Expert anticipates more unemployment and a substantial increase in cancelled reservations
Given the limitations placed on the tourism industry by the restrictions imposed by the new executive order to mitigate the coronavirus, the Puerto Rico Hotel and Tourism Association (PRHTA) foresees another dramatic drop in reservations and more job losses in the sector.
Last Friday, Gov. Wanda Vázquez banned once again recreational beach activities and limited casinos and swimming pools to 30 percent of their total occupation after the P.R. Department of Health reported a spike in COVID-19 cases. PRHTA President-elect Joaquín Bolívar III affirmed that these limitations are illogical and make it impossible for this economic sector to recover.
"We don't understand the reasoning behind the restrictions they place on us. In the hotels, there have been no outbreaks or sick employees. We have extreme health protocols. The limitations of the facilities prevent hotels from having a recovery," he stated.
Bolívar, who is also the president of the San Juan Water Beach Club, underscored that the drop in reservations that has been registered since the announcement of Executive Order 2020-080 last Friday has been in double digits and that the impact has been more noticeable in hotels and inns in the metropolitan area.
To date, the hotel industry is 80 percent below the business volume registered at the same time last year. However, with the previous economic reopening they had begun to register an advance in occupation, mainly during the weekends.
"Just when we were registering a slight improvement, they limit us again. It wasn't that we were doing well—because no hotel is making money—but there was some money flowing in on the weekends and we had started hiring employees again," Bolívar said.
Rise in Unemployment
Bolívar—who took the baton of the presidency of the PRHTA board of directors a week ago—pointed out that if the order limiting the offers had not been implemented, the trend reflected that they would register an approximate 10 percent increase in occupancy for January 2021. The high season for local tourism is usually during the months of November to March.
"There is no projection of high season this year. This will be a very sad period. We had started hiring again and they are people who, unfortunately, in the middle of Christmas, will be unemployed again. Even sadder is that the additional federal benefits for these people have already ended. It is a very sad scene," he stated.
It is estimated that tourism activity on the island represents more than 80,000 direct and indirect jobs, of which approximately 80 percent have been laid off or furloughed. The labor law establishes that after three months of temporary suspension, automatic dismissal proceeds, and after six months, employers are not obliged to rehire them.
"We are aware of the fiscal situation of the industry. Here we all have losses as a result of the pandemic. That is undeniable. This is worse than what the industry experienced after the 9/11 attacks. It is the worst situation we have faced in the last three decades," the PRHTA president-elect added.
Changes in the Tourist Profile
Bolívar understands that airlines play an important role in the island's recovery as a destination; nevertheless, he warned that because of price drops air tickets to Puerto Rico, there has been a change in the profile of the tourists who come to the island, who do not necessarily contribute to the industry's recovery.
"Very low rates are being seen to Puerto Rico. Roundtrip tickets from $34. That causes problems at the destination and does not contribute to economic recovery. These travelers do not necessarily stay in hotels and if they do, they do not consume anything inside the inn," he explained.
"These travelers come with a limited budget and do not seek to consume in the properties, nor in the restaurants that supply service to the hotels. It is not that cheap tickets make us the destination of the cheap, but you do not see the glamor that was seen before in the profile of the traveler who visited us. The impact of these visits is less," he added.
Call for More DMO Funding
Bolívar also opined that it is necessary for Puerto Rico to have the necessary resources to face the competition when tourist destinations return to operating normally. Thus, he called on the government to allocate more money to the Destination Marketing Organization (DMO), Discover Puerto Rico.
According to data from the Puerto Rico Tourism Co. (PRTC), the DMO currently has a budget of $25 million from room tax collections, of which the organization allocates an approximate 70 percent to marketing, promotion, and sales strategies; 22 percent for payroll expenses, and 8 percent for administrative expenses.
"The government has to allocate additional funds for the island's marketing. They have not been spending on public works, nor have they paid their debt in recent years. The funds are there and what needs to be done is request a special allocation from the Financial Oversight [and Management] Board. The DMO is key to our recovery. The return on what is invested in promotion is a lot," Bolívar said.
Lastly, Bolívar voiced his opposition to the PRTC becoming an office of the Department of Economic Development and Commerce (DDEC). “The key to our recovery is a DMO managing destination marketing and a PRTC managing tourism standards and development. This is the perfect formula ”, he specified.
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.