Slow tourism industry recovery underscores need for key reforms in Caribbean: IDB report
The extreme uncertainty surrounding the tourism recovery in the Caribbean highlights the importance of boosting innovation and supporting transformations that align tourism destinations and products with post-pandemic global demand trends, according to a report of the Inter-American Development Bank.
Most global tourism reports predict a 2-to-4-year period for a full recovery to 2019 levels. However, the Caribbean could either lead or lag the global recovery, depending upon the specific circumstances in the main Caribbean source countries and in Caribbean destinations themselves.
Imagining a Post-COVID Tourism Recovery: Regional Overview analyzes key drivers of tourism demand in the short term, including the evolution of the pandemic and the COVID-19 vaccination roll-out, the economic environment of source countries, the split between business versus leisure tourism, and airline capacity, among others.
“Over the longer term, Caribbean countries must spur innovation and reinvigorate their tourism offerings,” said Olga Gómez, Tourism Lead Specialist at the IDB. “It is no longer enough to depend on the lure of splendid beaches. Tourism destinations need to invest in improving their competitiveness, aligning their tourism products to the broader local and global economic trends, and exploring new and traditional emerging market segments such as global nomadism or nature-based tourism.”
Even for the less-tourism-intensive economies of Guyana and Suriname, where the tourism sector economic contribution is relatively small compared to the regional and worldwide averages, there is room for improving the sector’s contribution to growth and employment in the coming years.
The report is part of the Quarterly Bulletin series produced by the economic and tourism sector team from the IDB’s Caribbean Department. While it analyses economic challenges facing member countries – The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago – many of its conclusions are relevant to the broader Caribbean region. The study contains more detailed economic overviews of the six IDB member countries.
The study presents global travel sentiment analyses and post pandemic tourism demand trends. Given travelers’ revealed preferences and the fact that most current tourism activity relies on the region’s attractive natural assets, environmental sustainability and climate change adaptation will be more critical than ever. These issues must therefore be prioritized in the public and private sector policy and investment agendas, the study says.
The report also updated the IDB’s Tourism Dependency Index, which calculates the relative dependence of over 160 countries globally on tourism for economic output, employment, and exports. Of the world’s fifteen most tourism dependent economies, eight are in the Caribbean, led by Aruba (ranked first in the world, with a score of 80 out of a possible 100 on the index), with The Bahamas, Barbados, and Jamaica joining the list of most tourist-dependent economies.
Based on a database developed from various national sources, a breakdown is also now available for tourism arrivals to the three most tourism-dependent economies. Overall, 2020 represented a contraction of international arrivals of 76 percent for The Bahamas, 67 percent for Barbados and 69 percent for Jamaica. This is in line with the estimate by the UN World Tourism Organization of a 67 percent contraction for the broader Caribbean region.
“On the positive side, firms have been adjusting business processes, and governments have been advancing in digitalization in response to the pandemic,” the report notes. “This form of innovation could lead to productivity increases that are sustained into the post-pandemic period.”
For copy of complete report click below.
Published: Sunday | May 30, 2021
Sometime in the next 12 months, when the pandemic is fully brought under control in North America and Europe, visitors will return to the Caribbean in significant numbers.
Once that begins to happen, governments, conscious of tourism’s ability to drive rapid GDP growth, will encourage the fastest possible restoration of pre-pandemic arrival levels.
This is understandable, but begs two seemingly perverse questions: Is the basic Caribbean tourism product of sun, sand, and sea sustainable, and can the region remain competitive once present pent-up global demand is sated?
Unlike most Caribbean industries, tourism has grown in a haphazard, unintegrated manner, powering its way from the 1990s on, to dominate much of the Caribbean economy. This happened as arrangements for agriculture and commodities were attenuating, disposable income was growing rapidly in North America and Europe, and governments were happy to regard tourism as an alternative, seemingly limitless way to rapidly generate economic growth and new revenues.
The pandemic has proved conclusively the critical role the industry now plays in the wider Caribbean economy.
This suggests there is now the need to consider strategically how in future a wider product offering might encourage not only linkages with multiple sectors, but also catalyse rural development, grow transferable skills, and support newer industries in ways that better balance national economies.
Some nations like Jamaica and Barbados already understand this, but others that are also tourism dependent have not.
Helpfully, a recent report published by the Inter-American Development Bank (IDB) makes a start in identifying some of the post-pandemic responses required if the industry is to innovate and adapt its product to meet changing global demand and retain greater value.
Launching the 20-page report, Imagining a Post-COVID Tourism Recovery: a Regional Overview, Olga Gómez, the IDB’s lead tourism specialist, makes the important point that it is no longer enough to depend on what she describes as “the lure of beaches”.
“Tourism destinations,” she says, “need to invest in improving their competitiveness, aligning their tourism products to the broader local and global economic trends, and exploring new and traditional emerging market segments.”
The report outlines both a short- and longer-term agenda for recovery and change in the areas of safety, market intelligence, product adaptation, and easier regional access for visitors from the region’s main markets.
On safety strategies it proposes a common approach, intra-regional coordination, and a common brand for safe Caribbean destinations. To better understand the changing market, it suggests that sectoral analysis requires more than the use of traditional statistics, and should additionally consider real-time travel bookings, tourism expenditure data, and consumer sentiment surveys.
IDB’s short report also suggests that public and private sector policy and investment agendas should give greater priority to meeting the changing preference of travellers for nature-based tourism and experience related travel. This, it observes, makes it more important that the region protects its natural assets, environmental sustainability, and adapts to climate change.
When it comes to adjusting the tourism product to new consumer preferences, IDB’s tourism team argue for the development in the medium to long term of new tourism products to match evolving global tourism demand; including a greater emphasis on ecotourism, cultural tourism, remote working tourism, educational tourism, and retirement tourism, in the latter case linked to well-being and medical tourism.
With this in mind, it proposes the sector should place greater emphasis on the preservation of natural, cultural, and heritage attractions as “an essential element to improve tourism competitiveness”.
IDB also places stress on other changes it believes are necessary to ensure that Caribbean tourism fully recovers and remains competitive, including improved supply chain efficiencies, better destination management, and the recognition that the adoption of communication and information technologies are not optional, but “an immediate necessity”.
Unusually, the report looks at business travel. It observes in relation to The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad that this represents a surprising 19 per cent of all travel there, compared to the global average of 22 per cent. The bank’s tourism analysts are, however, uncertain about which business travel segments will be permanently affected, as many companies are expected to continue with teleworking. More positively, the report notes that the pandemic has created a new niche demand for temporary longer-term Caribbean stays enabling remote working by professionals.
Helpfully, IDB updates its Comprehensive Tourism Dependency Index to show that of the world’s 15 most tourism dependent economies, eight are in the Caribbean. They are led by Aruba (ranked first in the world) with The Bahamas (6th), Barbados (11th), and Jamaica (13th) now joining their list. The others are Grenada (4th), Antigua (5th), St Lucia (7th), and Dominica (9th), with Belize in 15th position.
There is much that IDB does not address, particularly in relation to how a longer-term demand led approach to tourism might see supply side adaptations retain the economic and social benefits a more holistic approach to tourism development could enable.
As previously noted by this column, the pandemic offers a unique opportunity to assess how a region with billions of dollars invested in fixed tourism infrastructure might establish new linkages that go far beyond agriculture and fisheries, able to stimulate, for example, new services-based industries located away from urban centres.
What is now needed is a thoroughgoing analysis that explores how the pandemic may have structurally changed travel and tourism, and how a more strategic Caribbean approach might adapt and reposition the industry so that it better facilitates long-term domestic growth.
IDB believes that volatility will persist in the Caribbean’s path to full tourism recovery, and could take between 2.5 to 4 years, requiring firms and workers to be offered continuing support.
Common sense suggests that while everything possible should be done by governments and the industry to facilitate tourism’s short-term recovery, its economic dominance requires a detailed analysis of the existing models sustainability, and the sector’s ability to drive more broadly based prosperity.
David Jessop is a consultant to the Caribbean Council.
To access previous columns, visit: www.caribbean-council.org/research-analysis
Some Countries with The Highest Vaccination Rates Are Facing A Surge In Covid Deaths And Infections–Experts Say Complacency Is Partly To Blame
Robert Hart: Forbes Magazine May 29 2021
Some countries with the world’s highest vaccination rates are also battling devastating surges of Covid-19 and the highest death tolls, a worrying trend that has left experts and officials wondering whether successful inoculation drives have lulled governments into easing restrictions too soon and the public into a false sense of security.
