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Eastern Caribbean waits as poor economy, prohibitive U.K. tax threaten recovery
Travel Markets Insider / March-April 2012

By Larry Luxner

Worldwide economic gloom, rising oil prices and a crippling British government tax on airline tickets to the Caribbean are all keeping the region’s tourism industry from rebounding to pre-2008 levels — with the smaller English-speaking islands of the Eastern Caribbean getting hit particularly hard.

The air passenger duty (APD) costs Caribbean-bound passengers an average of £75 ($118) per ticket, which is set to rise by 8% in April to £83 ($130) per ticket in economy class. At issue is the controversial four-tier banding system which well-meaning British tax authorities originally based on the distance between London and the destination country’s capital city.

Unfortunately for Caribbean hoteliers and retailers, that puts South Florida and even Hawaii in a lower tax band, despite the fact they’re further away from Great Britain than Barbados, Grenada, Trinidad and other holiday destinations.

“Both the public and private sectors — including hoteliers, ministers of tourism and some prime ministers — have been battling this issue for the last two years,” said Richard Kahn, spokesman for the Caribbean Hotel & Tourism Association (CHTA). “We’re trying to convince U.K. authorities that this system they’ve created is very unfair and discriminatory. Right now, the Caribbean is being put in an unfair level of taxation compared to European countries, the United States and other long-haul destinations.”

Kahn told Travel Markets Insider his group is “shoulder-to-shoulder” with the Caribbean Tourism Organization in lobbying against the tax — which was introduced as a way to combat climate change and greenhouse gas emissions from jets. Passengers flying the longest distance now pay up to £170 ($267) on top of the normal ticket price.

Yet that APD is largely responsible for a 16% drop in arrivals from Great Britain over the last five years, prompting British Airways, Virgin Atlantic, Easyjet and several other airlines to urge the U.K. government to review its environmental policies.

“The Caribbean is the most tourism-dependent region on Earth,” said Jamaica’s former tourism minister, Edmund Bartlett. “Pretty close to 40% of the region’s foreign exchange is generated by tourism. We see this as a slap in the face for the Caribbean.”

Kahn said the CHTA isn’t giving up. “They’ve ignored our pleas, but we’re staying strong and being persistent,” he told us.

The CTO, which is headquartered in Barbados, reported in mid-February that 23.8 million overnight visitors came to the Caribbean in 2011, a 3.3% rise over 2010. Cruise-ship passenger arrivals, however, were flat, rising by only 0.3% to 20.6 million.

“The Caribbean tourism industry is holding its own, remaining afloat and resilient amidst turbulence in the marketplace,” said Sean Smith, statistical specialist at the CTO. “Tourist arrivals to the Caribbean region remained buoyant in 2011, continuing the recovery process which began in 2010.”

While the Canadian market saw arrivals up 6.8% over 2010, growth from the United States was only 1.7% and Europe was flat, rising just 0.6%. High unemployment and rising oil prices are likely to keep the market down this year. “In light of these realities, arrivals to the Caribbean are not expected to exceed a 3% increase in 2012 and visitor expenditures are also not expected to grow meaningfully during this year,” said Smith, adding that cruise arrivals will rise by 2-3% in 2012.

Barbados itself saw a 2% increase in tourist arrivals for January. Tourism Minister Richard Sealy attributed this partly to new ventures such as TUI Nordic charter flights from Sweden. But he cautioned: “We are not getting carried away with the arrivals numbers obviously; we are still looking at the spend.”

With regard to cruise-ship arrivals, the Caribbean’s largest increases were reported by Jamaica (848,237 for January-October 2011, up 16.9% over the year-ago period); Antigua & Barbuda (399,490 for January-August 2011, up 13.5%) and St. Maarten (920,759 for January-June, up 14.1%).

The biggest losers were Martinique (18,303 for January-October 2011, down 68.4% from the year-ago period); Dominica (276,112 for January-November, down 39.3%) and

St. Vincent (71,029 for January-November, down 23.9%). For the first time, however, little-known St. Vincent & the Grenadines is receiving passengers from Royal Caribbean Cruises Ltd. The line’s 2,200-passenger Vision of the Seas will begin visiting St. Vincent & the Grenadines as part of its new 11-night Southern Caribbean voyages out of Fort Lauderdale, scheduled to start in December 2012. In addition, RCCL’s new 10-night Eastern Caribbean itinerary will include stops in Martinique, Tortola, St. Maarten, Dominica, Antigua, St. Kitts and St. Croix.

St. Vincent & the Grenadines got a further boost in December when it was ranked #5 by CNN’s “World’s Top Destinations for 2012” — making it the only Caribbean destination to end up in the CNN rankings.

