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Caribbean Business News

Caribbean Tourism Rebounds, Jobs Do Not

Author: Bikram Pandey
Last Update: 1:35 PM ET February 20 2011

1:30 PM Miami – Caribbean tourism has been on the rebound but unemployment in the region has stubbornly remained high. Governments have not been able to escape the spiral of debt and allocating resources to projects that only create low paying jobs.

Caribbean tourism has rebounded in the last two years but benefits of the pick up in travel spending rarely reach to the local small businesses and its citizens.

Total number of tourists that stayed overnight increased 8% to 18 million in 22-island region but unemployment in the region has stayed high.

The government and industry controlled organizations widely advertise the foreign exchange earned by the region but these organizations rarely note the corresponding rise in the imports, muting the net impact. Nearly 70% of the earned foreign exchange is lost to imports of food and other items.

The research, the parent company of this publication showed that Dominican Republic, the Bahamas and Barbados lost as much as 75 cents in the imports to support every dollar earnings in the exports.

For example, Dominican Republic has seen number of tourists rebound to 4.1 million in 2010 and hotel room construction is expected to add another 1,000 rooms in the next three years.

The Bahamas, Jamaica and Barbados are adding hotels to attract more visitors in the hope that increased arrivals will provide more jobs to the locals and business for small entrepreneurs.

A total of 10,500 rooms in 60 projects are in various stages of construction across 22 islands in the region led by the Bahamas, Puerto Rico and Dominican Republican.

The new construction brings much needed jobs and spending that supports local cement makers, construction companies and the development of infrastructure. But much of the spending goes to companies controlled by foreign companies.

For example, China based banks, contractors and architectural firms are involved in the construction of Baha Mar project in the Bahamas. Local workers are likely to receive less than 15% of total labor spending and that also required mediation from the office of prime minister.

JW Marriott Rio Grande Coco Beach in Puerto Rico is expected to be completed by 2012 with 990 rooms also works with architectural and general contractor firm that uses international companies.

Dominican Republican and increasingly Jamaica has moved in the direction of building walled resorts that are operating like cities within cities. Tour companies in Europe and North America sell packages and are based outside the region and keep bulk of the profits.

Most of these resorts are owned by foreign companies based in Spain, Germany, UK, U.S. or Italy and collect payment from these tourists in the local markets where the travel packages are sold.

Tourists visiting these resorts rarely move outside these walled compounds to experience local culture or interact with local businesses. Food sold on these resorts is imported and many skilled and highly paid workers are also brought in from Europe or North America.

In fact, local research groups argue that tourism ends up hurting locals as it drives up the price of land at oceanfront properties and allocates government money to developing infrastructure that benefits these walled compounds.

The root cause of the current misallocation of resources and the driver of tourism growth is group sale.

The sharp increase in packaged-tours based mass tourism at resorts controlled by foreign companies is driving government spending in Jamaica and Dominican Republic. Almost 35% of all tourists’ arrivals in Jamaica and 60% in Dominican Republic are through package-tours.

Jamaica has attracted in the last three years several new hotels. Spain based Groupo Iberostar opened hotel in Rose Hall, St James and RIU group opened hotels in Negril and Montego Bay.

These three hotels have become anchor of mass tourism with more than total capacity of 2,000 rooms. These hotels and Jamaica’s tourism ministry say that average tourists at these hotels spend $1,200 a trip but what is rarely discussed where and how that money is spent.

Most of the spending is at the resort and our survey indicates that less than 15% of that spending benefits local merchants. Food and drinks spending drive bulk of the local spending and the rest of 30% spending is for the local tours organized by the hotels.

Government of Jamaica has approved more all-inclusive hotels managed by international companies in various cities in the last five years on the promise that more hotel rooms will create more jobs and spur other activities on the island.

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