Uruguay has endured the highest Covid-19 death rate in the world per capita for several weeks, despite having one of the world’s most successful inoculation drives, a common situation in a number of other highly vaccinated countries like Bahrain and the Maldives.
Uruguay, a small country of around 3.5 million people, recorded an average of 55 deaths a day over the last week, approximately 1.6 deaths per 100,000 inhabitants according to data compiled by the New York Times, a figure that has remained roughly the same since cases surged in April.
Controlling for population, Bahrain (0.9 deaths per 100,000 people) and the Maldives (1) have similarly grim metrics and have reported far greater death rates than countries like the U.S. (0.15) and India (0.29) for a large part of May.
Other countries like Chile and the Seychelles rank among the worst Covid infection surges in the world, though each have higher vaccination levels than the U.S., with experts warning that lifting restrictions too early may have made the public unduly complacent.
Dr. Jude Gedeon, public health commissioner of the Seychelles, told a local paper the outbreak was partially fueled by the resumption of economic activity and “complacency” over public health measures like mask wearing and social distancing, a sentiment echoed to Reuters by Maldives President Ibrahim Mohamed Solih, who said the country had lifted restrictions too soon.
Uruguay’s approach to the pandemic, which involved as few restrictions as possible, has also engendered a sense of complacency, AFP report, and the country is in a similar situation to Argentina where, despite strict restrictions in the country, many are flouting guidelines.
In the U.S., as in many wealthy countries, vaccines are seen as an exit strategy from the economic and social restrictions of the pandemic. As vaccination rates rise in the U.S., experts and officials have urged people not to become complacent and for officials not to remove restrictions too soon for fear of a resurgent wave of the disease. Changes to CDC guidance allowing vaccinated people to forgo facemasks swiftly led a slate of states to rescind mask mandates—some have even banned local officials from putting their own in place—leading many to question whether a weakening of the policies is wise considering a slowing vaccination rate and persistent levels of hesitancy that could prevent the coverage needed to stop transmission.
WHAT WE DON’T KNOW
The relaxation of restrictions is just one variable contributing towards an outbreak. New variants could drive infections—Uruguay’s outbreak is partly fueled by the P.1 variant first identified in Brazil. The efficacy of the vaccines used is also a pertinent worry, with a number of highly vaccinated countries having made heavy use of Chinese vaccines.
50%. Of the world’s most vaccinated countries mentioned in this story, all have at least this proportion of their population partially vaccinated against Covid-19. Data is available for Bahrain (53%), Chile (55%), the Maldives (57%), the Seychelles (72%) and Uruguay (50%). According to the CDC, the U.S. has a similar level of partially vaccinated people to Uruguay (50%), though a much higher proportion of fully vaccinated people (40% against Uruguay’s 29%).
WHAT TO WATCH FOR
Bahrain’s health ministry undersecretary Waleed Al Manea attributed the country’s surge in cases to more testing and the large gatherings associated with the holy month of Ramadan and Eid al-Fitr celebration. However, Bahrain, alongside the nearby UAE, is already offering booster shots for the heavily used Sinopharm vaccine (which already requires two doses), amplifying worries it may not be as effective as others on the market at preventing the disease. A third of Seychellois cases are among vaccinated individuals, the country’s health ministry revealed in mid May and the majority of vaccines given were also the Sinopharm vaccine. The WHO said it would review cases from the archipelago in light of this.
Polling in the U.S. indicates unvaccinated people are more likely to be comfortable engaging in everyday activities than their vaccinated compatriots, a potential issue for the states relaxing pandemic restrictions based on high vaccination rates.
But travel rules are holding up a restart in North America.
The Economist: May 29th 2021 edition
The latest addition to the fleet of Carnival, the world’s biggest cruise operator, is the Mardi Gras. This ocean-going playground for 5,300 passengers comes complete with six different zones, including a “French Quarter”, two dozen restaurants and a rollercoaster. It is set to arrive at its base in Florida in early June. That is a year behind schedule—but possibly just in time for a revival of the industry, which has been hit harder than just about any other by the pandemic.
Holidays afloat gave an early hint of covid-19’s damage to international travel. Images of passengers stranded aboard modern-day plague ships prefigured lockdowns on land. Most pundits reckon cross-border tourism will not fully rebound until 2023. Yet cruising may steam ahead before then. “Where else can you go to bed at night and wake up every morning in a different, new, exciting place?” ventures Arnold Donald, Carnival’s boss.
A break at sea is a small niche of the global tourist industry. Of the 800m or so foreign holiday-makers in 2019, only around 30m ascended a gangway. It was, though, growing fast, adding over 10m more sea faring tourists in a decade. And before the pandemic drowned the business in red ink, it was lucrative. The three companies that transport three-quarters of all passengers—Carnival, Royal Caribbean and Norwegian Cruise Line—raked in combined operating profits of $6.6bn on revenues of $38bn in 2019.
With fleets mostly idle in the past year, cruise operators have been burning cash. Only a few of the world’s 270 large cruise ships are at sea with paying passengers. Luckily for Mr. Donald, investors seem to share his belief that the industry will roar back full-steam ahead. Carnival has had little trouble raising $24bn of debt and equity over the past 12 months to tide it over; its rivals have also been able to tap the market.
Now demand is returning. Carnival’s bookings for 2022 are back at the higher end of historical trends, its boss reports. The industry continues to expand long-term capacity. Over 100 vessels are on order; none has been cancelled during the pandemic. Perhaps the biggest headwind is countries’ fast-changing rules for international travel, especially in America. Half of all tourist seafarers are North American, double the number of Europeans, the next largest group, with China and other emerging markets far behind for now. Since the pandemic no ship has been allowed to set sail from an American port.
Mr. Donald hopes that will change soon. Big cruise firms are trying to move things along by lobbying governments to allow vaccinated passengers who test negative for covid-19 to come onboard. That makes recent efforts by lawmakers in Florida to ban companies from using vaccine passports rather unhelpful. The Sunshine State is home to not just the Mardi Gras but also to America’s largest cruise ports.
May 20, 2021 | Podcast
By Alex Dichter and Robin Riedel McKinsey & Company.
The COVID-19 pandemic decimated airlines in 2020, yet there are reasons for optimism as the industry looks to recovery.
In this episode of The McKinsey Podcast, Diane Brady speaks with partners Alex Dichter and Robin Riedel about the outlook for airlines and other industry players. An edited version of their conversation follows.
Diane Brady: Hello, and welcome to The McKinsey Podcast. I’m Diane Brady. During the COVID-19 pandemic, few industries have been harder hit than airlines. As we recover, few will have more challenges getting back to normal. Joining me are two McKinsey partners who have been working on these issues for years. Alex Dichter is a senior partner in London who leads McKinsey’s Travel, Logistics & Infrastructure Practice. Robin Riedel is a partner in McKinsey’s Aerospace & Defense Practice who leads the advanced-air-mobility group for the McKinsey Center for Future Mobility out of San Francisco.
Alex, let’s start with you. Give us some sense of the current state of air travel.
Alex Dichter: Most of the world’s travel went to almost nothing in April and May . At one point, we were running at about minus 95 percent, if we compared traffic in 2020 to 2019 during the same period. Obviously, some parts of the world have gone back to some degree of normalcy. If we were to look at air travel in mainland China, for instance, where the virus has been well contained, domestic travel is near normal. New Zealand and Australia, at least internally, have gone back to something that starts to look and feel like normal, and the US has some domestic traffic.
For virtually every other part of the world, what’s stopping international travel, and to some extent domestic travel, is the wide array of restrictions associated with travel. Everybody wants to go on vacation. Everybody wants to see their friends and family. But if you have to get tested and quarantine on the way back, it starts to look like a daunting task. That has kept international travel to a near minimum. In fact, one of the only reasons that we see a reasonable number of long-haul flights still in place is that cargo demand is relatively strong.
An industry hit hard by COVID-19
Diane Brady: This is an industry that has felt vulnerable for years, even before this degree of disruption. What is the economic fallout?
Robin Riedel: To put it into numbers, and just for last year, 2020, the estimated impact on airlines is about a $370 billion revenue loss versus 2019.
