Antigua and Barbuda

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Antigua and Barbuda

Tourism’s Economic Impacts

Increasing the Contribution to Prosperity

Prepared by:

KPMG Consulting LP

February, 2003

Prepared for:

Antigua and Barbuda Tourism Development Programme

Marketing Publication - 1991

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Executive Summary

Tourism is now, more than ever, recognized as a major economic contributor in many

destinations worldwide, adding value for foreign exchange but also support for export industries and environmental, social, cultural, and historic resources support and protection. Tourism now generates an estimated $3.5 trillion in expenditures and is arguably the fastest growing and largest industry in the world. The World Travel and Tourism Council (WTTC) estimates the travel and tourism industry:

• Comprises 11% of global GDP

• Generates 8% of total employment worldwide

• Supports 200 million jobs worldwide.

This is a significant contribution but it does not end there. An equally important trend is the contribution tourism is now making to environmental protection, heritage and cultural resources protection and quality of life in a destination. The interests of the markets in learning and education experiences, environmental responsibility and native, heritage and cultural activities provide an incentive for jurisdictions to enhance interpretive facilities, resource protection and the visitor experience generally. A natural outcome of this trend is enhanced quality of life for the country’s residents.

Background

Tourism has been a mainstay of the Antigua and Barbuda economy for decades. Recently the Antigua Hotel and Tourism Association(AHTA), with the support of government, has

determined to strengthen the industry and facilitate growth of the tourism sector. As part of that strategy, the country’s tourism sector is proceeding with the development of a tourism

management information system, a key component of which is ongoing measurement of the economic contribution of tourism to the economy. As part of this, and to encourage greater government involvement and support for tourism, the tourism sector has also called for estimation of the economic impact of tourism in the country today.

This study presents an analysis of economic impacts of tourism on the economy of Antigua and Barbuda. It also includes a recommendation to undertake a major pilot project in collaboration with Caribbean Tourism Organization (CTO) to build and launch the country’s tourism

management system – integrated with the new CTO management information system for tourism (MIST).

The Historical Context

The Antigua tourism industry saw significant growth in the late 1970s and 1980s with advent of new hotel construction, the development of major attractions such as Nelson’s Dockyard and redevelopment of St. John’s waterfront. Tourism was an important industry for the country, contributing an estimated 36% of GDP in 1978. After 1978, tourism increased even more in importance, reaching its peak in 1991 when visitor expenditure amounted to US $314 million. At this time GDP at factor cost was estimated to be US $359 million.

After 1991, the tourism data show an industry whose growth was curtailed for the remainder of the decade. Indeed, Antigua was one of only two reporting countries whose visitor expenditures declined in the 1990s according to CTO data. Visitor expenditures did not exceed the 1991 level

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at any time in the following eight years. Now the industry appears to be climbing back to 1991 levels with US $290 million in visitor expenditures in 1999. Although tourism was suffering, the country’s GDP increased steadily – from US $334 million in 1990 to US $554 million in 1999.

The result is that tourism’s share of the Antigua and Barbuda economy has been steadily declining.

A variety of factors have contributed to this situation, not least of which is the incidence of hurricanes in the mid to late 1990s that constrained any possible growth for the tourism sector and placed it in a rebuilding position. However, it is also recognised that competition worldwide has increased

significantly, taking market share from the Caribbean. Without effective destination marketing, countries could not hope to compete or even maintain market share. This is certainly the case for Antigua and Barbuda where the commitment to destination marketing has not been robust, notwithstanding the many strategic advantages the country enjoys ranging from outstanding Caribbean vacation resources to easy international air access. Although Antigua and Barbuda did not report marketing budgets in the last few years as part of the CTO statistical report series, these data provide something of a benchmark for destination marketing performance in the region. The average for reporting countries (in 1999 to the CTO) was US$35 for every US$1 spent on marketing.

1999 Visitor Expenditures per Marketing Dollar ($US)

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

St. Maarten Guadeloupe

St. Vincent & The Grenadines British Virgin Islands

Dominica

Trinidad & Tobago Martinique

Jamaica St. Lucia

Belize Aruba

Barbados Grenada

Bahamas St. Kitts & Nevis

Cayman Islands Bonaire

Bermuda

($US)

Antigua and Barbuda - Visitor Expenditures & GDP - 1990-1999

0 100 200 300 400 500 600

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Year

US$ Millions Visitor

Expenditures GDP at Factor Cost

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Economic Impact Methodology

The analysis is considered preliminary as the tourism demand and supply information, and inter- industry linkage data necessary for impact estimation is not yet available for Antigua and Barbuda. To provide impact estimates, therefore, the analysis has relied on tourism and economic multiplier information obtained from recent studies of other Caribbean countries whose economies and tourism industry characteristics are considered similar to Antigua and Barbuda. The Caribbean Tourism Organization (CTO) has developed an economic impact methodology based on an economic impact model prepared for Barbados. This methodology is now being applied in a number of countries in the Caribbean including St. Lucia. Based on similarities in the tourism sector, it was determined in consultation with CTO representatives that the impact of visitor expenditures on the economy of St. Lucia could provide reasonable “proxy”

data from which impacts for Antigua can be estimated. This approach is regarded as the first step in a process to develop regularized measures of the economic impacts of tourism for the country. Use of the CTO economic impact methodology will facilitate not only aggregation across countries in the region but also comparisons of tourism’s economic contribution between countries.

Tourism’s Economic Impact

This study of Antigua uses multipliers derived from the “limited” I/O methodology now being applied by the CTO in selected countries in the region. The methodology facilitates a practical but limited analysis in the sense that it mainly focuses on (a) the transactions of industries delivering tourism goods and services and, (b) the transactions of the main suppliers of goods and services to industries engaged in tourism activity. This methodology emphasizes the demand and supply elements of tourism and was applied for the purposes of this study of the Antigua and Barbuda tourism sector impacts. The estimates were based on 1998 data as this was the most comprehensive data set for both tourism and economic data necessary for the analysis.

