Caribbean Tourism Rebounds, Jobs Do Not

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 123jump.com 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.

But in the last five years not a single new hospital with more than 100 beds is built on the island or new schools are developed to prepare its young generation for the challenges of globalized world.

The financial resources that should have been invested in creating more schools, hospitals and investing in alternative energy industries that create higher paying jobs are consistently directed to support these hotels. Most jobs at these resorts pay less than $25 a day, just enough to stay above poverty line.

At the same time the government of Jamaica has dug deeper in debt to support these hotels and become dependent on the tourism industry. Jamaican government debt has ballooned to $11 billion and despite the steady rise in tourism could not save its ailing Air Jamaica.

The situation in Dominican Republic, The Bahamas and the Barbados is not that different.

Dominican Republic now hosts more than 4 million foreign tourists a year compared to 500,000 in 1987 as it attracts the largest number of tourists in the region and the most from Europe.

The sharp rise in tourism was driven by the government’s willingness to let all-inclusive resorts to build larger resorts that create jobs at the low end of the pay scale. Also easy visa regime has attracted tourists from Russia and other Eastern European nations that generally have difficult time traveling to other countries.

Despite a sharp increase in foreign investment in hotels in Dominican Republic, unemployment surged to 19% in 2004 and has now retreated to 15% and stayed at the same level as in 1986 before the tourists arrival boomed.

Jamaican unemployment rate has hovered between 13% and 16% in the last ten years despite the tourists arrivals increasing 50% in the period. Nearly 25% jobs are now in the tourism sector and most of them pay less than $15 a day, below what many locals consider poverty line.

The growth of tourism industry on Dominican Republic and Jamaica has been complex but limited and more balanced development based on education has created better paying jobs in Costa Rica.

A more balanced approach in the economic development may help these island nations to escape the government debt spiral and low paying jobs. Investment in eco-tourism, alternative energy resources, Internet telecommunication and lifting education levels will go a long way in creating sustainable jobs that are better paid.

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