It’s a massive hole that the industry’s in, and that’s just the airlines. You also have the supply chain and other sectors or subsectors. You add all of that together and you’re getting close to half a trillion dollars of losses across the airline or air-travel industries. That loss has impacted the companies, on the one hand, but also the employees, on the other. We’ve seen pilots, flight attendants, mechanics, and all kinds of workers lose their jobs over this crisis, and with an unclear path to come back.
The question of how many airlines will survive, to a large degree, will depend on some of the government support that is out there, what the recovery really will look like, and whether we will see a significant jump back to pre-COVID-19 levels of this year, or whether it will take until ’22, ’23, or even ’24 before we’ll see travelers and revenue come back.
Looking ahead to recovery
Diane Brady: Alex, can you give us some sense of what normalcy will look like?
Alex Dichter: Predicting the future is always a dangerous game. There are two fundamental axes here. One is the degree to which the world recovers from the economic fallout associated with COVID-19, and two is the speed at which we put the virus functionally behind us.
It’s clear that the virus is lasting much longer than we all hoped it would back in March or April of last year. It’s equally clear that the speed at which vaccines have been developed has surprised a lot of people.
We’re starting to see some light at the end of the tunnel, even if the remaining bit of the tunnel is still long. While the economic fallout has no doubt been significant, we’ve not seen a crash in global markets, for example, and asset prices have continued to hold up.
Corporate balance sheets are also relatively strong, so there’s good news amid the bad. Our more pessimistic scenario would have demand not recovering until 2024. If you were to double-click on that, you’d see a much faster recovery for leisure traffic than you would see for business traffic.
Businesses, even if they’re financially healthy, have all learned that technologies like Teams and Zoom and Webex are working relatively well and can replace some of the travel that they used to do. Technologies will likely replace that travel in the future.
The more optimistic scenario might have us back to normal, or at least back to 2019 volumes, by the end of 2022. The one caveat I would make is that in this industry, you can’t have more passengers than you have seats. This is an industry where we make relatively important decisions about capacity with long lead times. You can’t snap your fingers and bring back planes that you’ve parked in the desert. To recall furloughed pilots, it takes time. Even if demand comes back sooner, it may be that we don’t see the volumes come back until well into 2023, simply because the industry isn’t yet prepared to accept those passengers.
This is an industry where we make relatively important decisions about capacity with long lead times. You can’t snap your fingers and bring back planes that you’ve parked in the desert.
How employees are coping
Diane Brady: Robin, you’re out there on the front lines, talking to executives, employees, and engineers. Can you give us a sense of just what people have been doing to cope and survive this?
Robin Riedel: It’s a really challenging time for the executives of these companies and for the employees. I’ve been heartened by many of the actions we’ve seen where companies really have stepped forward to try to protect jobs as much as they could.
Employees and their unions have leaned forward to find creative arrangements that will protect jobs, help the companies survive, and work much more hand in hand than they have in the past. There have been a number of deals that reduce flying hours for individual pilots, keeping the overall number of pilots at a higher level—or reduce certain compensation packages for the short term so that the financials work out in these difficult times. That has been heartening to see. At the same time, we’ve seen massive layoffs despite all of that.
In particular, on the pilot’s side, it’s a challenging situation. As a pilot, you need to remain certified and stay in the role to feel comfortable flying. Many pilots who have been laid off don’t really have an opportunity to go somewhere else to fly.
They’re probably going to spend a year or two or three not flying before they get recalled. By then, they might have switched into another industry. They might feel that they have really lost skills and need significant training to come back to flying. There’s a good chance that this will cause what we would consider to be a pilot shortage in a couple of years, simply because there are enough people leaving the industry as a result of all of this.
Leisure travel makes a comeback
Diane Brady: Alex, you mentioned the shift between the ratio of leisure to business. Airlines are constantly innovating on that front. I remember talking to somebody at a café once even about how they place the bathrooms, and how many bathrooms they have on different flights depending on how much beer people drink. How is this shifting the focus of the investments that these airlines are making, both now and in anticipation of a recovery?
Alex Dichter: There are a number of changes. On the investment front, it really depends on what kind of airline you are. Certainly, there are airlines whose hubs are in cities with enormous volumes of high-end business traffic: the banking sector, the consulting sector, the legal sector. These people historically have flown a lot, and they typically fly at the front end of the cabin. You would see airlines where the number of business-class seats could exceed the number of economy-class seats.
Many of those companies will struggle to fill those cabins in a post-COVID-19 world at first. We will see a shift in thinking about that. Over the past several years, one of the biggest growth segments that we’ve seen has been high-end leisure.
These are not necessarily very wealthy people, but people who see travel as the most important use of their disposable income and are willing to splurge for a better experience. If you looked across business-class cabins of many airlines over the past few years, you would’ve seen a number of people with loosened ties and their laptops out. But you’d also see couples clinking their champagne glasses and families and honeymooners and retirees. That will be a really important segment post-COVID-19. While a hundred business-class seats in some cases may be too much for that segment, 50 certainly isn’t.
The corporate market tends to pay very high prices, and they tend to book relatively late. It wouldn’t be unusual to look at a flight between London and New York a month out and see that the seat map is two-thirds empty, only to find it relatively full on the day of departure.
Leisure passengers tend to book earlier. Historically, airlines have held back on the number of leisure passengers that they would allow into those seats, waiting for corporate travelers to show up. We may see a shift in that dynamic, where we allow more seats to be sold earlier, perhaps at lower prices.
With that might come a shift toward point-to-point traffic, people who are actually going between London and New York versus people who are connecting through London from another market. All of that will likely result in lower average revenues, but it doesn’t have to result in dramatically lower average revenues.
Pricing in a world without precedent
Diane Brady: Robin, I’ve been looking at seat sales to Miami from New York, for example, for $60 round trip. It does feel like it’s going to be hard to wean people off of some of these extremely low fares that we’ve become addicted to in the past few years, even prior to the pandemic. What do you see there in terms of pricing power?
Robin Riedel: On the pricing side, the challenge we’re having is that the systems that manage the pricing, revenue-management systems, and pricing systems, in many cases, rely on past information and past data. However, past information is not that helpful right now to figure out what passengers really want or what people are willing to pay.
What we’re finding with our clients is that customers are much less elastic than they were before. Before, you could throw out a very low fare and people would flock to it. Right now, it’s not necessarily the fare that makes people travel or hold them back, but it’s the fear of getting infected or the fear of being away from home and the door shutting on them. Pricing is a very challenging topic right now where there’s very little precedence we can rely on.
That being said, airlines are making some progress in using what we would call nontraditional data sources and really trying to understand what drives willingness to pay. What are customers really looking for and willing to pay for in this new scenario? Airlines are looking at search trends, looking at customer sentiments, and looking at how people search across a website.
All of those kinds of things are starting to flow into the revenue-management systems and will hopefully help us manage prices back up to a more sustainable level, instead of lowering them and lowering them, trying to stimulate traffic that is really not that possible right now.
‘Working around the clock’ on sustainability
Diane Brady: Alex, I know you’ve done a lot of work with McKinsey regarding sustainability. COVID-19 has almost distracted us from what a terrible year 2020 was. I think it was the hottest year on record.
The airline industry has been front and center, both as an emitter of greenhouse-gas emissions and as an innovator on that front. Has COVID-19 shifted the focus of the industry on this issue?
Alex Dichter: Yes and no. I don’t know a single CEO who believes that sustainability is not coming back to the agenda as a critical topic. It is something that our corporate clients are demanding, and our corporate clients are demanding it because their employees and their customers are demanding it of them.
The good news is that those who are working on technology innovation—the development of sustainable aviation fuels, the use of hydrogen, electrification, and such—have been working around the clock and haven’t taken any time off.
Robin Riedel: There’s almost not a week right now where we’re not meeting with senior executives in the industry talking about sustainability. I’m both surprised and excited about the fact that this is happening, and that COVID-19 has not made this a second-order item. It’s still on the top of the agenda for many of the industry executives.
We see airlines all over the world wondering what to do. Some are working with offsets, and some are working by buying sustainable aviation fuel and trying to spur that industry. Some are investing in future technology for propulsion, whether it’s electric or hydrogen combustion or similar technologies. We’re seeing an influx of investment in that sector.
