another study, is price and lack of quality, availability and quantity. Of these, quality and availability are the most important factors in decisions to import.
On the other hand, what about increasing local supplies to the industry to save foreign exchange? The Evans study shows the extent of the existing linkages as shown in Table 1.
It is obvious that there is little or no room to increase the sale of local products to the industry since the percentage of sales is already very high.
The employment content of tourism is much more beneficial. A study by Pacific Analytic in 1997 showed that tourism employment was 7.6 per cent of total employment in Jamaica. At that time employment was 72,800 persons.
Undoubtedly, it is somewhat higher now. Total tourism employment, direct and indirect, is much more as it takes into account the multiplier effect in related areas.
A VERY VALUABLE INDUSTRY
This total figure in 1997 was 160,762 or 17 per cent of all employment. Comparing this figure with other major employment sectors, tourism is the second highest employer, next to agriculture at 21 per cent of the total labour force. This makes tourism a very valuable industry.
Another point that is often argued is the cost and benefit of tourism to government. The Pacific Analytic study answers this. The direct cost to government to support the industry in 1997 was J$1.595 billion. The estimated revenue was J$4.012 billion, or two times greater than cost.
Taking an overall look at the contribution of tourism to the macroeconomy, see Table 2.
The conclusion can be drawn that tourism, at an average contribution of six per cent, is of relatively small value, even though it ranks with agriculture and mining. The comparative contribution of other sectors to GDP is set out in Table 3.
The real value of tourism then is in the employment it generates.
The full potential of the industry has not yet been exhausted bearing in mind the possibilities for health tourism, heritage and the environment.
Of course, all this is predicated on continuing to operate the industry on a low average room rate and low average occupancy. The existing plant can produce far greater returns if there is a movement to better grade hotels and greater promotion and advertising expenditure on the product.
HIGHER ROOM RATES
Unfortunately, of the hotels in Jamaica, only some can be upgraded to higher room rates. Hence, not too much improvement can be expected here. But for the future, this must be borne in mind. The proposed Harmony Cove complex in Trelawny, with five hotels of five-star rating, is a move in the right direction.
Tourism, therefore, should not be overvalued or undervalued. Taken as it is, it is still one of the prime movers of the economy.
Opportunities for Linkages Between the Tourism Industry and Other Sectors, 2001
Vegetables and starches - 96.1
Fresh fruits - 90.6
Canned fruits - 74.0
Dairy products - 89.7
Meats - 80.6
Seafood (fresh) - 90.3
Seafood (frozen) - 74.3
Alcoholic beverages - 82.3
Non-alcoholic beverages - 94.9
Percentage Contribution of Tourism to GDP 1996-2004
1996 - 5.5
1997 - 5.7
1998 - 6.0
1999 - 6.1
2000 - 6.4
2001 - 6.2
2002 - 6.1
2003 - 6.3
2004 - 6.5
Contribution to GDP - Constant Prices (%) 2004
Distributive Trade - 21.9
Transport, stores, communication - 13.9
Manufacturing - 13.8
Producers of gov't. services - 9.9
Construction and installation - 9.8
Financing and consumer service - 8.8
Edward Seaga is a former Prime Minister. He is now a Distinguished Fellow at the University of the West Indies. Email: email@example.com.