“What’s not to like about a tropical paradise that bills itself as ‘one destination, 32 gorgeous Caribbean islands?’” said CNN. “Located between St. Lucia and Grenada, this island chain has long drawn stars and vacationers with deep pockets, but it will become more accessible to a wider range of travelers thanks to a $240 million airport scheduled to open on mainland St. Vincent.”

The island’s Argyle International Airport, which should be up and running by December 2013, will have one terminal and be capable of handling 1.5 million passengers a year once international flights commence in 2014.

“The government is going to decide in the next two months whether [management of the airport] is going to be privatized,” said Glen Beache, CEO of the country’s Tourism Authority, in recent comments to Airport World. He noted that in addition to local government funding, the airport has also received in-kind contributions and cash from a number of partner countries including Austria, Cuba, Iran, Mexico, Qatar, Venezuela, Trinidad & Tobago and Taiwan. “If you have someone who is experienced in this sort of management, it helps you to attract the airlines. We have to take this into consideration.”

Nearby Grenada hasn’t been as lucky. Operations at Maurice Bishop International Airport are under threat as thousands of dollars in airline fees are being diverted from the Grenada Airports Authority every day — a result of Grenada’s disputes with its former benefactor, the Republic of China.

The battle arose after the Export-Import Bank of Taiwan sued the Grenadian government following its cutoff of diplomatic relations in favor of mainland China.

The bank is trying to recover $25 million in default loans by forcing all airlines serving Grenada to pay funds owed to the GAA into an escrow account set up by Taiwan. So far, Virgin Airlines, British Airways and Delta have all complied, placing GAA — which has already lost $500,000 worth of landing fees — in a very precarious financial position.

Peter David, Grenada’s minister of tourism, told reporters: “It’s a very serious matter and one that has been keeping me awake at nights. The prospect of operations at the airport grinding to a halt is something that will have dire consequences on the entire country.”

Likewise, the fees cruise ships normally pay the island’s government are also being deposited into a special account because of the Grenada-Taiwan loan dispute.

On the plus side, a $65 million tourism project will rise in Grenada’s capital city of St. George’s, on the former site of the Islander Hotel. The project, to be completed by year’s end, involves Peter De Savary — developer and investor of the Port Louis project — and local contractor Anslem La Touche.

It involves rebuilding the Islander Hotel and constructing a number of luxury villas and suites with swimming pools overlooking the sea. More than 90% of Grenada’s buildings were damaged or destroyed by Hurricane Ivan in 2004.

“It will comprise 45 to 50 suites with a touch of the past,” said De Savary. “Upon completion, among the main attractions will be glass elevators from the top of the mountain descending down to the sea. They would be supported by 22 penthouses — 11 on each side with a touch of the famous Amalfi course of Italy.”

In St. Kitts, home to the sprawling St. Kitts Marriott Beach Resort, passenger arrivals from North America to Robert L. Bradshaw International Airport last year were up 10.7% over 2010 figures, according to the St. Kitts & Nevis Tourism Authority. Exceptional growth was reported from Miami and Charlotte, N.C., as well as increases in arrivals from the Midwest thanks to new feeder market access resulting from the Delta/Northwest merger.

The twin-island nation got plenty of headlines — but not the kind it wanted — after visiting U.S. Supreme Court justice Stephen Breyer was robbed of $1,000 by a 28-year-old man wielding a machete. The crime, which took place at Breyer’s vacation home on the normally tranquil island of Nevis, has focused attention on growing delinquency and gang violence throughout the Caribbean.

The Turks & Caicos Islands is also seeing some big developments.

Middle Caicos, a 48-square-mile island with only 250 people, will soon get a boutique hotel, beachfront residences, a nature reserve and health club, all designed to blend in with the surrounding environment. Grand Caicos Holdings Ltd. is the owner and developer of this project, with is being managed by 7th Heaven Properties.

But a bigger development could be the possibility of the territory’s capital moving from Grand Turk (population 3,700) to Providenciales (population 17,000).

“There is no truth to the story about the capital of TCI being moved. It is not even on the agenda of the interim administration,” said government spokesman Neil Smith. But two reliable sources told journalists that a move is indeed being contemplated.

At present, many government services are duplicated, with the largest operations in Provo. Moving the capital would save residents expensive travel costs and time traveling to much smaller Grand Turk to conduct Provo and Caicos-based business.

Since Club Med built the first large resort on Provo in the 1980s, many other hotels and resorts have followed — turning Provo into TCI’s financial capital.

Meanwhile, Grand Turk is becoming a popular cruise-ship destination but due to its low $3.50-per-passenger arrival fee, the colonial government isn’t benefitting from the port at the same level as other cruise ship destinations. To interest potential stayovers, the government is planning to expand tourist sites on Grand Turk while developing short side trips to nearby Salt Cay.

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