The promise of personalized air travel
Diane Brady: There was so much excitement around personalized air travel before the pandemic. Are those conversations taking a backseat to recovery? Or are we still seeing the investments in AI [artificial intelligence] and some of the other areas that might advance air travel beyond where we are today?
Robin Riedel: We’ll have to separate these future models, which are a shorter distance. Some people would refer to them as the equivalent of flying cars. These are smaller aircraft that fly, let’s say, up to 300 or 500 miles.
That is a new industry. It’s driven by a number of major trends, one being electrification and battery density. We’re getting to a point when it becomes technically feasible to have vehicles that operate that way. There’s also the drive for more sustainability.
The advance of AI makes some of this more effective. Last, but not least, is the interest of the customer to look at mobility as a service. Customers no longer just want to own a car and drive everywhere, but to hail a rideshare or look at sharing different modes.
When taken together, these trends create a fertile environment for a new mode of air transportation. We track more than 250 companies out there that are trying to play in the space. There are probably about a dozen or so of them that have significant funding by now.
We see a number of prototypes flying around. There are real expectations that in the next three to four years, we will see the first commercial models of these arrive in our cities. What form that will take, whether it’s helicopter-like from one rooftop to another, or a regional model that uses airports or airport-like infrastructure to go from one city to another, is to be seen. All of these have some promise. The devil is going to be in the execution and in the detail, but it surely is an exciting time for that space.
Diane Brady: How is that picture changing, especially in a part of the world where air travel is more back to normal?
Alex Dichter: Over the short and medium-term, we see some clear shifts.
We’re seeing a bias toward fewer flights and typically larger aircraft. Get as many people as you can on each one of your relatively few flights. The other reason for that is there is cargo demand. Larger aircraft do a better job of accommodating cargo than do smaller aircraft.
As we look forward, we’ll see airlines looking for more fuel-efficient aircraft. They will be looking for aircraft with more customer-friendly features like Wi-Fi and upgraded business-class cabins and bigger overhead bins.
The interest in 100-seat aircraft will exist for some of the same reasons that were the case before COVID-19. Those aircraft are very useful at filling in city pairs that demand a lower cost structure than can be achieved with a 50- or 70-seat aircraft but don’t need 140 or 150 seats in order to achieve reasonable load factors.
The only thing that the industry expects to change is the amount of global investment in long-haul wide-body capacity. The reason for that is pre-COVID-19, many of the world’s airplanes that were flying on long-haul routes were losing money.
They were losing money because they were flown by relatively small airlines, in many cases backed by states, whose objectives went beyond profit. It was important to have these routes for political reasons: for pride, national sovereignty, and, in some cases, thoughtful links to economic development. Many governments are coming back around and saying, “Look. We’ve got a lot of priorities for a stretched state’s treasury. We’re not going to be able to keep funding loss-making operations forever.”
We’re seeing more and more governments asking their state-linked airlines to come up with plans that enable them to be financially sustainable. In many cases, that will mean smaller long-haul networks with fewer aircraft, which is good for carbon emissions, but probably not great for long-haul ticket prices.
Diane Brady: You both must be road warriors who also had your plans and travel put on hold. I’m personally very eager to get back on a plane again. Is that something that you welcome?
Robin Riedel: Yes. It’s a bit of a mixed bag. On the one hand, I’m glad to be home more right now. We have an infant in the house. It’s fantastic to be between meetings or at the end of the day and to be able to see my son. I appreciate not being on the road all the time anymore.
At the same time, I truly miss seeing my clients and my friends and my family. I just did the math the other day and this is the longest I’ve gone without seeing my parents in my life. That weighs heavily on me. There’s some positive and some negative in the lack of travel right now.
Diane Brady: What about for you, Alex?
Alex Dichter: First, prior to COVID-19 I was traveling more than virtually anyone that I’ve ever met. Typically, I would be in three continents in a week. I sleep well on planes. My pattern would be, I would get on a plane at night. I’d go to sleep. I’d wake up in another continent. I’d have a full day of meetings. I’d get on another plane that night, go to sleep, wake up on another continent, and end up back at home Thursday night or Friday morning. That allowed me to cover a lot of ground, see a lot of people, and do so in a way that was relatively sustainable from a lifestyle standpoint. Remember, I sleep well on planes, so I got as much sleep on the plane as I would typically get at home, and in some cases more. That has changed dramatically.
I have been on a few flights, particularly on the long haul. As an aside, some of the conversations I’ve had with crew have really been touching. I was on a flight between the US and London with eight passengers on board. The crew were practically in tears. It was their first flight in months. They understand very well that without passengers, they don’t have a future. I certainly hope for their sake that we see as much of the demand coming back as possible. Like Robin, I see some benefits to this.
I find interacting with my colleagues, whom I know well, to be much more efficient via these kinds of technologies. I don’t need to read their body language. I do want to see them on some cycle, but we can get a lot done very quickly.
The fact that nobody is traveling also means that calendars are much less rigid. If I want to get a client together with me for a discussion, I usually find an hour within a couple of days. In the old world, we’d often go back and forth for a couple of weeks trying to match up calendars and find a time when we could both be in the same spot on the globe when neither of us were someplace else.
That will be something that I don’t want to give up. At the same time, I am in this business because I want to help people. I like people, and I like getting to know my clients on a personal level. That is hard to do via Zoom.
I will do a lot less internal travel. I will replace some of that space with more client travel. The other thing that I’ve noted, and I’ve heard others say the same, is that in the future, I may need to see in person everyone in my personal network less frequently. Every two out of three interactions we can do remotely, I’m also meeting more people.
I wouldn’t be surprised if a couple of years from now, you find me doing as much travel as I was doing before, but perhaps getting more out of it.
What industry leaders should know
Diane Brady: To those in the industry, any advice?
Robin Riedel: There are a couple of things worth keeping top of mind here. One, making sure to understand what are the relative risks and what does the latest research show about what is considered safe, or what is relatively safe, versus what is risky behavior? Even within travel, with the many studies that have been done, there’s enough evidence to show that air travel is relatively safe, and you can protect yourself with a few measures.
The second thing is to really think through what is essential travel; how do you define that, and guide your organization? The questions are going to be, “How do you roll back into travel? Do you just go back to where you were before, or do you adjust your travel policy and make some adjustments for things like safety, the environment, and how we’ve all learned to work with modern technology to avoid some of the travel?”
Diane Brady: Alex, anything you’d want to add?
Alex Dichter: Everyone needs to be prepared for a two-speed recovery or return over the course of the next 12 months. None of us really know how the summer is going to play out.
Expansion may prove to be complicated. When demand falls off, your reduction in capacity trails the falloff in demand, almost by definition. When there are fewer people on planes, you reduce flights. As you reduce flights, you reduce pilots.
When demand comes back very quickly, by definition, it will come back faster than you can bring capacity on board. At a time when airlines are going to be looking for as much goodwill as they can get from governments, labor unions, and their passengers, there’s a very high risk that we’ll see long queues in airports, lots of delays, and canceled flights. We’re simply not ready for the demand that appears, and I wish I had a better answer as to which one to prepare for. We need to be ready for both.
I would also leave airline executives with a longer-term thought. I hope that five years from now, everyone will still be talking about COVID-19 agility. What I mean by that is the speed at which we were able to get difficult things done during COVID-19.
Many airlines have moved to a world where what used to be eight-week, 12-week planning cycles are now done in one to two weeks.
My hope is that we retain some of these learnings, and maybe move to a world where we stop telling ourselves that every major innovation needs to, by definition, take several years to implement. We can start acting a little bit more like digital leaders, who tend to get things done quite quickly in a trial-and-error kind of way. I’m speaking more about the commercial side than I am about operations, where safety is paramount in our industry.
How COVID-19 has driven industry innovation
Diane Brady: Can you give me some sense of what’s on your radar and what you’re watching over the next year in general with regard to the industry?
Robin Riedel: There are probably four or five different themes here that are becoming important into 2021 beyond COVID-19. We need to get more serious and find better ways to abate some of the carbon we’re producing.
A second theme will be what we call the future of air mobility: the Electric Vertical Takeoff and Landing [eVTOL] space or advanced-air-mobility space.
Another theme we haven’t talked about is cargo transportation by drone. We’re seeing a broad number of trials around the world where vaccinations or blood transfusions, or even medication and e-commerce packages, are transported by drones over the short range or over the long range for the last mile.
