Sun | Sep 19, 2021

What might Brexit mean for Caribbean tourism?

Published:Wednesday | October 16, 2019 | 1:55 AMDavid Jessop - Hospitality Jamaica Writer

It is likely that in the coming days we will learn how and when Britain will leave the European Union (EU). Although the consequences remain uncertain, even the best-case scenarios suggest a significant economic impact that will affect United Kingdom (UK) outward-bound tourism.

It raises the question, what action should the region be considering especially if, as is quite possible, Britain crashes out of the EU without any transitional arrangement being in place?

The first point to make is that for many Caribbean nations, the UK remains a significant source market for leisure, diaspora and business travel. This means that whatever happens to the UK economy will have an impact on the region.

The UK is the Caribbean’s third-largest supplier of visitors after the US and Canada, with the majority of British visitors travelling to Barbados, the Dominican Republic, Cuba, Jamaica and Eastern Caribbean destinations, including Antigua and St Lucia.

Despite this, the potential overall impact of Brexit on the Caribbean tourism economy is hard to assess. This is because some nations are proportionately more dependent on the UK for arrivals than on other major source markets. In Barbados, for example, in 2018, 222,519 or 33 per cent of its 681,197 visitor arrivals came from the UK, representing about US$400m in visitor expenditure to the island annually.

Moreover, the available statistics fail to indicate the ways the UK visitor market is segmented by income, purpose of travel, or category of hotel stayed in. Apart from pointing to the absence of any reliable regional figures about the region’s leading industry, this makes the economic forecasting that governments, central banks and industries have to undertake, when faced with new challenges, very difficult.

It is possible, however, to speculate on some of the factors that may affect visitor arrivals from the UK in the event of Brexit.

The most obvious impact will be on the cost of a holiday and airlift because of the rapid downward movement in the value of the pound. Just before June 2016, when the UK electorate narrowly voted to leave the EU, sterling stood at US$1.47 to the £1. Since then, it has experienced significant fall to a present figure of US$1.23 to £1, with many forecasters suggesting that without a deal on leaving the EU, it will fall to parity with the US dollar.

not the predominant factor

Although price is not necessarily the predominant factor when buying a Caribbean vacation, the implications of sterling’s being weaker are likely to be fourfold.

Firstly, the dollar-sterling relationship will likely have a diversionary effect. If potential visitors see Jamaica or Barbados as having become too expensive as destinations, they will choose the Dominican Republic, Cuba or destinations elsewhere in the world that offer better value for money. They may also decide that an all-inclusive property or a cruise is preferable, as they know that such vacations can contain the cost.

A second factor may be a short-term downturn as a ‘wait and see’ attitude takes hold. There are already signs in the UK that its own premier holiday destinations in the South West and in Scotland are benefiting considerably from ‘staycations’ and decisions by the upper end of the UK market to rent holiday homes. While this is no substitute for tropical sun, if some of the worst-case Brexit scenarios occur and this coincides with a global economic slowdown as a consequence of the trade war between China and the US, 2020-21 may see a significant overall fall in UK arrivals into the Caribbean.

And a third outcome could be increased competition from other destinations that will equally be affected by any possible downturn in visitor arrivals from the UK. For example, the South African Tourist Board is already beginning to consider what measures it needs to enhance its marketing spend, post-Brexit, to ensure visitor arrival numbers remain strong.

The value of sterling will also likely impact the Caribbean’s diaspora market in the UK. While there are now many UK Caribbean citizens who are high achievers with significant disposable income, this cannot be said of the still large numbers of less well-off friends and family who return annually, or more frequently, to the anglophone Caribbean.

Rapid falls in sterling could also hit the commercial relationship between travel companies and suppliers,whether hotels or ground transfer operators. Although most UK companies hedge their foreign exchange costs and absorb small currency fluctuations, a significant fall in sterling could result in supply contracts not being met and even, in some cases, being broken. The likely upshot is that when new contracts are negotiated, they will be at the lowest conceivable exchange rate, either forcing retail prices upwards or hoteliers seeing their revenues fall.

None of which is to say that British travellers will not continue to want dream holidays in the Caribbean.