Air fare costs crucial for Bahamian tourism

Low cost access is the most important factor for tourism development in the Bahamas, according to a speech by Minister for Tourism and Aviation Vincent Vanderpool-Wallace at the Cayman Business Outlook in January.

The definition of tourism in the Bahamas is quite simple. “On a very good day we grow our population by about 10 per cent. The daily spending of that 10 per cent is significantly higher than the daily spending of any 10 per cent of our existing population,” he said. “That’s all it is.”

He explained that preliminary estimates show that, in terms of direct, indirect and induced taxes, this 10 per cent contributes 24 per cent of Bahamian taxes. “So you can imagine, the best thing we can possibly do is increase that spend, because in so doing we lower the tax burden of the population.”

Despite all the sophisticated tools the Bahamian government uses, at the end of the day tourism remains an economic development tool.

In 2010, tourism grew by 15 per cent and for only the second time in its history the Bahamas exceeded five million visitors. The bad news, however, is that the Bahamas dropped back to 2008 levels in terms of visitors’ spend. And “that’s what matters the most”, said Vanderpool-Wallace.

The cost of getting there

If managed correctly, the Bahamas has an almost inexhaustible supply of a natural resource. But unlike other brands such as Gucci, Fendi or BMW, the Bahamian tourism industry only has one shop, which makes the cost of getting to this shop an important part of the value equation, he said.

This is also one of the reasons why Vanderpool-Wallace dismissed talk of going after the BRIC countries. “Yes we are going after them, but the reality is they have to fly over a large number of other competing places to get to us.”

In addition the further tourists have to travel, the longer they have to stay and the more they have to pay. As a result, the number of people that can be attracted from the other side of the globe is necessarily very small, he said.

Surveys among Americans show that the places they would like to visit most are Australia and New Zealand, but these are also the places Americans travel to the least because of the time and cost of getting there.

At the same time it is cheaper to travel from Florida 1900 miles to the number one destination in America, Las Vegas, than to fly 900 miles to the Bahamas.

“What is critically important to our business is low cost, high quality, high frequency air fare,” he said, mentioning a test carried out in November 2008 at the height of the financial meltdown.

At the time the Bahamian government together with Spirit Airlines artificially created a $99 roundtrip air fare between Fort Lauderdale and Nassau, which included all taxes. “It blew their website out. The number of people who booked in that time period was higher than ever before.”

This experiment was then repeated in New York with the offer of a $99 air fare each way from New York including all taxes with Jet Blue. The result was the same, except that other airlines started to match the price.

“And all of a sudden in that one week we got more bookings than we had ever seen. This is not guessing about the power of low cost air fare, it is part of the equation.”

This means that most tourists, if offered a low cost air fare are much more flexible as far as the room cost is concerned. Ultimately this leads to fewer discounts on room rates.

Another promotional campaign, the Bahamas’ companion fly free programme, became the country’s most successful promotion in its history.

In 2010 it sold over 300,000 room nights. Intended as a full scale test of the effect of low cost air fare for tourism development, the initial three month period from January to March had to be extended, by several months, to wean the hoteliers off their new found drug, Vanderpool-Wallace said.

“When we did see how rapidly we would go broke, we decided that we have to stop.”

However, what these tests showed, is that within a three hour flight, low cost easy access is crucially important for the development of tourism, he said. For longer flights, in contrast, visitors will require first class and business class.

Connecting the islands

The numbers resulting from enabling low cost access have been quite extraordinary, said the tourism and aviation minister.

If Nassau and Paradise Island were a separate country in the Caribbean, it would be number five in the entire Caribbean in terms of total air arrivals, number two in terms of total visitors and number one in cruise passengers, he said.

“But Nassau and Paradise Island, and this is what stuns many people, is less than 2 per cent of the landmass of the Bahamas.”

When considering this potential, “we have the most under performing destination in this region in terms of using our assets”, he said.

The reason for this, which is currently in the process of being fixed, is that for an archipelago like the Bahamas the most important infrastructure is the transportation between islands, rather than roads on islands.

“You will see unfolding over the course of the next year or so a very specific strategy to bring all these other destinations within the Bahamas together, to differentiate one from the other and to get people travelling there.”

The Bahamas tourism promotion has already seen a re branding with a logo symbolising the various main and out islands in the Bahamas. The website also has dedicated sections for each of the islands, highlighting their unique characteristics and enabling visitors to customise their trip to the Bahamas and offering “island hopping” as one of the travel experiences.

First and foremost the new initiative entails internal, low cost transportation systems to make sure that people can access all parts of the Bahamas.

Currently, visitors have the options of flights, speed ferries and slower mail boats to travel between the islands.

Several hotels and resorts on the out islands also take part in a promotion that enables two passengers to fly free from Nassau to other Bahamas destinations.