In the more traditional airlines, customer experience is going to be one to watch. As we come through COVID-19, smart airlines will take this as an opportunity to make things not just safer but also better. Whether that is self-service at the airport, some of the digital offerings they have, or onboard product, we’re seeing a number of changes coming that will make travel better in the future.
Diane Brady: Alex, what would be on your radar for people to watch over the next year?
Alex Dichter: I’m hopeful that we’ll see a couple of things. We’ll start to move from a world where the industry is focused on survival to a world where at least parts of the industry are focused on long-term success.
Let’s recognize that this is an industry that, for the better part of its 75-plus-year existence, has not made a dime. Part of that has to do with a very challenging structure: too many airlines, outdated regulations, very powerful supply chains.
I’m looking forward to some of the innovations that will naturally come out of this. Several of the changes that the industry has put in place during COVID-19, particularly moving from physical touchpoints to digital touchpoints, are hugely relevant. Digital technologies allow people a sense of control and transparency that I think everyone wants. As a passenger, I’m looking forward to some of those changes.
Diane Brady: So much fodder. If you’d like to hear more, please do go to McKinsey.com. We’ve been speaking with Alex Dichter and Robin Riedel. Alex and Robin, thank you so much for joining us.
Robin Riedel: Thank you for having us, Diane. It was a pleasure.
Alex Dichter: Thank you, Diane.
COVID-19: An almost full recovery of air travel in prospect.
Brian Pearce Chief Economist IATA
26th May 2021
The pandemic struck these islands unequally. What does this mean for tourism, a major economic driver for the entire region? The answer is unique, just like the islands.
By Emily Palmer: New York Times: May 25, 2021
On the glassy blue waters surrounding the U.S. Virgin Islands, catamarans and pleasure yachts have packed the shoreline for the past year — a scene so busy and crowded, it’s unimaginable, even before the pandemic.
Indeed, the business of charter yachts is booming, and expected to pump at least $88 million into the local economy this season, almost double the roughly $45 million that came in 2019, according to Marketplace Excellence, which represents the U.S. territory’s department of tourism.
But less than 12 miles away, the quiet waterways of the British Virgin Islands present a different story. Relatively few boats have harbored there since last spring, when Britain mostly shuttered the territory to international tourists. Strict Covid safety protocols have kept many away.
Before the pandemic, the Caribbean was the world’s most tourism-reliant region, according to recent calculations by the World Travel Tourism Council. Made up of dozens of sovereign nations, territories and dependencies that often reacted disparately to the virus, the region was struck unequally by the coronavirus. Some islands were walloped by staggering caseloads, while infections on others sometimes dwindled to single digits. With 48 percent of its population fully vaccinated, and 62 percent at least partially vaccinated, Turks and Caicos is one of the most inoculated places in the world. Haiti hasn’t received a single dose. And like the B.V.I., the fates of many Caribbean islands are tied to their colonial history. With limited sovereignty, truncated voting rights and an economy largely serving international visitors, they are often subject to the decisions of nations far away.
Health care infrastructures across the region are limited, and many islands have endured flip-flopping border closures and stringent curfews. The result: Tourism has drastically declined, sinking the region’s gross domestic product 58 percent last year.
According to a recent survey by the Caribbean Hotel and Tourism Association, a quarter of the more than 250 Caribbean tourism companies surveyed said they do not expect a full recovery until at least mid-2023. More than half of those businesses surveyed said they were unsure they could stay afloat.
In a handful of islands with fewer travel restrictions and more successful vaccine campaigns, tourism is already thriving. For the U.S.V.I. and Turks and Caicos, for example, catering to a wealthier market and specializing in luxurious longer stays, strong numbers are only expected to rise, as islands market a Caribbean summer to an increasing number of vaccinated Americans.
But much of the region lags perilously behind. Unable to secure vaccines and with no end to the economic turmoil in sight, the economies and the people of these islands are endangered — along with the myth of paradise found on their sugar-sand shores. Here’s a look at the strategies that various islands have adopted to survive, from work visas to testing availability.
Aruba’s passport to Covid safety
Proactively responding to travel trends has helped position some islands ahead of others. In February, occupancy rates on the Dutch island of Aruba fell more than 66 percent compared to the same month a year before, according to a recent STR destination report.
Then, in March, Aruba teamed up with JetBlue, which offers about 40 weekly flights from the United States to the island, to debut CommonPass, the world’s first digital vaccine passport. Those with the digital pass may take a virtually supervised at-home PCR test within three days of departure, upload results and cut through immigration lines. United’s Aruba flights from Newark and Houston also use the pass, with plans for additional routes in the near future.
“We wanted to create a way to make it easier on travelers and more efficient for our air travel partners,” said Shensly Tromp, director of development and technology at Aruba Airport Authority N.V., “without compromising the safeguards we have in place around health and safety.”
Vaccination information will be added to CommonPass as early as June.
Before the pandemic, almost three-quarters of the island’s gross domestic product and nearly 85 percent of jobs had been rooted in tourism, according to W.T.T.C. analysis. Now, with tourism up 53 percent from February to March, Dangui Oduber, the minister of tourism, public health and sport, noted a “continual uptick” since Aruba’s dual CommonPass and vaccine rollouts.
Aruba too is a world leader in vaccinations. As of mid-May, almost 57,500 Arubans were at least partially inoculated, with the island optimistically reaching herd immunity this summer, Mr. Oduber said.
‘Reaching the end zone’ in the U.S.V.I.
Even when Americans were shut out of most of the world, the borders to the U.S. Virgin Islands never closed. Lured there with slogans like “Reconnect with Paradise” and the chance for anyone to get vaccinated, even before many could get a shot back home, visitors have recently crowded the American territory’s beaches and restaurants.
Hotel occupancy rates in the U.S.V.I. are almost triple that of the region and seven times that of the Bahamas, according to recent analysis by STR, a global hospitality data and analytics company.
Visitors are required to get tested but not to quarantine. With tourists swarming, the U.S.V.I. prioritized hospitality workers early in its vaccine rollout. So, in February Sandy Colasacco, a nurse practitioner who runs the Island Health and Wellness Center, a nonprofit clinic serving many of St. John’s uninsured population, reached out to most restaurants and hotels there to schedule appointments.
“The fact that everyone can get vaccinated and feel safe when they work, even though they’ve been exposed to hundreds of tourists every day, is a relief,” Ms. Colasacco said.
Bryan Mitchell, a software engineer from Los Angeles, discovered that on St. Croix, getting vaccinated was easier than finding a rental car. Extending their stay for the second round, he and his girlfriend were among the tourists who received some 4,150 shots.
“Getting the vaccine and stepping out of the pandemic, felt like reaching the end zone,” Mr. Mitchell said.
Among the first American communities to vaccinate everyone 16 and older, the U.S.V.I. had fully vaccinated 31,645 residents and tourists as of mid-May and is on track to administer 50,000 first shots by July 1, said Tai Hunte-Ceasar, medical director with the territory’s health department.
The health department declined to provide an official target date for reaching herd immunity. But Gov. Albert Bryan Jr. has equated reaching that goal with greenlighting the Crucian Christmas Carnival, a monthlong festival on St. Croix in December, which traditionally brings together many islanders and tourists.
But while top Caribbean destinations a year into the pandemic experienced a 34 percent dip in flights, according to global business aviation data by WingX, Americans are already coming to the U.S.V.I. in droves.
A joint partnership to expand testing in Turks and Caicos
Despite low infection rates and a massive vaccine rollout, by late January, Turks and Caicos was just days from effectively re-closing its borders — because the U.S. government had suddenly required inbound international travelers to show proof of a negative antigen test, and Turks and Caicos lacked such a testing infrastructure. Several thousand Americans already vacationing there would be stranded and the travel dollars just returning to the semi-independent British territory would again disappear.
Turks and Caicos, which officially reopened in July 2020, expected some 30,000 visitors — many of them Americans — to its 40 islands and cays in February. A closure would be a devastating blow.
“It was a do-or-die moment for Turks and Caicos,” said Sharlene Cartwright-Robinson, then the premier.
With just seven days to plan, Ken Patterson, the chief executive officer of the five-star Seven Stars Resort & Spa, offered to front $600,000 for the archipelago’s needs.