Proxy multipliers from the St. Lucia economic impact analysis conducted by the CTO were used in the absence of a detailed survey of leakages to determine multipliers in Antigua and Barbuda.

Key economic indicators of visitor related impacts are summarized below.

Tourism Accounts for about 1/3 or more of GDP. Visitor expenditures impact GDP directly, indirectly and through the induced spending of local households that gain income from the expenditure. Expenditure “leakages” outside the economy, usually in the form of intermediate goods imports, limit the size of the potential increase. Applying the Saint Lucia multipliers to 1998 visitor expenditures in Antigua suggests that tourism accounted for $EC 447.2 million, or 31.9% of 1998 GDP. This is likely to be a minimum estimate given that Antigua and Barbuda's leakages factor will likely be less than St. Lucia, in light of the strength of the construction, banks and insurance and transport sectors. To estimate the potential impact of higher GDP multipliers on the contribution the tourism sector makes to GDP, sensitivity tests indicate that increases in the GDP multiplier from a base of .648 have the following impacts:

GDP Multiplier Estimate Range GDP Multiplier % of 1998 GDP

Base estimate 0.648 31.8%

Base estimate plus 10% 0.713 35.0%

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Therefore, if the GDP multiplier estimate is up to 30% higher than observed through primary research in St. Lucia, the contribution of tourism to GDP could reach about 41%. Without the benefit of similar primary research in Antigua and Barbuda, the multiplier value used in this analysis remains an estimate only.

Tourism Generates 10,700 Jobs or 48% of All Jobs. The number of wage/salary earners in

Antigua in 1998 was 22,117 persons of which 6,238, or 28%, worked in the hotel/restaurant and wholesale/retail sectors combined. Nearly 92% of the persons employed work in private sector establishments. Total visitor expenditure of $EC 690.1 million, in 1998, generated about 10,700 jobs. Of this total, 7,380 jobs were created directly in the tourism industry while an additional 3,310 jobs were created through indirect and induced activity other sectors. Alternatively, it requires visitor expenditure of about $EC 64,350 to create a single full time job.

Import Impacts are EC $194.6 Million. Antigua is an open economy in which external trade in goods and services comprises a major portion of its economic activity. As a service activity that generates foreign currency, tourism can be considered an export sector. While visitor

expenditures positively influence the balance of trade, they also involve a negative factor

associated with the import of goods and services. Imports represent leakages from the economy which reduce the expenditure proportion that is re-circulated within the economy and lower the potential impact of the initial expenditure. Direct imports into Antigua from visitor expenditures amount to $EC 68.2 million. With indirect and induced imports included, total import impacts associated with visitor expenditures is $EC 194.6 million.

The Status of the Tourism Sector

The estimate of 32% tourism sector contribution to the economy flies in the face of the view of some observers who suggest that the contribution is much closer to 50%. We find no evidence to support that. Indeed, if one examines trends in the 1990s, the fact is that tourism’s contribution has been on the decline.

Applying the proxy data from St. Lucia to Antigua and Barbuda’s GDP in 1990 (a reasonable order of magnitude assumption) reveals that tourism’s contribution to total GDP was about 58%. This is probably, to some, an

astonishing number and suggests a dramatic decline in tourism sector contribution if the 1998 estimate is correct.

Applying this same proxy

through the 1990s indicates the extent of that decline (from 58% to about 34%).

There is simply no escaping the fact that the tourism sector has indeed stagnated in the 1990s while the country’s GDP has expanded. While the actual contribution may range up to about 41% of GDP depending on the extent of leakages, the indication from the data is that it is highly unlikely that the contribution will be close to 50%.

Antigua & Barbuda: Tourism's Contribution to GDP at Factor Cost (Est.)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

1990 1991

1992 1993

1994 1995

1996 1997

1998 1999 Year

Tourism GDP as % of Total GDP at Factor Cost

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It is noteworthy that as tourism's contribution to GDP has declined over the last several years, several economic activities have demonstrated significant growth. For example, from 1995 to 1998 total GDP experienced strong growth at 25.4% for the four year period. Leading sectors in this same timeframe were:

• the banks and insurance sector (51.5% for the four year period),

• the construction sector (43.6%),

• the transport sector (34.7%),

• the real estate and housing sector (30.2%), and

• the communications sector (29.2%).

The Opportunity Tourism Presents

Notwithstanding the problems of the 1990s, the country faces an excellent opportunity to increase tourism’s contribution with relatively little investment. For example, an effective destination marketing campaign supported by adequate resources could, in our view, easily grow the tourism sector and attract new tourism sector investment. The country’s strategic advantages are simply too compelling to conclude otherwise. The fact is that the lack of significant

marketing during the 1990s has contributed to the country’s tourism sector stagnation. If the average visitor expenditure in the Caribbean is $35 for every $1 spent on marketing, then Antigua and Barbuda should be able to achieve a better ratio given its comparative advantages.

This alone is justification for such an investment, providing excellent leverage for economic development and economic expansion objectives.

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1. Introduction

This study presents a preliminary analysis of the economic impacts of tourism in Antigua and Barbuda. The analysis must be considered preliminary as the tourism demand and supply information, and inter-industry linkage data necessary for impact estimation is not available for Antigua and Barbuda.

To provide preliminary impact estimates, therefore, the analysis has relied heavily on tourism and economic multiplier information obtained from recent studies of other Caribbean countries whose economies and tourism industry characteristics can be considered similar to that of

Antigua and Barbuda. In particular, a study by the ARA Consulting Group on tourism economic impacts in Barbados¹ has been adopted by the Caribbean Tourism Organization (CTO) as the most reasonable and practical approach to economic impact estimation in the region. The CTO is now applying this methodology (including adaptations as necessary) to several countries, one of which is St. Lucia. The study of the impacts of visitor expenditures on the economy of St.

