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Fundamental issues of productivity analysis

1 While tourism’s importance to the economies of the Canbbean is unquestionable, the picture has not been as rosy as early proponents predicted in the 1960s. Tourism has contributed less to long-term economic development than expected. Too often governments jumped in feet first with no planning feasibility studies, or any idea of what costs might be involved. Many were influenced by those early optimistic statements on tourism, and the early econometric arguments were not always based on good science (Hiller 1976) .

2 Tourism has required larger capital outlays for infrastrecture than expected, as governments and investors discovered they needed modern, Western-style amenities to attract tourists (Pattullo 1996). That has meant airports (ideally a large international airport to handle wide-bodied jets), roads, sewage treatment plants, landfills, electricity, and telephones. Tourism has required facilities not just to make the tourists’ journey possible but to make it convenient and comfortable as well. To raise the enormous sums of money required to build new infrastructure, Canbbean states have borrowed from foreign governments. Paying off those loans, and the cost of maintaining the expensive new infrastructure, has stretched some Caribbean governments and their taxpayers to the limit. On the brink of bankruptcy, some have required bailouts by the International Monetary Fund (MF)

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3 Sometimes the expense is worthwhile because some of the new infrastructure, such as better water, telephone, and electricity supplies, also benefits local people. But there is much that locals make little use of, such as the large tracts of land turned into golf courses and large international airports which offer little benefit to poor locals who do not travel (Pattullo 1996).

4 Yes, building an infrastructure for tourism is expensive, but shouldn’t the profits from tourism be enough to meet the cost? After all, didn’t the World Bank and others predict in the 1960s that tourism had unlimited potential to earn foreign exchange? Unfortunately, the advocates of tourism did not realize, or did not care to admit, that much of the profit from tourism leaves the region. This repatriation of profits,” or “leakage, as it is referred to in the tourism literature, means that there is a large discrepancy between gross and net tourism receipts. Hence, the real economic benefits of tourism to a country are not revealed by gross foreign-exchange earnings but by what is left over after deducting the amount which stays or returns overseas. Most of the leakage is due to foreign investment and foreign control of the Caribbean’s tourism industry.

5 Two-thirds of the hotel rooms in the region are foreign owned, and the tour companies who arrange the visitor’s activities are often foreign owned. The international airlines (American, KLM, British Air, Air France) that bring visitors to the Caribbean are also foreign owned. The small, underequipped, state-owned regional Caribbean airlines, notes Polly Pattullo (1996), have never had the capacity or marketing to compete overseas. The foreign carriers, based in New York, London and Pans, can influence which destinations get the most traffic by availability of seats, price, and schedules. It was a blow to Trinidad, for example, when British Airways withdrew direct flights to Port of Spain in 1994.

6 In a pattern referred to as vertical integration, airline, tour company, and hotel chains may be owned by the same overseas firm. Such firms retain many of the profits, thereby reducing the economic gains of the Caribbean countries (Chambers 2000). The worst is the all-inclusive package holiday, in which travelers make a single payment in advance (to the New York, London, or Paris office) that covers airfare, accommodation, ( food, and services (and sometimes even tips).

7 With all-inclusives, much of the foreign exchange never reaches the Caribbean. Tourists at all-inclusive resorts have no need to eat out at locally owned restaurants, rent watersports gear from local entrepreneurs, or arrange island tours with local taxis. Having already paid for their holiday at home, they act as if they left their wallets there, too. The impact on local businesses dependent upon a tourist clientele is devastating. I witnessed most of the small restaurants in Speightstown, Barbados, shut down after a nearby large resort became all-inclusive. Many locals who are positive about tourism are deeply resentful of the all-inclusives. Since the late 1980s, eleven of Barbados large hotels have gone all-inclusive, and several more are planning to
8 Leakage also happens because Caribbean islands do not have the facilities or the means to produce the kinds of goods required by visitors, especially luxury items for the upscale traveler; hence, much of the food, furnishings, and equipment for tourism must be imported. Polly Pattullo (1996) reports that the Caribbean has a miserable record for attempting to supply its tourism sector from local and regional goods and services. The foreign management of most Barbadian hotels, for example, contributes to leakage by serving their guests a European menu which relies heavily on imported foods. In the dining rooms of Caribbean hotels, where millions of meals are consumed daily, why are tourists not served more mangos, breadfruit, citrus, and bananas grown locally? asks Pattullo. A few countries such as Jamaica and Dominica have succeeded in putting more locali products on the tourist’s dining tables, but they are the exception.

9 The leakage of profits is greatest in upscale, or first-class, tourist facilities such as the west coast hotels of Barbados. With rooms going from $400 per night, the guests require many goods expected with high-cost accommodations, which must be imported. While the gross receipts of these luxury hotels are high, the amount of money that stays on the island is low. Conversely, low-end, or backpacker, tourism relies more on local products and has less leakage.

10 In the Caribbean, on average, for every dollar earned in foreign exchange, seventy cents is lost overseas-the antithesis of the Pan Am press release that predicted 80 percent of every dollar earned would stay at home. Sadly, this drain of hard-earned foreign exchange is one of the distinctive characteristics of the Caribbean tourism industry (Pattullo 1996). And tourism profits that remain on the island are not distributed equally among all citizens but go disproportionately into the hands of local elites who have invested in hotels, restaurants, and other tourism attractions and facilities. While all citizens of island destinations must put up with the negative impacts of tourism, only some share in its profits.

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