In addition, the study prepared by Nicole Laframboise, Nkunde Mwase, Joonkyu Park, and Yingke Zhou, also found that the nominal cost of an average one week beach holiday in the Caribbean is higher than in other beach destinations around the world.
The study pointed out, “These results point to the need for structural reforms to raise product quality, cost reduction or containment in “low-end” destinations, including possibly via exchange rates, and an adjustment in aggregate consumption to adapt to the implications of a lower contribution to GDP (gross domestic product) from tourism.”
The study also found that the Caribbean remains highly dependent on tourism. In many countries, the importance of tourism increased steadily as the system of agricultural trade preferences was dismantled. Thus, tourism gradually became the dominant sector, accounting for a large share of GDP, ranging from eight to 40 per cent of GDP for most of the 16 countries that were studied in the paper.
The study discovered that tourism is of course the main driver of economic growth and employment, thereby making it a key source of government revenues. The paper went on to say, “In recent years, however, the rate of growth in tourist arrivals has stalled, and the region’s share of the global market has been shrinking. Moreover, many Caribbean countries are facing significant macroeconomic imbalances as growth has slowed and public finances have deteriorated. Thus there is strong interest in understanding what drives tourism flows.”
The study revisited the determinants of tourism and explored new factors like the impact of competitors from periphery Europe; it investigated the extent to which the global financial crisis and recession may have altered tourism demand; and it introduced the concept of a “week at the beach” index to compare the nominal cost of similar tourism products across different beach destinations around the world.
Using data covering the period 2000–2013 for 16 Caribbean countries, the paper found that both price and income factors had a significant impact on tourism arrivals and expenditure, although price elasticity was found to be statistically insignificant for high-end destinations. The number of airlines also had a statistically positive impact on arrivals and expenditure.
The 16 countries used in the study were Anguilla, Antigua & Barbuda, The Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Jamaica St. Kitts & Nevis St. Lucia and St. Vincent & the Grenadines.
The authors of the study said they excluded Guyana, Haiti, Suriname and Trinidad & Tobago -non tourism-based economies – in some of the empirical work. Among the findings of the study, it was discovered that “since the demand for tourism in the Caribbean is sensitive to shocks in key source countries, governments may wish to place more emphasis on policies that help diversify source markets, and especially to countries with higher growth rates, such as large emerging markets in Latin America”.