Tourism and hotels
It is hard not to have some sympathy with Premier Dr. Ewart Brown.
Since coming to power in 1998, the Progressive Labour Party was consistently criticised for failing to end the decline of tourism, with some justice.
Last week, Dr. Brown announced that 2006 had been a banner recovery year for the industry, with overall arrivals soaring 23.2 percent over 2005 with a total of 641,717 air and cruise visitors. More importantly, air arrivals rose ten percent to 298,973 visitors, 10.9 percent higher than in 2005.
At the same time, Dr. Brown has been enthusiastically announcing new hotel construction plans, notably the upscale Southlands development, which could, if it comes to fruition, give the industry the same kind of jump start that the Atlantis resort did in the Bahamas .
And yet, Dr. Brown noted, some of the same people — including this newspaper — who once bemoaned the decline of tourism are now questioning whether further tourism growth is either necessary or desirable.
It’s a fair criticism and one that deserves to be answered.
First, it is worth looking at the numbers in more detail. The overall growth in tourism has largely been driven by the surge in cruise arrivals, which increased 36 percent to a record 336,299 in 2006, and overtook the number of air visitors for the first time in decades and by a significant margin.
That’s important because air visitors outspend cruise visitors by an estimated ratio of ten to one, meaning that it takes ten cruise visitors to equal the economic impact of one air visitor to the Island. On the basis of the visitors’ estimated average spending, cruise visitors contributed just $37.6 million compared to the estimated $320 million air visitors will have spent in 2006.
From an economic point of view, therefore, it makes much more sense for Bermuda to attract more hotel guests.
Dr. Brown and others have argued that Bermuda needs more hotel beds to accomplish that, and it is fair to say that in the Island’s high season, when it is easier to attract visitors, it can be hard to find a room. And it is also indisputable that Bermuda needs at least two stable and viable economic sectors to provide the Island with the economic security it needs. Just as international business helped Bermuda to survive the recession of the early 1990s when tourism slumped, so tourism needs to be strong in the event that international business weakens. On that basis, hotels are more important than cruise ships.
So some increase in the number of hotel beds is needed, and this is the impetus for Southlands, the new city hotel and the Golden Hind redevelopment. Before that happens, there will be some 300 beds added at Tucker’s Point, Belmont Hills and Newstead, while Ariel Sands and the Wyndham are also being renovated.
So what’s wrong with the Southlands development?
First, the environmental concerns are very real and serious. It is one of the few large areas of open space left in Warwick and once it is developed, it will be gone forever, regardless of the good intentions of the developers. The foreshore will effectively be concreted over under the proposed plans.
Even then, this plan might be acceptable if there were no other hotel sites available. But there are. From Lantana in Sandys to Club Med in St. George’s there are sites available for redevelopment which will remain vacant even if Southlands is approved. Indeed, Government was quite happy to rezone land already slated for tourism at Loughlands — through another “stealth” approval of a special development order — for housing.
The question for Dr. Brown and his colleagues is not to assume that no one wants tourism to grow, but to determine just what size industry Bermuda needs. There has been talking about developing up to 10,000 hotel beds, which was the cap during tourism’s heyday in the 1970s and 1980s, but the Island’s economy and employment pattern was radically different then. The fact is that any Bermudian who wants a job in tourism now can have one, so job creation is a non-starter as an argument. Nor has any consideration been apparently given to the effect on the infrastructure that the addition of hundreds, if not thousands, of non-Bermudians will have on the Island’s infrastructure and social fabric.
There is a risk that an over-supply of hotels is as dangerous as an under-supply, and managing growth and avoiding a glut is just as important as avoiding one. So is avoiding further overheating in an economy in which demand and inflation are already dangerously high. Dr. Brown admits he is not an economist, but Finance Minister Paula Cox and her civil servants know very well what the risks of that are.
Dr. Brown and his Government deserve credit for finally ending years of steady decline in tourism, a good part of which occurred under the United Bermuda Party. But planning a recovery which results in real and sustainable economic growth and opportunity is as important as turning the corner.
