Editorial | Leverage tourism investment

This week’s groundbreaking by Spain’s Palladium Group for a 948-room expansion of its hotel in western Jamaica is another significant vote of confidence in the island’s future as a tourism destination.

Jamaica must now leverage these investments, and the opportunities they present, to help drive development and push itself up the economic food chain.

Obviously, nobody invests €500 million without having done the hard analysis and being relatively certain that the enterprise will be profitable.

“This is not only one of our biggest investments, to date, but also a statement of our commitment to excellence,” said Abel Matutes, the president of the Palladium Hotels and vice-president of Grupo Empresas Matutes, the family-held outfit that owns Palladium.

But it is not only the Matuteses who are bullish on Jamaica. The Spanish resort chains have maintained a strong positive outlook for the island since they began investing here in the early 2000s.

Indeed, in December, Princess Hotels and Resorts, owned by Grupo Piñero, opened a 1,000-room property in Negril, also in western Jamaica. It is planning to add a casino operation this year.

INHERENTLY VALUABLE

Such investments are inherently valuable and are good for jobs. Over 100,000 Jamaicans work in tourism, the bulk of them in hotels, and the industry, according to government’s statistics, grosses US$4.3 billion.

The new Princess properties have added 1,700 new jobs, and the additional Palladium rooms, which will add to 1,054 existing ones, will directly employ 1,500 workers. A positive aspect of these latest projects is that the investments include housing for workers, although the arrangements under which these are allocated and/or paid for aren’t clear.

Notwithstanding, the concept is, of itself, significant. Indeed, a deficit in Jamaica’s tourism expansion was that housing for the industry’s workers didn’t keep pace with its growth.

The upshot was that,hidden from view, but not far from swanky hotels, many tourism workers lived in less than ideal conditions, including in informal settlements or squatter communities.

The fact firms recognise that how their employees live as an issue in which they have a stake is worthy. However, the direct provision of housing can’t be a substitute for good labour relations practices and decent, affordable wages for workers. Fundamentally, firms are not, and shouldn’t be, in the business of social welfare.

We raise this on two counts. The first is the series of strikes at hotels last year by employees complaining of poor compensation. In the midst of the turmoil, trade unions, which are generally frowned upon in the tourism industry, attempted to get a toehold in the hotel sector.

It is not clear that, though quieted, this issue has been resolved. Notwithstanding, our second point – recent remarks on the worker unrest by Carey Wallace, the executive director of the government’s Tourism Enhancement Fund (TEF).

“Underneath all that smoke (strikes) there are really some positives,” he told The Gleaner at the recent Tourism Resilience Conference.

SHORTAGE OF WORKERS

Jamaica’s officially low unemployment rate (3.5 per cent), he argued, has resulted in a shortage of workers, to the point where there were “more jobs needing people”.

“... The handle is now in the hands of workers,” he said. “The blade has changed.”

How that, if true, is reflected in the price of tourism jobs, and in labour productivity, is a matter to be watched closely. It is notable that, in the face of Jamaica’s fall of unemployment to historic lows, labour productivity continues to decline (by one per cent a year for decades) and economic growth has remained anaemic.

Additionally, while we welcome the investments in Jamaica’s tourism and the higher gross earnings from the industry, we also believe that Jamaica has to become more aggressive in keeping more of that money in the domestic economy. Officially, the net retention is 40 per cent – a figure that some believe to be overstated.

Extracting more from the gross inflows will demand more, and stronger, linkages between tourism and the rest of the economy.

Given Jamaica’s existing circumstances, this won’t happen on its own, at a level that is transformative. Which is why we insist that it must take place in the context of an industrial policy, involving a partnership, led by the State, between the government, the political opposition, labour, the private sector and civil society institutions. In other words, it must be a joined-up arrangement in which there is consensus on incentives for research and innovation, new approaches to education and training, and support for especially targeted areas of the economy.

With respect to tourism, the aim must be for it to source more of requirements, not just at lower reaches of the sector, in the domestic economy.