Tourism industry hit hard

An international study on Hurricane Ivan reports an estimated loss of 79,869 stay-over tourists for 2004 and 91,000 for 2005 in the Cayman Islands as a result of the storm.

‘The Impact of Hurricane Ivan in the Cayman Islands’, released by the Economic Commission for Latin America and the Caribbean was released last month.

The report outlines tourism’s contribution to the economy.

‘Tourism contributes over 50 per cent to GDP and 27 per cent to employment, has revenues of CI$30.7 million, accruing to government and statutory bodies.’

It points out that Hurricane Ivan hit when the sector was experiencing a comeback following an almost continuous decline in stay-over tourism since 1998. This was exacerbated after 2001 through weak economic performance in the US and a lowering in travel levels following 9/11.

In October 2002, however, the trend stopped and figures improved with the 2003/4 season exceeding the performance of previous years.

‘Stay over arrivals grew by 14.46 per cent over the period January to July 2004 as compared with the same period in the previous year. Expectations for the remainder of the year and for the 2004/5 season remained strong. Indeed, the pre Ivan scenario forecasted total tourist arrivals of about 338,000 people for the year 2004,’ said the report. That’s the highest yearly figure for stay-over tourism since the year 2000.

The study reports the loss in stay-over arrivals amounts to 79,869 tourists in 2004.

‘Using the implicit stay over expenditure per tourist estimated for 2003 at CI$910.1, the loss in stay over tourism revenue for 2004 amounts to CI$72 million. This was partially compensated by expenditures from relief and recovery workers from abroad.’

The report estimates the loss in stay-over arrivals to be 91,000 visitors for 2005. Applying the same average visitor expenditure, the loss in stay-over revenue would amount to CI$82.8 million, it says.

As of 9 September no cruise ships visited until 1 November when they began to re-visit. By December restrictions had been lifted and the number of cruise ship visitors returned to normal.

According to the report, as a consequence of Hurricane Ivan, the loss of cruise ship arrivals is estimated at 20,438 visitors for 2004.

‘Using the implicit expenditure multiplier calculated for 2003 (of US 97.62 or CI$78.10) the loss of revenue from cruise ship activity stands at about CI$25 million.’

The report forecasts, in relation to accommodations shortages, ‘In 2005 capacity constraints will remain until September because this month is in the through of the low season and the reduced capacity will be able to respond to the typical September demand quite comfortably. Thereafter capacity should no longer be an issue, even though the room availability will remain below the pre-Ivan level.’

The report says that many properties in the sector received 15 per cent to 45 per cent damage.

‘Before Hurricane Ivan hit, the jurisdiction had 2,292 hotel rooms, 963 units in condominiums and apartments and 131 rooms in guesthouses available for rental.’

The report anticipates that there may be around 2,750 rooms available in the accommodations sector by December 2005 from a 3,400 pre-Ivan room figure.

Indeed, Director of Tourism Pilar Bush told Fidelity’s Cayman Business Outlook conference last month that projections for re-opening of hotel rooms show that by this April, 44 per cent of the pre-Ivan numbers would be back up and running, by June 59 per cent, and by November 75 per cent.

Some concerns that the report mentions are indications that few condominiums, apartments and guesthouses have loss of business insurance, while most major hotels do.

‘This is a situation that needs careful monitoring since it may eventually lead to business closures.’

The report also mentions that there is a high level of underinsurance, as in other sectors.

Another concern relates to time shares and buildings that have multiple owners and advises the imposition of a time limit by which property owners have to reconstruct the building or demolish it.

‘Experience from other islands has shown that repair or reconstruction can be delayed by years (nine years in the case of Mullet Bay in St. Maarten).’

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