Lucia prepared for the Caribbean Tourism Organization² was determined to provide a reasonable proxy for application of multiplier data in the case of Antigua and Barbuda. This approach was taken given that it was not realistic to undertake a detailed survey of tourism operations and ancillary businesses to determine leakages and spending patterns as the basis for estimating multipliers.

While this study provides reasonable estimates of economic impacts, the incorporation of economic impact estimation as a regular part of tourism sector performance measurement will necessitate the creation of Antigua-based multiplier estimates. This is addressed in Chapter 7 of this report.

This report commences with a description of the role of tourism worldwide in Chapter 2,

providing a backdrop against which the economic impacts of tourism in Antigua and Barbuda are considered. Chapter 3 describes the economic impact methodology and definitions used in the study. Tourism demand and supply characteristics in Antigua are described in Chapter 4, followed by a description of the historical context for considering tourism’s contribution to the economy in Chapter 5. The economic impacts of tourism are analysed in Chapter 6.

1 ARA Consulting Group Inc., Systems Caribbean Ltd., KPMG Peat Marwick Barbados, Ione Marshall, “Barbados Sub-programme A: Tourism Information Systems, A Model for Measuring Economic Impact”, Caribbean Development Bank, July 1998.

2 “The Impact of 1998 Visitor Expenditure on the Economy of Saint Lucia”, Draft Report, Caribbean Tourism Organization, December, 2000.

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2. The Role Of Tourism

2.1 Tourism’s Economic Contribution

Tourism has historically been regarded in most economies as a second cousin to other economic sectors ranging from resource industries to manufacturing. Indeed, in the past several decades of economic reporting, tourism expenditures were always hidden in various service categories.

Today, however, there is an increasing recognition of the contribution that tourism can make to a jurisdiction – not only in terms of foreign exchange earnings and value added, but also in social, cultural and even export industry terms. This recognition is reflected in the current data on the tourism sector worldwide. It is the fastest growing and largest industry in the world, generating some $3.5 trillion in expenditures. Many countries are now investing in better tourism reporting through the use of such techniques as satellite accounts, all in recognition of the importance of tourism. The World Travel and Tourism Council (WTTC) has been encouraging satellite accounting from 160 countries around the world for the last decade. The WTTC now estimates that the travel and tourism industry³:

• Comprises 11% of global GDP (US$3,575 billion)

• Generates 8% of total employment or 1 in every 12.4 jobs worldwide

• Supports 200 million jobs worldwide.

Their recent global tourism forecasts released in 2000 indicate a growth to $6,591 billion in global GDP (11.6%) of the world’s total. The WTTC is now aggressively encouraging

governments to become proactive and to embrace travel and tourism in policy making processes as a positive economic contributor for future generations.

“Tourism Satellite Accounting research and analysis has clearly quantified Travel &

Tourism as the world’s foremost economic activity,” says Jean-Claude Baumgarten, President of WTTC. “As well, it is the only industry which promotes the understanding and preservation of culture and the environment, fosters co-operation between the private sector, public sector and local communities and presents career opportunities unlike any other industry. It is the industry of the future which embraces the values and lifestyles of future generations.” – WTTC Media Centre, 2001

2.1.1 Leveraging Destination Marketing for Economic Benefits

Paralleling the sophistication in the tourism industry’s product is a new sophistication in marketing. Destinations are also spending ever greater amounts on tourism marketing to create greater awareness of the destination in target markets and facilitate industry’s efforts to “close the sale.” Traditional destination marketing has focused on creating awareness of the destination in target markets, usually with some form of destination branding or logo “call to action.”

Recognition of the importance of tourism has carried with it ever increasing investments by many jurisdictions seeking to strengthen their tourism sector and compete effectively in the marketplace.

There is also a recent emphasis on linking tourism with a destination’s exports. This relates to the “branding” approach many destinations take in positioning their tourism product against

3 World Travel and Tourism Council Media Centre, 2001 (www.WTTC.org)

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those available worldwide. The oft-quoted example is that of Australia. This destination leveraged a major increase in destination awareness created through the Crocodile Dundee movies to not only increase tourism arrivals to its shores but also to increase exports of

Australian products, particularly to the United States. Many destinations are now exploring and exploiting the linkages between specialty product branding and the “branding” of the destination in tourism market efforts.

2.2 Impacts on a Destination’s Quality of Life

An equally important, and perhaps more profound trend, is the contribution tourism is now making to environmental protection, heritage and cultural resource protection, and quality of life in a destination. Tourism markets today expect destinations to be environmentally responsible and are more interested than ever in a “learning/education” experience. For example, the State of Hawaii (in a syndicated survey) asked those customers interested in beach vacations about their preferred activities.⁴ Surprisingly, the majority identified cultural activities and experiences as number one. As a result, Hawaii restructured its tourism marketing effort and invested in product development consistent with the expectations of the market in this regard. This has appeared to contribute to much greater attention on cultural history and expressions of culture through various venues in the state. Indeed, in destinations around the world investments are being made in heritage, cultural and natural resource protection and interpretation because of the benefits to the destination’s tourism sector. In a similar vein, cities in North America that have invested in their waterfronts – making them places for people – have enhanced their image and contributed to greater tourism arrivals, not only from vacationers but also from meetings and conventions markets. There are now developing country cases where such projects as waterfront developments are taking place as an investment to explicitly strengthen the destination’s tourism attraction. This contributes not only to a stronger economy but also to enjoyment by a

destination’s residents of its waterfronts.

