ARTICLE

Economic diversification, tourism and ownership

Long-term sustainability, insulation from disruptive events, whether man made or natural, and the need for control over our economic future require that the Caribbean region and the Virgin Islands, specifically, do more to diversify its economic base. Today, however, tourism and travel (T&T) determines regional and Virgin Islands’ economic viability.

The Virgin Islands economy is more dependent than the regional average for the importance that T&T represents to GDP, employment and total capital investment.

T&T brought 26 million visitors to the Caribbean region in 2017.

In 2017 the Virgin Islands received 2.6 million visitors, a number negligibly changed since 2006. Worthy of note is that the ratio of Virgin Islands to Caribbean tourist arrivals declined by 3.2% in that eleven-year period.

For the year 2017, The World Travel & Tourism Council (WTTC) estimates that tourism’s relative share of regional GDP was 15.2%, that it supported 2.4 million jobs and generated $7.1 billion of capital investment in the 23 countries.  In the same year total contribution to Virgin Islands GDP was 28%, contribution to employment was 10,800 and capital investments was $374 million.

Among all 13 sub regions of the world evaluated on a relative basis by WTTC, T&T total contribution to GDP, total contribution to employment, and capital investment ranks the Caribbean first in its dependence on T&T in the above areas.

A noteworthy statistic is that T&T’s contribution to total capital investment represented 45.1% of capital investments made in the Virgin Islands economy. That places the Virgin Islands first among the 188 countries evaluated by the WTCC on the importance of T&T investments relative to total capital investment in the economy.

Every Virgin Islands administration since the mid 1970s has made economic diversification a stated goal. Over the past fifty years, however, limited progress has been made. The absence of a strategic geographic location with commercial possibilities, commercially exploitable natural resources, a small population and high cost of the inputs for production, has stymied government’s success.

For the foreseeable future tourism will remain the mainstay of the Virgin Islands’ economy. As such, it is important that we use tourism as effectively as possible and maximize the advantage we derive. We need to look within the tourism sector to see opportunities for differentiating the Virgin Islands product. We can also promote the growth of related businesses that add spillover benefit to the economy.

Tourism leverages several industries to satisfy market demand. Among these are facilities for accommodation and related services; food and beverage services; transportation and logistics; advertising and promotion; events scheduling and execution; and goods production and retail sales. Deconstructing the tourism industry and pursuing growth opportunity within its related sectors offers opportunity for new business formation and diversification.

Ownership or being part of management must be an end objective for the qualified and competent. The entire community must rally around and support local businesses and where possible Government should link concessions granted, contract awards and investments to advance local ownership and management.

When we consider economic diversification from this perspective, it seems more doable to achieve success.

Each of these tourism related industries offers opportunity for investment and growth in the local economy, regionally and even globally.  Business growth in any one of these tangential sectors loops back and generates additional value to what we derive from tourism. Diversifying the economy is possible without wandering far afield from the core product we know.  And, that is without considering opportunities, which exist, to segment the tourist product and appeal to different visitor markets by promoting marine, boating, historical and cultural tourism.

A business in accommodation and guest services is not necessarily limited by geography. Experience and a successful business model can be transplanted to other markets to build a brand and produce incremental profits. The same is true for other industries such as food and beverage, transportation, advertising, event production, and retail sales. All offer opportunity for market growth beyond the geographic boundaries of the Virgin Islands. Local roots do not limit regional and even global market aspiration. Today’s global brands began as local companies, some in equally small communities as the Virgin Islands.

Building a foundation on vision, management and quality of service is important. An entrepreneurial and competitive orientation is critical as is seeking opportunities for scaling operations and delivering a globally competitive product or service. The successful business owner with aspirations for brand development and or expansion thinks, plans and acts locally, yet is continually mindful of regional and global opportunity. The aspirational challenge is competing in a larger market place.

Writing for Caribbean Council, David Jessop shares that just $0.15 to $0.40 cents of each dollar spent by a visitor remains within the Caribbean. The remainder flows out to others in the form of purchases of goods, services and corporate profits. For others then, the Caribbean is a market within which products are sold to grow their respective brand.

As part of our strategy for economic diversification we must support the growth and expansion of local businesses. These can then become providers to our tourism industry and diversify our local economy. Over time, they can be players in other markets.  Absent that we will continue to share only a small portion of the T&T dollar and remain beholden to others for the long-term economic viability of our community.

 

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