“It really was not that hard a decision,” Mr. Patterson said, noting the catastrophic effects of a potential second closure. “More like swerving to avoid a car wreck: It was just instinctive.”
And so the territorial government and private sector imported 60,000 test kits, immediately certified 18 new testing sites (most at resorts), trained hotel staff to conduct tests and passed a series of laws to ensure health standards.
“It was very, very important for the Turks and Caicos to get it right,” Ms. Cartwright-Robinson said. “Having a tourist come back and say they weren’t stuck, that personal story was the best marketing we could get.”
Deborah Aharon, the chief executive officer of the Provo Air Center, a private airport serving the archipelago, said that traffic is busier than ever.
Since January, the number of private jet flights in and out of Provo Air Center has soared more than 50 percent above rates seen before the pandemic, she said. Mid-May traffic rocketed 73 percent from 2019.
Overall, tourism to the archipelago hovers around 70 percent capacity, but Seven Stars, which now offers a drink voucher along with complimentary Covid-19 tests, is sold out for May and almost sold out for June, with little availability until September.
“It was literally like a tap being turned on,” said Mr. Patterson, noting he had never seen such high demand. In recent weeks “we’ve taken more bookings than we have in the last year.”
St. Barths and the B.V.I.: few tourists to be seen
On the other end of the spectrum, some islands are still undergoing extreme economic stress.
In February, with variants sprouting across the globe, France again locked its territories down, including the 11-mile-long St. Barths. The island is largely autonomous, but not independent.
When St. Barths had its first reopening, last June, tourists quickly returned to the sparkling watercolor island — rusty red roofs and pink bougainvillea set against blue-green sea.
“We never experienced such a busy operation,” recalled Fabrice Moizan, the managing director of Eden Rock - St. Barths hotel. By January, he said, bookings were full through June — long after the typical high season.
“We were ready for the best year ever,” said Nils Dufau, the president of the tourism committee on St. Barths, who noted that Covid-19 cases eventually plateaued as they ramped up testing.
Then, Mr. Moizan said, “out of the blue we received this decree from the French government.”
In mid-February, the island’s territorial council asked the French government to reopen its borders. “The economic consequences of this decision are expected to be dire, especially as no horizon has been drawn,” the council members stated in a policy memo.
“They got our message loud and clear,” Mr. Dufau said. “Unfortunately, we didn’t get a positive response.”
In April, the island received Pfizer vaccines from France and pushed a massive rollout. More than two-thirds of the island’s adult residents are now at least partially vaccinated, and the hospital has no Covid-19 patients. St. Barths reopened to the European Union, Britain and some other countries last week, Mr. Dufau said, and expects to reopen to Americans in a matter of days.
Meanwhile, the British Virgin Islands, which had fully vaccinated 4,201 people — or just shy of 14 percent of the population — by mid-May has endured the almost-complete closure of its waterways to international inbound travelers for over a year. Ferries reopened April 15, and those going between the B.V.I. and U.S.V.I. will increase passenger capacity and add a second daily ferry starting May 27. Otherwise, international vessels are still barred, and there is no timeline for reopening, said Keith Dawson, the tourist board’s public relations manager.
Testing and quarantine requirements remain disparate across the region, and testing in the B.V.I. is laborious for those who still want to visit. Travelers must get tested three times — before travel, upon arrival and following a four-day quarantine. (Most travelers with proof of completed vaccination can exit quarantine following a negative test taken upon arrival.) Anyone accused of breaking social distancing rules can be fined up to $10,000. (The territory, which in March had no cases, recently ticked up to 33.)
“Visitors compare no restrictions in the U.S.V.I. to some restrictions in the B.V.I., so the choice is easy for many,” said Clive McCoy, the B.V.I.’s director of tourism, alluding to the shift in tourism to its American counterpart.
Before the pandemic, the B.V.I.’s G.D.P. ranked third in the world for its dependency on tourism, which provided almost two in three jobs, according to a recent W.T.T.C. analysis. The territory has turned to its strong financial services sector to help alleviate the economic strain, Mr. McCoy said.
Other islands have no such safety net. While the U.S.V.I. and Turks and Caicos enjoyed prompt and massive vaccine rollouts, much of the region is dependent on vaccines from other nations or via a discounted global program known as Covax. Largely headed by India, which is plagued by its own desperate outbreaks, the initiative promises to eventually provide poorer countries with enough vaccine doses to cover just incremental portions of their populations. But it faces a $23 billion funding gap and delayed shipments.
Stalling public health and their economic recoveries, countries reliant on Covax are not expected to be widely vaccinated before 2023, “if it happens at all,” according to an analysis by the Economist Intelligence Unit.
So far, the Bahamas and Barbados have only received enough vaccines from Covax and India to fully inoculate fewer than 11 and around 20 percent of their populations, respectively. By February, the Dominican Republic had ordered 20 million doses across international suppliers, but has only received a few million so far, according to government news releases and news articles.
Looking ‘beyond tourism’ in Barbados
A few weeks after the world shuttered, Peter Lawrence Thompson, an entrepreneur from Barbados, pitched the idea of one-year remote work visas to the island’s cabinet. “Our tourism industry must adapt or risk death,” he wrote, outlining a plan to take “Barbados beyond tourism.”
“We’ve been talking forever about diversifying the economy, but it’s hard,” Mr. Thompson said of the independent British Commonwealth nation. “This is a new type of tourism, it’s just very long-term. It’s not vacation, it’s workation.”
More than 2,500 people — mostly from the United States, Britain, Canada and Nigeria — have applied since the Barbados Welcome Stamp Visa began in July, according to recent data from Barbados Tourism Marketing, Inc.
And Terra Caribbean, a real estate group with properties across the region, recently found that about three-quarters of almost 100 visa holders they surveyed had never even visited Barbados before they applied for the program; by November, more than 40 percent of the newcomers Terra Caribbean tracked were budgeting $2,500 to $5,000 monthly for housing.
“From a Barbados brand perspective, this initiative will pay dividends for many years to come,” the group concluded in an analysis this fall.
The remote-work concept has been adopted by other nations across the Caribbean, including Anguilla, Aruba, Antigua & Barbuda, the Bahamas, Bermuda, the Cayman Islands, Curaçao, Dominica and Montserrat.
Danita Becker, a senior product owner for a start-up in Dallas, moved to Barbados with the visa in September.
“Coming to the island accelerated a lot of growth for me, putting into perspective some of my career goals,” she said, adding that it provided a break from the mental stress of social isolation and racial tensions in the United States.
Now, most mornings, Ms. Becker, 40, who had never spent more than a few weeks in Barbados visiting her Bajan family, swims in the sea before returning home or to an open-air restaurant to work. Weekends include snorkeling and swimming with turtles, and she has also joined local Christian fellowship groups.
Welcome Stamp may extend visas another year, but Ms. Becker is considering citizenship.
“I have aspirations to make a mark on the island,” she said. “And through technology and volunteering, do my part to improve things here.”
The Conference Board Consumer Confidence Index® Virtually Unchanged as Expectations Soften
25 May. 2021
The Conference Board Consumer Confidence Index® held steady in May, following a gain in April. The Index now stands at 117.2 (1985=100), down marginally from 117.5 in April. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased from 131.9 to 144.3.
However, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 99.1 in May, down from 107.9 last month.
The monthly Consumer Confidence Survey®, based on an online sample, is conducted for The Conference Board by Toluna, a technology company that delivers real-time consumer insights and market research through its innovative technology, expertise, and panel of over 36 million consumers. The cutoff date for the preliminary results was May 19.
“After rebounding sharply in recent months, U.S. consumer confidence was essentially unchanged in May,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of present-day conditions improved, suggesting economic growth remains robust in Q2. However, consumers’ short-term optimism retreated, prompted by expectations of decelerating growth and softening labor market conditions in the months ahead. Consumers were also less upbeat this month about their income prospects—a reflection, perhaps, of both rising inflation expectations and a waning of further government support until expanded Child Tax Credit payments begin reaching parents in July. Overall, consumers remain optimistic, and confidence should remain resilient in the short term, as vaccination rates climb, COVID-19 cases decline further, and the economy fully reopens.”
Consumers’ appraisal of current conditions improved in May. The percentage of consumers claiming business conditions are “good” fell from 19.4 percent to 18.7 percent, but the proportion claiming business conditions are “bad” also declined, from 24.5 percent to 21.8 percent. Consumers’ assessment of the labor market improved. The percentage of consumers saying jobs are “plentiful” climbed from 36.3 percent to 46.8 percent, while those claiming jobs are “hard to get” declined from 14.7 percent to 12.2 percent.