In developing countries, the interest tourists take in destination learning experiences has been a boon, given that many of these countries have been able to effectively link tourism with heritage protection, cultural development, national parks and other attractions. Through revenue

generated by tourism activity, these countries have been able to afford a greater level of protection and interpretation than would otherwise be the case. In turn, this has meant greater awareness in the country’s resident population of its history and culture.

The important underlying trend, from the perspective of a destination, is the opportunity that a jurisdiction is afforded to shape tourism and manage its activities in ways that enhance the destination’s quality of life and generate a range of benefits well beyond economic activity alone.

2.3 Growth Areas Within the Tourism Sector

Several segments of the tourism industry have experienced substantial growth, building on lower travel costs and more disposable income available for tourist activities. Examples range from major attraction areas such as the Disney, Branson and Universal facilities to ski and golf resorts.

In the Caribbean, the introduction of Atlantis in the Bahamas as a major themed resort is one such example of the creation of a “destination” product that is sufficiently large to generate its own market above and beyond the destination. Here again, destination attractions rely on significant marketing power and prowess to generate year round business on a consistent basis.

4 Discussions with State Tourism Department representatives, 1994.

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Another product area that has emerged over the last two to three decades as one of the leading products is the cruise experience. Similar to the all-inclusive resort experience, cruise travel offers a single, all-inclusive price, modern facilities, an opportunity to see interesting

destinations, and safety and security. Consistently voted by consumers as one of the top products in the world, the growth in the cruise industry has reflected this market interest.

Future product trends have been forecast by the World Tourism Organization (WTO) in their Tourism: 2020 Vision publication (1998). The WTO predicted that the following five tourism products will emerge as the hottest trends over the next two decades (WTO 1998):

• Adventure travel – with most of the world already being explored, the trend will be for tourists to travel to the world’s highest peaks, to underwater sites (such as the Titanic) and places at the “ends of the earth” (such as Antarctica).

• Cruises – the cruise sector is expected to expand at the high annual growth rates that have been seen in recent years.

• Cultural tourism – Europe, the Middle East and Asia are predicted to enjoy especially strong tourism growth.

• Ecotourism – trips containing a nature component will continue to gain in popularity.

• Themes – thematic tourism, where a special interest is the main travel motivator, is also expected to see strong growth.

One of the interesting features about WTO’s “hottest trends” forecasts relates to the implications for potential economic impacts. Four of the five trends (excluding cruise) point to increasing expenditures by visitors on activities and experiences. This, in turn, results in more business for smaller tourism enterprises in any given destination. The result is a more active small business community serving the tourism industry and tourism markets, greater opportunities for new business development and greater potential for local involvement in tourism beyond just employment.

2.4 Measuring Tourism’s Contribution

As the preceding discussion indicates, the contribution of tourism extends well beyond the quantitative measure typically quoted – economic impacts and contribution to gross domestic products. With an integrated tourism management plan in place, destinations are seeking to leverage tourism destination branding to enhance exports of other products, strengthening impacts on quality of life of the destination’s residents, and enhancing small business development.

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3 Estimating Economic Impacts – Methodology

The economic impact methodology used in this study is described below. It begins with a description of concepts and definitions including generally accepted use in tourism economic impact analysis, describes alternative economic impact analysis techniques, and concludes with a description of the approach used for this project.

3.1 Concepts and Definitions

Economic impacts associated with tourism arise as a result of the demand and supply

relationships in the industry, the associated visitor and investment expenditure patterns that they stimulate, and the structure of the economy. The demand/supply factors influence the number of visitors, their length of stay, and their expenditure patterns while the economy’s structural characteristics determine it’s propensity to re-circulate those expenditures internally. The more rounds of circulation generated within the economy, the greater the multiplier effect of the initial stimulus.

Tourism is defined by the World Tourism Organization as the activities of persons travelling to and staying in places outside their usual environment, for not more than one consecutive year, for leisure, business or other purposes. In the present analysis, the focus is on in-bound tourism travelling within Antigua and Barbuda.

Tourism is the dominant activity in the economy of Antigua and Barbuda, both directly and indirectly. Increased tourist arrivals over the past decade have stimulated activity not only in food, accommodation and transportation sectors directly but also, indirectly, in the construction and light manufacturing industries. Tourism can be considered an export activity, in the context of the economic base approach to impact analysis, as it provides a service to visitors who are resident outside the local economy.

Multiplier analysis for tourism involves the use of a number of concepts and terms that are described below. The fundamental entity for tourism impact analysis is the visitor.

A Visitor is defined as any person not normally resident in Antigua and Barbuda who visits the country for less than one year for purposes of leisure, study or business, but not to undertake any activity remunerated within the country. Visitors comprise tourists and excursionists. Yacht visitors are classified as either tourists or excursionists, depending on their length of stay.

Tourists refer to any visitors that stay in Antigua and Barbuda for at least 24 hours.

Excursionist is any visitor staying less than 24 hours. Cruise passengers and crew are special classes of excursionists … cruise visitors refer to persons who arrive in Antigua and Barbuda on a cruise ship and return to the ship each night to sleep on board, even though the ship may stay in port for 24 hours or more.

Operators and businesses providing for the goods and service needs of visitors generates a range of impacts on the Antigua and Barbuda economy. Consumption expenditures and payments to government or investment expenditures on visitor-related facilities generate economic impacts

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on various aspects of the economy. Employment, income, government revenues and balance of payments are some of the most commonly analyzed. These impacts can be defined at the following levels; direct, indirect and induced impacts.

The direct impact is the change in the level of economic activity among those who are providing goods and services directly to visitors.

The indirect impact is the change in the level of economic activity among those that are supplying goods and services to the persons or establishments comprising the tourist industry which, in turn, are providing goods and services directly to visitors.

The induced impact is the change in the level of economic activity associated with the re- spending by Antigua and Barbuda residents who have received income directly or indirectly from visitor expenditures.

