Update Country Report Curaçao 20 Jun 2019

With the Caribbean hurricane season approaching, the main tourism markets are taking stock of performance over the first half of the year and preparing for the high season. For those markets still recovering from major hurricane hits in 2017, the focus will be on reopening ahead of the winter high season. For other markets, the priority will be to highlight new attractions and retain market share amid strong competition from peers.

According to the Caribbean Tourist Organisation (CTO), the region performed strongly in Q1, the traditional tourism high season. Overnight arrivals grew by 12% year on year, totalling 9.1m tourists. The cruise industry also grew well, with arrivals rising by 10% to reach 10.7m passengers. This surge in visitors was driven primarily by rising arrivals from the US and Canada, growing by around 24% and 4%, respectively. This compensated for a relatively slow pace of arrivals from Europe, traditionally a major source market, and Latin America, a large and growing market. Arrivals from Europe grew by 0.6% to 1.6m, while arrivals from Latin America grew by 1.6%.

Some of the strongest growth in individual countries has been in those badly damaged by the September 2017 hurricanes, which are now approaching full capacity again, positioning them well for a strong 2019. In Sint Maarten, which suffered extensive hurricane damage, tourist arrivals rose by 144% year on year in the first four months of 2019. While some reconstruction remains ongoing, particularly to the airport and transport infrastructure, hotels and restaurants are now almost all open again.

In addition, Antigua and Barbuda experienced a 17% year-on-year surge in tourist arrivals in April. Although the two islands do not report their arrivals separately, this high growth figure is likely to reflect the re-opening of properties on the smaller island of Barbuda, which, like Sint Maarten, suffered major hurricane damage. A vote of confidence in the islands' tourism potential was the agreement in late May of a deal with cruise firm Royal Caribbean International for the cruise line to increase calls at the two islands and to construct a fifth berth at Antigua's main cruise pier. This forms part of the government's strategy to double tourist arrivals by 2024, to around 500,000.

Challenges for the remainder of 2019

Despite positive arrivals data in the early part of 2019, the region will face several challenges in the second half of the year. Most immediately, the hurricane season between June and November raises the risk of major damage along the lines of the two devastating hurricanes in 2017. While hurricane preparedness and emergency planning are now factored into most islands' budgets, a direct hurricane hit could still knock out major infrastructure and provides a medium-term challenge to tourism.

Beyond the hurricane threat, new US restrictions on US tourism to Cuba pose downside risks for Cuba's tourism industry and will have negative economic implications. US tourists have rapidly become Cuba's second-largest source market and a sharp slowdown in US arrivals will not only have an immediate impact on the industry but may weigh on longer-term investment into Cuba's tourist market.

As part of the new restrictions, US tourists cannot now visit Cuba via cruise ships. In the first quarter of the year, around 257,500 US tourists visited Cuba, with 55% of these arriving on cruise ships. This means that cruise-oriented tourism will suffer particularly badly in the short term. Conversely, some other islands in the Caribbean (such as the Cayman Islands, the Bahamas and the Dominican Republic) may benefit from the new restrictions on cruise calls to Cuba, if they manage to replace Cuba in cruise-ship itineraries.

Separately, regional airline LIAT (jointly based in Antigua and Barbuda, Barbados, and Trinidad and Tobago) has been experiencing financial difficulties for several years and the Barbadian government is in the process of selling its majority 49% stake to the government of Antigua and Barbuda. LIAT operates nearly 500 flights a week between 15 Caribbean countries and in the case of some smaller islands is one of the primary routes serving that island.

It is unclear as yet whether the restructuring of LIAT will imply a cut in routes across the Caribbean. Antigua has stated that it plans to introduce new routes to the US states of Florida and Georgia, but this may lead to fewer flights on the less profitable routes. LIAT's smaller destinations will be keenly watching the outcome of the negotiations between Barbados and Antigua in order to assess the risks and opportunities potentially offered by the shift in airline management.

Some clouds on the horizon

The strong performance in the first part of 2019 has engendered confidence among the Caribbean's main tourist destinations, with the CTO forecasting overall arrivals growth of 8-9% in 2019. However, the new restrictions on Cuba are likely to weigh on regional growth, with overall arrivals therefore likely to come in closer to 5%.