Consumers’ optimism about the short-term outlook waned in May. The percentage of consumers expecting business conditions to improve over the next six months fell from 33.1 percent to 30.3 percent, while the proportion expecting business conditions to worsen rose from 12.1 percent to 14.8 percent. Consumers were also less upbeat about the job market. The proportion expecting more jobs in the months ahead fell from 31.7 percent to 27.2 percent, while those anticipating fewer jobs rose from 14.4 percent last month to 17.3 percent in May. Regarding short-term income prospects, 14.5 percent of consumers expect their incomes to increase in the next six months, down from 17.4 percent in April. The proportion expecting their incomes to decrease also fell, from 10.5 percent in April to 9.3 percent in May.
NOTE: The May 25, 2021 release of The Conference Board Consumer Confidence Index® is the first based on survey data collected online. Data has been restated back to January 2021, the effective changeover month; no other data revision was necessary. Click here for a Technical Note with complete details.
Source: May 2021 Consumer Confidence Survey®
The Conference Board
Published: Sunday | May 23, 2021
Will the decision by several United States-based cruise lines to home port in the Caribbean this summer become a permanent fixture, or is it just a temporary workaround?
The widespread suspicion that it is the latter was succinctly voiced in one recent online posting on Tribune242’s website in The Bahamas.
“These cruise people aren’t coming here because we’re such an attractive destination to home port in. They’re coming here because they think we’re a bunch of dummies who will do anything they say, and they don’t have to put up with ironclad safety travel restrictions,” it said.
For government and the tourism industry, however, the test will be whether home-porting arrangements agreed for this summer can be retained or whether the cruise lines will simply return to Florida when the pandemic and the strict US hygiene restrictions on sailings out of US ports end.
In normal times, the principal reason for choosing a home port relates to ease of passenger access from a line’s principal markets and proximity to the locations included in cruise itineraries. It also depends on the ability of a port to be able to provide the support, fuel, and supplies the lines require, and a country’s willingness to facilitate the movement of crew.
Other requirements relate to port infrastructure and efficiency; an ability to handle a large number of passengers simultaneously; the availability of local transport and other passenger services; security; proximity to an international airport; and more generally, a satisfactory regulatory and fiscal environment. For these and other reasons, Florida has developed over time as the location of choice for the principal US lines that sail into the Caribbean.
Uniquely, however, several pandemic-related factors have created a window of opportunity this year for the Caribbean to change its relationship with the cruise lines through home porting.
First, the cautious approach being taken by the US Centers for Disease Control and Prevention (CDC) means that it may well be November at the earliest before cruise companies are able to resume near-normal sailings out of the US to the Caribbean. Before then, its ‘Conditional Sailing Order’ requires a phased approach to the resumption of cruising, involving simulated voyages with volunteers for those lines that cannot meet its requirement that almost all passengers and crew on each sailing are fully vaccinated.
Second, a politically driven legal challenge by the governor of Florida against the CDC is under way. This relates to the Centers’ requirement for mask wearing while boarding cruise ships. Florida State law now bans the use of digital health passports and forbids businesses to base entry based on vaccination status. The issue, which the courts have sent for mediation, has seen Norwegian Cruise Line’s CEO Frank Del Rio indicate that it may move its ships out of Florida and observe that it “can operate from the Caribbean for ships that otherwise would have gone to Florida”.
And third, some Caribbean governments and port authorities have sought to demonstrate during the pandemic that they have the facilities the cruise companies require by offering safe haven to the many idle cruise ships moored in Caribbean waters. Some, like Barbados, have additionally gone out of their way to demonstrate they are a ‘trustworthy partner’ by continuing to honour pre-existing provisioning and other obligations, while helping facilitate humanitarian support and arrangements for the repatriation of stranded crew.
All of which has caused several cruise lines to consider what they had largely previously resisted: home porting some of their vessels in the Caribbean.
In recent weeks, Royal Caribbean, Norwegian, MSC, Seabourne, Crystal, Viking Cruises, Celebrity, and others have announced that they will be variously home porting this summer season in Antigua, The Bahamas, the Dominican Republican, Jamaica, and St Maarten, bringing significant new economic benefit to each of the ports and countries concerned.
At best, this should offer new commercial opportunity to local suppliers, employment, and the wider hope that cruise visitors sailing out of Caribbean ports will subsequently return for a longer stay.
As Lisa Cummins, Barbados’ minister of tourism and international transport observes, Barbados and other Caribbean governments have wanted to see for some time more home-porting operations and hope that the incorporation of pre- and post-stay vacations will encourage cruise passengers to return. The island also intends using the experience to develop a southern Caribbean cruise alliance for summer itineraries based on Barbados.
Caribbean tourism is structured in such a way that hotels and others onshore bear the brunt of the sector’s tax burden, contributing heavily to destination-improvement initiatives and local social causes, and by helping to market their destinations and enhancing and protecting the environment.
That is why this column has pointed out before the need for a cruise industry that is genuinely Caribbean focused and developmental rather than just using the region to benefit the owners of the big cruise companies. Home porting would be one way of proving this, and if viable and popular with passengers, should become an annual summer feature of sailings in the Caribbean.
Unfortunately, over decades, the cruise lines have proven to be fickle commercial and developmental partners, playing off to their advantage one country against another, raising well-documented concerns that range from the environmental to the extent to which they leave revenue behind.
It is true that in times of crisis the cruise lines can be a good corporate partner as they recently demonstrated in St Vincent, but they should be doing more. They need to be wholeheartedly engaged.
Apart from better protecting the region they make use of, they should be assisting the development of the Caribbean tourism product, supporting local business, and playing a direct role in post-pandemic economic recovery.
The home porting of some ships each summer would demonstrate this.
This is the moment when there ought to be a much wider regional discussion on what it would take post-pandemic to incentivise the use of summer home-porting hubs in the region and to explore whether ‘multiporting’ around larger islands should be encouraged. It would also be a good time to attract the owners of the large number of smaller ‘expedition’ cruise ships now under construction, better suited to smaller ports, to locate permanently in the Caribbean.
- David Jessop is a consultant to the Caribbean Council.
To access previous columns, visit: www.caribbean-council.org/research-analysis
The hunt for the next Bali: Inside Indonesia's plan to save its tourism industry by minting 5 new hubs for international travelers.
Business Insider May 22 2021.
Land of holy temples, age-old traditions, beaches and jungles — and hordes of influencers in flowing white clothing.
The vacation hotspot is one of 17,000 islands that makes up Indonesia, the largest archipelago in the world. Its verdant rice terraces and Hindu temples define its landscape and make it catnip for the Instagrammers and tourists who flock to the island every year.
In 2019, Indonesia welcomed 16.1 million foreign tourists, according to data from the country's central bureau of statistics. Bali's Ngurah Rai International Airport saw 6.23 million foreign arrivals that year, the most of any airport in the country. While some would argue that tourism has "ruined" Bali, it has become an indispensable part of the island's economy: An estimated 80% of Bali's economy is tied to travel.
The pandemic, of course, ground tourism to a halt globally, and Indonesia was no exception. In April 2020, foreign arrivals in Bali dropped by more than 93%. In the same month, the government announced the pandemic was forecast to wipe out $10 billion from its tourism revenue by the end of the year. By November, Indonesia announced it was in its first recession in 22 years.
Now, the government is trying to kick start tourism with a series of proposed measures that include travel bubbles between several of its islands and nearby Singapore, and a five-year visa targeting business travelers and digital nomads.
It's also planning to spend $275 million on 108 infrastructure projects this year to mint a series of "new Balis," a sweeping initiative that aims to bring tourists to new parts of the vast country.
But all that development comes at a cost. Insider spoke with economists as well as tourism and Southeast Asian development experts to understand what kind of downsides a new surge in tourism could create. Some of those experts expressed doubt that the appeal of Bali can be replicated in the first place — while others are concerned about the impact widespread tourism will have on the country's people and environment.
One of those experts, Jaeyeon Choe O'Regan, who has a Ph.D. in tourism management and focuses on sustainable community development and poverty alleviation in Southeast Asia, told Insider the project raises a series of red flags.