3.2 Approaches to Estimating Economic Impacts

Economic impacts describe the changes in an economy resulting from a positive or negative stimulus to a particular segment of that economy. Although usually related to changes in expenditure levels, they may also measure the effects of taxation, price adjustments, or policy and regulatory changes. Because of the circulation of money in the economy, the overall impact of an expenditure increase or decrease will be a multiple of the initial stimulus. The greater the proportion of the initial expenditure that continues to re-circulate within the economy, the greater the multiple and the resulting impact.

Economic impact analysis often involves the application of one of the following techniques:

economic base; income-expenditure or input-output analysis. All three approaches are designed to predict changes in the economy resulting from specific expenditures or stimuli, but none of them indicate the length of time over which these changes take place. All of the approaches can be used for tourism analysis. The choice of which approach is most appropriate is more a function of the nature of the economy and the impact detail required than the type of economic activity under analysis.

The economic base model is the simplest and least costly methodology to apply. It is formulated in terms of the economic relationship between exports and the local retail and service markets.

The driving force in the model is exports. Increases in the sale of local services occur primarily as a response to export growth, and impacts are usually measured in terms of changes in

employment and income.

The income-expenditure model is also relatively simple to apply but, although it is a little more information intensive than the export base, it provides little insight into the industrial linkages that illustrate how tourism relates to other economic sectors. Expansion in the income-

expenditure model relies on an injection of external funds into the economy. Although these funds may arise from increases in exports, as in the economic base model, they may also flow from increases in consumption, investment, or government spending. Growth in this model can even result from households drawing down savings and increasing consumption of locally supplied goods and services.

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The input-output (I/O) approach is the most comprehensive method available for measuring economic impacts in a systematic and comprehensive way, despite its limiting assumptions of fixed technology and constant relative prices. At the heart of the I/O system is a full inter- industry matrix which defines the flows of all goods and services from one sector to another and highlights the linkages among them. The I/O matrix can be converted to an I/O model that quantifies direct, indirect and induced effects of a stimulus in final demand, i.e., visitor expenditure, on the economy. While the other impact estimation approaches develop an

aggregate multiplier, the I/O model is capable of generating multipliers for each producing sector in the economy.

Of the three approaches, the economic base approach is the most constrained in its application but it is very appropriate for small-scale economies whose growth is heavily dependent on a single export, and it is the least expensive to estimate. The income expenditure approach is also most useful for small scale economies but it is more versatile and it recognizes a wider range of economic stimuli. While it is a more flexible model than the economic base, its advantages must be assessed in terms of the characteristics of the economy under analysis and weighed against its, generally, greater costs of application.

While both the economic base and income expenditure models are most usefully applied when the interdependencies among sectors are relatively insignificant, the strength of the I/O model, on the other hand, is its ability to describe complex sectoral interrelationships. Hence, the more complex the economy in terms of inter-sectoral linkages, the more appropriate is the I/O model for economic impact analysis, relative to the above alternatives. Again, however, decision- makers must weigh the advantages of the model against the higher costs, in time and money, of its application.

3.3 Preliminary Impact Analysis – Antigua and Barbuda

This preliminary analysis for Antigua and Barbuda utilizes economic multipliers derived from a

“limited” I/O methodology developed in a study of tourism impacts in Barbados, by the ARA Consulting Group and, subsequently, applied by the CTO to an assessment of visitor

expenditures on the economy of Saint Lucia. The ARA methodology facilitates a practical but limited analysis in the sense that it mainly focuses on (a) the transactions of industries delivering tourism goods and services and, (b) the transactions of the main suppliers of goods and services to industries engaged in tourism activity. The methodology emphasizes the demand and supply elements of tourism but gives little detail on inter-industry relationships nor total demand and supply. Therefore, although its data requirements are considerable, they are less extensive than for a complete I/O model.

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4 Tourism in Antigua and Barbuda

In this Chapter, we describe the key features of the Antigua and Barbuda tourism sector relative for economic impact analysis. Throughout the Chapter, reference is sometimes made to

comparable statistics for St. Lucia, given the approach selected for the economic impact analysis presented in this report (see Chapter 3.3). In addition, there is occasional reference to the

position of Antigua within the context of other Caribbean countries relative to tourism activity where warranted.

4.1 The Antigua and Barbuda Tourism Product

The Antigua tourism product typifies expectations for tourism vacations in the Caribbean – blue water, beautiful sandy beaches, hospitable people and a welcoming, warm climate. The tourism industry has grown up around these attributes, now welcoming over half a million air-arrival and cruise passenger tourists. There are about 3,200 rooms in Antigua. The majority are in larger hotels (over 100 rooms) and offer a resort experience. Of these, the majority of rooms are sold offering as all-inclusive vacations.

The tourism product includes an active yachting sector, based primarily in Nelson’s

Dockyard/Falmouth Harbour. With hurricane-safe moorage, and a favourite first stop or last landfall when crossing the Atlantic, Antigua has long held an important position in yachting in the Caribbean. Strengthening its attraction is Nelson’s Dockyard itself – one of the last

remaining Georgian dockyards in the world. A key feature of the yachting product is Antigua Sailing Week, attracting enthusiasts from North America and Europe to participate in this shoulder-season event.

Antigua’s tourism product caters more to high-value tourism customers than most destinations in the Caribbean. Average per visitor spending of US $1,172 in 1999 was fifth in the region, superceded only by the Turks and Caicos Islands, Bermuda, Barbados, and Anguilla. ⁵

Mention must also be made of the role of Antigua’s international airport in the tourism sector, not only for Antigua and Barbuda but also for many parts of the eastern Caribbean. Antigua’s airport passenger traffic is over 380,000, far in excess of Antigua’s actual visitor count. Many of these are customers connecting through to other locales in the eastern Caribbean. Recent

investment in the airport reflects the increasing importance of Antigua as a location where air- related industry will develop.

