Update Country Report Curaçao 28 Jun 2018

Nine months after Hurricanes Irma and Maria hit the Caribbean with devastating force, the region is gearing up for the approach of the 2018 hurricane season. Many islands are still recovering from the damage sustained in the previous season, reducing their tourist capacity. In addition, even those islands unaffected by the hurricanes may experience a knock-on economic effect linked to negative risk perceptions and damage to regional infrastructure.

Hurricanes have increased in frequency and intensity over recent seasons, raising the risk of damage to more islands in the 2018 season. Given that many Caribbean islands are heavily dependent on the tourism industry, restoring faith in the region as a destination is a priority, as is putting contingency plans in place for future hurricane damage.

Damaging the tourist industry

A number of countries experienced major damage from the hurricanes, with Barbuda, Sint Maarten, Dominica, Puerto Rico, the British Virgin Islands, the US Virgin Islands, the Turks and Caicos Islands, and Anguilla particularly hard hit. Other islands such as Cuba and Haiti experienced minor damage to tourist facilities, and damage was caused to housing stock and the agricultural sector.

A May 2018 report by the World Travel and Tourism Council (WTTC) assessed that the hurricanes cost the Caribbean US$741m in lost tourism revenue in 2017, with approximately 826,100 visitors having to cancel their holidays or being deterred from booking. This figure does not include reconstruction costs or losses to other industries. In addition, the report noted that the lost tourist arrivals would have sustained 11,000 jobs, meaning that the downturn in arrivals has pushed up unemployment rates in affected countries.

The Caribbean is heavily dependent on tourism to maintain economic growth, with tourism comprising 15.2% of regional GDP in 2017, according to the WTTC. This compares to a global industry contribution of 10.4%. As such, governments across the region have been working hard to repair tourist facilities and infrastructure in a bid to attract as many tourists as possible to return to the Caribbean in the 2018-19 tourist season.

Reopening for business

According to the Caribbean Hotel and Tourism Association (CHTA), many hotel properties have been repaired and are reopening for tourist arrivals. As at end-April, the CHTA estimated that 90% of Puerto Rican properties had reopened, with 65% open in Anguilla and the British Virgin Islands, 50% in Dominica and 40% in Sint Maarten and the US Virgin Islands.

Moreover, infrastructure is also being repaired, with utility provision to most islands restored, except isolated parts of Barbuda and St Maarten. For the latter, the reopening in October of the Princess Juliana International Airport, one of the main regional air hubs, was a major step forward. However, full repairs have not yet been completed and are complicated by an ongoing dispute with the airport's insurers. Although the runway is operational, the main terminal building is not scheduled for completion until September.

Given its position as a main entrance hub for visitors flying in and out of the Leeward Islands, lower capacity at the airport will have a knock-on effect on other countries in the region. As well as limiting potential arrivals from other regions, such as the main source markets of North America and Europe, the airport's closure reduces the potential for intra-Caribbean travel, both by Caribbean residents and by foreign tourists wanting to air-hop around the region.

Regional co-operation underway

Concerns about a long-term deterrent effect on tourist arrivals have encouraged regional co-operation to boost tourism prospects. The CHTA and the Caribbean Tourism Organisation (CTO) have joined forces to launch a marketing campaign focusing on the Caribbean as a whole, rather than separate countries, as is usually the case. The campaign emphasises that the Caribbean is open for business, and highlights particular areas of the region as attractive destinations. The aim is to replace the lingering public perception of the Caribbean as a hurricane-hit region, with visual imagery and social media posts highlighting the region's attractions.

The campaign is being funded both by countries there were not hit by Irma and Maria and those that suffered damage. The brand damage was suffered by the Caribbean as a whole; a lack of tourist differentiation between various Caribbean islands means that all may be perceived as being at risk of hurricanes.

Outlook mixed for the upcoming high season

Those economies that suffered hurricane damage in 2017 can expect a statistical rebound in tourist arrivals in 2018 as returning tourists compensate for the contraction in arrivals suffered the previous year. However, arrivals are likely to be below 2016 levels in those islands that were badly damaged, such as Dominica, Barbuda and Sint Maarten, which will weigh on real GDP growth prospects in 2018. A full recovery in tourism is only likely in 2019, when tourist facilities are expected to fully reopen.

Those countries that escaped hurricane damage in 2017 have better tourism prospects this year than their less fortunate neighbours, despite some deterrent effect. In the long term, growth prospects should even out, and the damaged islands should even reap some benefit from a host of new tourist facilities, especially if buildings are sufficiently hurricane proofed during the reconstruction phase.

Indeed, the longer-term outlook for Caribbean tourism is dependent on islands having the will and the financial ability to implement hurricane risk into all infrastructure and contingency planning where it is not already included. With hurricane risk higher than in previous decades, countries cannot afford to risk suffering devastation on a regular basis. For example, Grenada has still not fully recovered from Hurricane Ivan in 2004, with some damaged areas yet to be redeveloped.

Incorporating hurricane risk into infrastructure and contingency planning will be expensive, especially for economies already struggling to cope with the loss of tourism revenue. Donor aid and concessional lending is already helping to fund reconstruction programmes, with an emphasis on hurricane proofing. Moreover, private firms are also adopting this approach, with telecommunications firms in damaged areas replacing their infrastructure with more resilient technology designed to withstand hurricanes classified up to Category Five.

The region's efforts to reopen and provide reassurance to prospective tourists about the durability of the Caribbean tourism industry should reap some benefits. However, as a relatively expensive destination that has experienced a succession of natural disasters in recent years, the Caribbean is suffering from competition with cheaper destinations in areas such as the Asia-Pacific. Another devastating hurricane season could further reduce investor and tourist sentiment towards the region, putting increased pressure on regional economies.