"I'm concerned about replicating the idea of Bali in these provinces because they have characteristics, resources, heritages, and people that are totally different from Bali," Choe O'Regan said.
Indonesia launched its plan to replicate the success of Bali years before the pandemic.
President Joko Widodo described the plan to a group of businessmen during a trip to Hong Kong in May 2017: "You all know Bali, our famous island paradise? With improved infrastructure, we will launch a program called 10 New Balis."
Last year, the government narrowed that list down to five "super priority" locations, which were selected based on their accessibility, their viability as tourism destinations, and the presence of a pre-existing tourism scene to build on.
The list includes:
The yellow arrow points to Bali. The locations of the "5 new Bali's" are highlighted by red arrows. From left: Lake Toba; Borobudur; Mandalika; Labuan Bajo; Likupang. Google Maps
Luh Putu Mahyuni, a Balinese associate professor of management accounting at Universitas Pendidikan Nasional (a private university in Bali) and a Ph.D. in sustainable business and economy, told Insider that Indonesia's approach to selling each location as a tourism destination will likely vary.
"The central government will sell Lake Toba for the beauty of its nature — they will sell eco-tourism," she said. "In Borobudur, they will sell the temples, so it's historical and cultural tourism."
She also pointed out that even with the natural and cultural resources across these destinations, not all elements of Bali are replicable — particularly when it comes to religion. While Hinduism is practiced by less than 2% of Indonesia's total population, it's practiced by almost 87% of people in Bali, per data from the country's central bureau of statistics.
Bali is also home to more than 20,000 temples, according to a 2014 paper called "The Readiness of Bali as Spiritual Destination" released by a team of French and Indonesian universities. Between its myriad temples and its many wellness clinics and yoga retreats, the island has become a magnet for tourists who like a little spirituality with their vacation.
"Basically, the 'new Balis' are dependent on natural beauty and some history. But Bali is known for richness of culture — in Bali, you can find a living culture that is closely related to religious practices, which you will hardly find in other areas in Indonesia," Luh Putu said. "This is the one that is missing in the 'new Bali' [scheme]."
In a 2019 report for the Organization for Economic Cooperation and Development (OECD) focusing on Indonesian tourism, economists Patrice Ollivaud and Peter Haxton laid out the government's tourism goals. Those goals focused on getting as many people to visit as possible.
"Initially [the government] was focusing on attracting more and more tourist numbers," Ollivaud told Insider on a phone call. "That gradually changed."
A representative for the Indonesian government told Insider the strategy for 2021 is not tied to the number of visits, but instead prioritizes "tourists who have a high income."
But even as the program's focus shifts away from mass tourism, the locations may still collectively have their work cut out for them, as indicated by the World Economic Forum's (WEF) 2019 Travel and Tourism Competitiveness report.
When it comes to tourism infrastructure and as compared to Asia Pacific nations, Indonesia ranked in the bottom 40% of the WEF report. And while it scored high on the WEF's ranking of price competitiveness (No. 6 of 140 countries total) and prioritization of travel and tourism (No. 10), the county is lagging in tourist service infrastructure (No. 98) and in environmental sustainability (No. 135).
In other words: It's an inexpensive country to visit, and the government is focused on tourism — but the infrastructure to receive those tourists is weak, and the government's environmental regulations to protect natural resources are very weak.
As the authors of the 2019 OECD report put it, "Infrastructure needs are enormous compared to government funding capacity."
Closing the accessibility gap
So, what does it take to turn an area into a "new Bali?"
For one thing, there's the matter of physically getting to each location.
"The government is currently focused on infrastructure, because the connectivity from Bali and Jakarta to these five new Bali destinations is very bad," Luh Putu said. "That's the biggest challenge."
Both the island of Lombok (on which Mandalika is located) and Labuan Bajo have small international airports, but Luh Putu said the roads linking the airports to their destinations need to be improved. Borobudur is a two-hour drive from the closest airport in Jakarta, a city where the traffic has been described as a "nightmare," while Lake Toba is a four- to five-hour drive from the closest airport.
Likupang, known for its snorkeling and diving, is the area that faces the biggest developmental challenges due to limited infrastructure and tourist attractions, as well as the lack of good internet access, the representative for the Indonesian government said.
Bali, on the other hand, is home to Indonesia's second-biggest airport by airline count: Ngurah Rai International has two terminals and receives direct international flights from hubs including Beijing, Singapore, and Sydney. The airport is a 40-minute drive from tourist hotspot Ubud and a 10-minute drive from the Bali party town of Kuta.
To fill the accessibility gap between Bali and the would-be Balis, the government said in an April press release that it would be allocating part of its spending on connectivity. In the case of Mandalika, for example, part of the area's budget is being used to connect Mandalika to Lombok airport. In Lake Toba, part of the budget is going towards road and bridge upkeep, and in Borobudur, it will be used for flood control infrastructure.
But, as Choe O'Regan, the Ph.D. who focuses on sustainable community development, said, "It's not just the roads and the airports."
Ollivaud echoed the same idea: "Transportation is an important part of the deal. But there's also all this other environmental infrastructure that's very important and often lacking in Indonesia."
At the core of the plan to replicate Bali as a tourism model is a basic and pervasive problem: Succeeding could be harmful to local people and local environments, both Ollivaud and O'Regan said.
"Pollution is becoming a huge problem for Indonesia, not only plastic but also having proper water is an issue," Ollivaud said.
"Replicating Bali is a bit of a dangerous idea," said Choe O' Regan. "Bali has serious issues — water shortage, garbage management, people pushed out of villages and homes because of fancy resort development."
In December 2017, the island declared a "garbage emergency" and three-and-a-half miles of beach were deemed an emergency zone because they were so overrun with plastic waste. (The government representative said Indonesia is targeting a 70% reduction in marine debris by 2025.) It's also experiencing a water crisis that's driven in part by its popularity as a tourist destination.
Development plans in Mandalika — which, as a Special Economic Zone, is attracting foreign investment in addition to government investment — in particular, have raised red flags overseas. In March, UN human rights experts urged the Indonesian government to respect human rights after sources found local people were forced off their land without compensation. The Indonesian government representative told Insider it rejects the UN's concerns, calling them "false and hyperbolic."
Ollivaud and Choe O' Regan also both pointed to the importance of developing vocational training programs in the new tourism areas so that locals can find employment, and not only in low-income positions.
"Local people usually get hired for cleaners, receptionists, drivers. These developments generally make low-income jobs for local people," Choe O' Regan said.
Luh Putu, the Balinese professor, is more optimistic. She said the new locations are being developed with Bali's issues in mind: "The government learned a lot from the case of Bali tourism. They realized mass tourism generates a lot of negative impacts on the environment."
She went on to note that Bali's model of tourism is evolving, too, and pivoting towards a village-tourism model in which income is generated in and kept among the local communities.
"If you come to Bali right now, there's a lot of tourism based around villages that's more sustainable in terms of the environment and the culture," Luh Putu said. "Tourists are invited to experience living like a villager to interact with the local culture."
Emerging from the pandemic
Some indicators show the initiative was succeeding in drawing tourists into the new locations before the pandemic struck.
Borobudur and Lake Toba, for example, emerged as new tourism destinations in Indonesia in recent years, per the OECD report. Construction projects including zoning, road construction, and waste management have been ongoing throughout the pandemic in all five locations, the government representative said.
But while the initiative is riding on Bali's international renown to attract tourists, the question still remains whether the island's innate appeal will rub off on other Indonesian destinations.
"Even though they have marketing plans, I don't know how they will actually attract tourists to these locations," Choe O'Regan said. "I think people will still prefer to go to Bali."
And independent experts and government officials alike acknowledge that the stakes are high with this latest tourism push. Luh Putu said that success across the new destinations would bring some much-needed stability to Indonesia's tourism sector.
"Currently, most of Indonesia's tourism income comes from Bali," Luh Putu said, referencing pre-pandemic information. "If the five destinations are a success, it will improve the resilience of tourism because the country won't only be dependent on Bali for income."
On the flip side, Basuki Hadimuljono, Indonesia's minister of public works and public housing, identified what is at stake should the program fail.
"For tourism, first the infrastructure must be repaired, then amenities and events, then a massive promotion," Hadimuljono said in an April press release. "If that's not ready, tourists come once and won't come back again."
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.