The Antigua and Barbuda tourism product has faced difficult challenges in the last decade, particularly from hurricane damage. That, together with the September 11 terrorist events, has made it difficult for the industry to maintain a solid and steady growth pattern.

4.2 Visitor Arrivals

Visitor arrivals to Antigua and Barbuda currently total about 560,000 persons per year. Of this total, 60% arrive on cruise ships and the remaining 40% are stay-over visitors (Table 4.1).

5 Ranking based on those countries reporting average expenditures, Page 98, CTO, Caribbean Tourism Statistical Report, 1999 – 2000.

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Table 4.1: Visitor Arrivals – Antigua and Barbuda

1995 1996 1997 1998 1999

Tourist Air Arrivals 191,401 202,433 211,444 203,958 207,862

Other Sea Arrivals 20,262 18,042 20,697 22,163 23,852

Subtotal – Tourism Arrivals 211,663 220,475 232,141 226,121 231,714

Cruise Passenger Arrivals 227,443 270,461 285,502 336,455 328,038

Overall Total Arrivals 439,106 490,936 517,643 562,576 559,752

Cruise Ship Calls 237 221 243 253 260

Source: Pages 109 - 111, CTO, Caribbean Tourism Statistical Report, 1999 – 2000.

Stayover visitors arrive by air or by sea with the majority staying at hotels, apartments and guest houses. Antigua’s hotel plant included about 3,200 rooms in 1998, of which 95% were hotels.

4.2.1 Yacht Arrivals

The visitor arrival statistics exclude yacht business as well as those of nationals of Antigua and Barbuda who permanently reside abroad. This adds another 25,000 visitors in 1999.

Table 4.2: Other Visitors

1995 1996 1997 1998 1999

Yacht Visitors 20,682 21,955 18,558 22,949 17,358

Nationals Resident Abroad 8,323 7,718 8,261 8,133 7,858

Source: Page 111, CTO, Caribbean Tourism Statistical Report, 1999 – 2000.

4.3 Visitor Characteristics

Antigua and Barbuda has relied primarily on the US, United Kingdom and Caribbean markets to generate air arrivals in the last several years. The dominant market is the UK at 34.3% of total air arrivals in 1999, followed closely by the US at 31.2%. Visitors from the Caribbean

comprised 18.3% of air arrivals in 1999.

Table 4.3: Tourist Air Arrivals by Country of Residence – Antigua and Barbuda

Country of Residence 1995 1996 1997 1998 1999 % Share 1999

United States 62,703 60,852 64,789 65,995 64,953 31.2

Canada 12,153 15,837 18,580 14,783 11,758 5.7

United Kingdom 41,106 50,417 57,737 57,500 71,313 34.3

Other Europe 25,238 28,099 23,196 19,663 15,554 7.5

Caribbean 36,522 39,199 38,772 32,270 38,040 18.3

Rest of World 7,679 8,029 8,370 8,747 6,244 3.0

Total 191,401 202,433 211,444 203,958 207,862 100.0

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This air arrival profile is similar to the country of comparison used for the purposes of this economic impact analysis – St. Lucia. St. Lucia also has a reliance on US, UK and Caribbean markets. In the case of St. Lucia, however, there is a greater emphasis on Caribbean markets (23.5% in 1999).

Table 4.4: Tourist Arrivals by Country of Residence – St. Lucia

Country of Residence 1995 1996 1997 1998 1999 % Share 1999

United States 84,728 75,622 73,446 81,161 83,575 32.1

Canada 11,073 11,734 16,043 15,439 13,159 5.1

United Kingdom 50,965 50,563 59,592 63,160 71,108 27.3

Germany 12,518 12,757 11,085 8,345 7,968 3.1

Other Europe 18,505 21,056 25,721 17,137 19,479 7.5

Caribbean 50,565 59748 58,583 63,524 61,148 23.5

Rest of World 3,951 4,179 3,936 3,471 4,146 1.6

Total 232,305 235,659 248,406 252,237 260,583 100.0

Source: Pages 210-213, CTO, Caribbean Tourism Statistical Report, 1999 – 2000.

Consistent with its emphasis on high-value customers, Antigua’s age group profile of visitors stands out as heavily weighted towards older customers. Seventy-five percent of Antigua’s arrivals in 1999 were 40 years of age or greater, with the majority (almost 50%) in the 40 to 59 years of age group. Although data are not available for these specific tourists, trends worldwide indicate that income levels of 40+ tourists exceed younger tourists by a significant amount. The heavy weighting towards this age group underscores Antigua’s attraction for high-value, older customers. ⁶

Table 4.5: Age Group of Visitor Arrivals – 1999

Under 20 20 - 39 > 40 40 - 59 60 + 40 +

Antigua 10.8 14.2 25.0 49.9 25.1 75.0

St. Lucia 6.4 51.4 57.8 38.3 3.9 42.21

Antigua’s age profile is markedly different from that of St. Lucia. As Table 4.5 indicates, St.

Lucia attracts a much younger customer with about 58% visitor arrivals less than 40 years of age.

4.4 Tourist Accommodation

The estimated tourism accommodation for Antigua and Barbuda is about 3,200 rooms. The CTO estimates, shown in Table 4.6 below, comprise a majority of hotel rooms (2,963) as compared apartments and guest houses.

6 This finding is also consistent with per-visitor spending estimates for Antigua in comparison to other destinations in the Caribbean (see Chapter 4.5).

