Grounds for optimism in tourism product
For the past three years or more, the one bright spot in the Bermuda economy has been the tourism industry.
Helped by the publicity surrounding the 35th America’s Cup and a tightly focused digital marketing strategy, visitor arrivals and the other key tourism indicators showed strong growth from 2016 on after years of decline.
Bermuda was helped by some external factors as well. The US economy has continued to grow strongly through this period. Bermuda’s immunity from the Zika virus has also been good in the babymoon and young family market.
The Bermuda Tourism Authority has deservedly received a great deal of credit for the success of the past three years. But the worry now is that the growth may be flattening or declining.
This week’s tourism figures show that the total number of air visitors has fallen by 2.6 per cent and 3.3 per cent in the second quarter and first half of the year respectively. The BTA rightly puts its focus on “leisure visitors”, excluding business visitors and people visiting friends and family; here the numbers are slightly worse — down 3.6 per cent for the second quarter and 5 per cent for the first six months of the year.
The BTA’s other key number is visitor spending, and rightly so — one visitor coming to Bermuda and spending a hypothetical $10,000 is more valuable to the economy than four visitors spending $2,000 each for a total of $8,000.
Here the news is more encouraging. Although this newspaper has doubts about the accuracy of departure surveys, both face-to-face and online, as an exact measure of visitor spending, they do at least show a trend, and, in fact, visitor spending increased by 2.4 per cent to $96 million in the quarter and by 1.4 per cent to $130 million for the half-year.
It should also be acknowledged that cruise visitors are again up by 15 per cent, and indeed, overall visitors are up by 8.5 per cent, so all is not lost. But cruise passengers spend vastly less than air visitors on island, and the economy’s future depends on growth in air visitors.
Finally, a key statistic in measuring the health of tourism lies in the hotel occupancy and revenue figures. In contrast to the overall spending figures, hotel revenue numbers are down, as are room occupancy statistics.
So, too, were the number of people staying in “the Airbnb sector”, where the number of guests was down by 2,000 people or 18 per cent.
Despite that, the picture for tourism is not as gloomy as the headline numbers suggest. Nonetheless, there are reasons for concern, especially if the trend continues for the rest of the year.
So what has happened? The BTA has pointed out that American Airlines cancelled its midday flight from New York last year and has not restored it.
The loss of the flight has resulted in a projected drop in air capacity from New York of 14 per cent. For the first six months of the year, the drop in the number of New York residents visiting Bermuda is down 12 per cent. Visitors from most other major gateway cities — Boston, Philadelphia, Washington and Atlanta — are up, in many cases significantly.
While there may be other factors influencing this, the drop in air visitors from New York City almost exactly mirroring the cut in airlift from the same city cannot be ignored. The message is obvious: the more aircraft seats, the more visitors. The challenge is in convincing the airlines that Bermuda can fill the seats if they put more aircraft on the routes.
This will not be easy. Apart from airlines’ boom-and-bust tendency to add too much capacity to already popular destinations and then cut back too far when yields unsurprisingly fall, the US airline industry faces a shortage of both airport gates and aircraft — this has been exacerbated by the grounding of the Boeing 737 Max fleet.
It may also be that 2019 is something of a natural correction year for tourism; many people, the BTA included, expected arrivals to fall in 2018 in the wake of the America’s Cup, but the year turned out to be a record-setter. It’s also possible that the glow of publicity around and after the America’s Cup is now fading, and as a result Bermuda is falling off some of the hot destination lists and must-see destinations for 2019 and 2020, having been a staple on them in 2017 and 2018.
This may be especially true for the 24 to 35-year-old age group — defined by the BTA as adventure seekers — where arrivals have dropped some 14 per cent in the first six months of the year after surging in 2018.
Many in this age group are from New York, and it may be that, apart from being deterred by higher airfares from that city, their notoriously short attention span and insatiable hunger for new experiences means that perhaps Bermuda’s time as flavour of the month has passed. That does not mean Bermuda should give up on this segment — the idea that Bermuda must attract this age group and encourage them to keep coming back as they get older is the right one, just as it has always been — but it does suggest you can never take your eye off the ball.
Bermuda is also experiencing a decline in group business, which makes it harder to fill rooms as the large resort hotels now have space for leisure visitors. This may also be part of the reason for the drop in Airbnb numbers.
More than anything else, Bermuda needs more visitor rooms if the tourism recovery is to continue. Despite the travails of Caroline Bay, there is room for optimism.
In January, Azura, the former Surfside, will open its first phase with 46 rooms. The Bermudiana Beach Resort, on the site of Grand Atlantic, will open its first phase next spring with 70 of a projected 110 rooms. It will be managed by Hilton with its massive loyalty programme — an enormous worldwide market will be available.
Then the long-awaited St Regis has announced it will open in 2021. That is great news for St George’s and Bermuda, and it is good to see optimism around after many years of negativity and doomsaying.
Now the island must make sure it gets the rest of its offering to visitors right: sufficient airlift, a new airport, accessible — in all senses of the word — and flexible transport, appealing entertainment and activities, and, above all, superb and friendly service.
The past three years have shown that Bermuda can have a vibrant and viable tourism industry. There are still internal and external risks — what if the US economy goes into recession on the heels of a Trump trade war? Building on the success of 2016 to 2018 will not be easy, but it can and must be done.
Call for answers on Crockwell death
Teacher: middle school merger ‘total mayhem’
Self-service dog wash proves a hit
Charity hit by rising violence in Haiti
Smith’s man denies sexually assaulting girl
Take Our Poll