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Table 4.6: Tourist Accommodation (Rooms)

1996 1997 1998 1999

Hotels 2,963 2,963 2,963 n/a

Apartments 168 168 168 n/a

Guest Houses 54 54 54 n/a

Total 3,185 3,185 3,185 n/a

These estimates have not been updated in some time. Therefore research was conducted to determine whether this estimate continues to be reflective of the Antigua tourism

accommodation plant.

More detailed data on the small hotel sector (defined as 75 rooms or less) has been developed through the OAS Small Hotel Assistance Program. This was developed based on an inventory prepared by Antigua and Barbuda tourism officials, together with surveys of small hoteliers conducted by the OAS. The data indicates that the small hotel sector comprised 995 rooms, generally distributed between hotels, apartments and guest houses as shown in the table below.

Also shown are the CTO statistics and a comparison to St. Lucia’s small hotels accommodation facilities.

Table 4.7: Small Hotels – Accommodation (Rooms) Estimates

Antigua % St. Lucia %

Total Rooms (CTO)

Hotels 2,963 93% 2,721 %

Apartments 168 5% 562 %

Guest Houses 54 2% 486 %

3,185 100% 3,769 %

Small Hotel Rooms (OAS)

Hotels (≤ 75 rooms) 575 58% 624 71%

Apartments 355 36% 76 9%

Guest Houses 65 6% 183 20%

995 100% 883 100%

Average Number of Rooms / Property 25 14

Sources: (1) CTO, Caribbean Tourism Statistical Report, 1999 – 2000.

(2) OAS, Small Hotels Needs Assessment, 1998.

The data show that about 995 rooms are available in the small hotel sector in Antigua and Barbuda. However, there are significant departures from reported data through the CTO with

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respect to apartments. The OAS Small Hotels Study found 355 rooms versus the reported 168 rooms published by the CTO. For the purposes of this report, the significant finding is that the small hotels sector comprises almost 1,000 rooms, leaving about 2,200 rooms (presumably) in hotels larger than 75 rooms.

Research into Gold Book data and website sources indicates that the large hotel plant (greater than 75 rooms) in Antigua amounts to 2,223 rooms, as shown below.

Table 4.8 Antigua Large Hotel Sector (75+ rooms)

Hotel Name # Rooms

Allegro Pineapple Beach 180

Antigua Village 100

Blue Waters 77

Hawksbill Beach Resort 112

Jolly Beach 462

Jolly Harbour 200

Pineapple Beach Club 130

Rex Halcyon Cove 211

Royal Antiguan 282

Sandals 191

St. James Club 178

Sunsail Club Colonna 100

TOTAL 2223

Source: CHA, Antigua Web site research

Together with small hotels, this suggests an inventory of 3,218 rooms, very close to the CTO’s published estimate of 3,185. In a large hotel sector, the majority of properties offer all inclusive vacation packages, some exclusively and some as part of their product mix. An estimated 86%

of all rooms fit this characteristic.

4.5 Visitor Spending

Visitor spending in 1999 was an estimated US$290 million, of which US $281 was generated by stayover visitors.

Table 4.9: Average Visitor Spending – 1999

Total Spending ($US Millions)

Number of Arrivals Per Visitor Spending ($US)

Tourist Arrivals $ 280.8 239,590 $ 1,172.0

Cruise Arrivals $ 9.2 328,038 $ 28.0

Source: Page 98, CTO, Statistical Report, 1999 – 2000. *Interpreted – Estimated to include air arrivals, other sea arrivals and nationals resident abroad (Page 111, CTO, Statistical Report, 1999 – 2000) but not yacht arrivals.

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Per visitor spending for tourist arrivals was US$1,172, compared to US$28 for cruise arrivals.

1999 performance in visitor expenditure significantly exceeded reported performance in previous years in Antigua and Barbuda, as indicated in Table 4.10 below. It is not clear why the sudden jump in visitor expenditures (from US$246 million in 1998 to US$281 million in 1999). For example, stayover visitor increases in the same period were less than 5%.

Table 4.10: Visitor Expenditure by Type of Visitor, US$M

1995 1996 1997 1998 1999

Stayover Visitors 240.4 250.4 261.5 246.3 280.8

Cruise Ship Visitors 6.3 7.5 7.9 9.3 9.2

Total 246.7 257.9 269.4 255.6 290.0

Visitor expenditures are similar to St. Lucia, running at about 4% to 8% less annually except for 1998 (where St. Lucia exceeded Antigua’s visitor expenditures by about 14%).

Table 4.11: Visitor Expenditures – 1995 – 1999 ($US Million)

1995 1996 1997 1998 1999

Antigua 246.7 257.9 269.4 255.6 290.0

St. Lucia 267.8 269.5 283.7 291.3 311.1

The average spending per visitor by stayover tourists in Antigua and Barbuda, exceeds most Caribbean countries reporting this data. Antigua ranks 5^th of those reporting in 1999 as shown in Table 4.12 below.

Table 4.12: Estimated Visitor Expenditure By Type Of Visitor – 1999

Total Expenditure (US $)

Tourist & Other Arrivals

Average Expenditure (US $)

Tourist & Other Arrivals

Rank

Turks and Caicos Islands 238.0 2,023.8 1

Bermuda 437.9 1,237.0 2

Anguilla 56.5 1,207.3 3

Barbados 622.5 1,202.0 4

Antigua and Barbuda 280.8 1,172.0 5

St. Vincent & Grenadines 78.0 1,142.0 6

US Virgin Islands 562.0 1,003.7 7

St. Lucia 255.7 981.2 8

Jamaica 1,218.0 975.6 9

British Virgin Islands 294.1 969.3 10

Bahamas 1,468.0 930.8 11

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St. Kitts and Nevis 63.5 756.0 12

Martinique 394.7 699.5 13

Grenada 87.0 694.3 14

Dominica 43.4 590.5 15

Bonaire 35.6 578.9 16

Belize 111.5 341.5 17

Although visitor expenditures per visitor are relatively high in comparison to other countries in the region, the Antigua and Barbuda tourism sector has essentially stagnated in the last 10 years.

Growth has been flat, as compared to most other destinations in the region. Table 4.13 below shows the increases in visitor expenditures between 1990 and 1999 for several Caribbean

countries. Antigua is the only country showing a decline in visitor expenditures over the 10-year period.

Table 4.13: Comparison of Ten Year Visitor Expenditure Growth Rates

Destination 1990 1999 % Change

(10-year)

Martinique 240.0 404.0 683.0

Turks and Caicos Islands 36.5 238.0 552.1

Suriname 10.7 53.4 399.0

British Virgin Islands 132.1 299.9 127.0

Trinidad and Tobago 94.7 209.6 121.3

Guyana 26.8 59.0 120.1

Aruba 353.4 773.5 118.9

Guadeloupe 197.1 400.2 103.0

St. Lucia 153.8 311.1 102.3

Dominica 25.0 48.8 95.2

Cayman Islands 235.7 439.4 86.4

Grenada 37.5 66.6 77.6

Jamaica 740.0 1,279.5 72.9

Anguilla 34.6 56.5 63.0

St. Maarten 315.5 449.4 42.4

St. Vincent & Grenadines 56.0 78.9 40.9

US Virgin Islands 697.0 954.9 37.0

Barbados 493.5 666.2 34.5

Belize 91.4 111.5 22.2

St. Kitts and Nevis 57.7 70.4 22.0

Haiti 46.0 55.0 19.6

Bahamas 1,332.9 1,582.9 18.7

Antigua and Barbuda 298.2 290.0 -2.7

Source: Caribbean Tourism Statistical Report, 1999 – 2000.

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4.6 Tourism Employment

Estimates of employment in the tourism sector are about 7,400 jobs – created directly in this sector (see the discussion in Chapter 6, Chapter 6.2). These estimates are derived from overall labour force estimates to which employment multipliers are applied. While employment census information is not available for the tourism sector, estimates can be made for the accommodation sector, as described below.

4.6.1 Accommodation Sector Employment

Recent survey data is available for employment estimates in small hotels in Antigua from a survey of over 380 small hotels in Antigua and Barbuda, Grenada, Dominica, St. Kitts & Nevis, St. Vincent & the Grenadines, and St. Lucia in the Eastern Caribbean and Belize, Bahamas and Guyana. The estimated small hotel employment in Antigua is 685 fulltime equivalents (FTE).

The derivation of the estimate is shown in Table 4.14 below.

Table 4.14 Employment – Small Hotels (75 rooms or less)

Classification Regional Average Per Property

No. of Properties

Estimated Employment

Year Round Full Time

High Season Increment *

Year Round FTE **

High Season Increment **

Total FTE

Hotels

1 – 25 14.2 4.3 7 99 30 109

26 – 50 32.9 13.4 8 263 107 299

51 – 75 36.3 2.9 3 109 9 112

Sub-Total 471 146 520

Apartment Hotels 6.5 3.3 16 104 53 122

Guest Houses 6.3 2.5 6 38 15 43

Total 40 613 214 685

Source: OAS, Regional Small Hotel Needs Assessment, 1998.

* Employed Full-time during the high season

** FTE = Full-time Equivalent.

In this estimate, small hoteliers were asked to provide information on their year-round full-time staff, as well as the staff hired for the high season. The regional average per property was applied to the estimated number of properties by classification in Antigua to derive the estimate of 685 full-time jobs. For remaining properties, we have used the CTO estimate of 1.1 employees per hotel room. Applying the 1.1 factor results in an estimated 2,409 full-time employees in large hotels or about 3,100 full-time employees in accommodation facilities in Antigua.

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Table 4.14: Total Estimated Employment – Hotel Sector

Rooms FTEs

Total Hotels 3,218

Small Hotels (≤ 75 Rooms) 995 685 *

Large Hotels (> 75 Rooms) 2,223 2,445 **

Total 3,130

* Source: Table 4.13 Above.

** Source: CTO Ratio Estimate 1.1 Employees per room.

4.7 Destination Marketing

An important feature of tourism management is the destination marketing program for the country. Marketing expenditures in countries reporting their destination marketing budgets to the CTO in 1999 generated an average of $35 in tourism or visitor expenditures per marketing dollar spent. The data is shown in Table 4.15, with reporting countries generating an estimated US$7.8 billion in visitor expenditures, and spending US$220 million to generate those visitor expenditures. Some countries, including Antigua and Barbuda, did not report marketing budgets for that time period.

Chart 4.1: 1999 Visitor Expenditures per Marketing Dollar ($US)

$0

$10

$20$30

$40

$50

$60$70

$80

$90

$100

St. Maarten Guadeloupe

St. Vincent & The Grenadines British Virgin Islands

Dominica

Trinidad & Tobago Martinique

Jamaica St. Lucia

Belize Aruba

Barbados Grenada

Bahamas St. Kitts & Nevis

Cayman Islands Bonaire

Bermuda

($US)

Source: CTO, Caribbean Tourism Statistical Report, 1999-2000

The results indicate generally that those islands with large, established tourism sectors (e.g., Bahamas, Cayman Islands, Bermuda) are spending more marketing dollars per tourism or visitor expenditure generated. In these cases, it may also be a function of attempting to maintain market share in an increasingly competitive market.

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In the case of Antigua and Barbuda, and if one accepts the $35 visitor expenditure average generated per dollar of marketing, then Antigua and Barbuda’s marketing budget would amount US$7.4 Million annually. If one takes the highest performing country indicator (US $89

generated in spending per dollar spent on marketing for St. Maarten), the equivalent budget for Antigua and Barbuda would be about US$3.3 million (US$290 million divided by US$89).

Antigua and Barbuda