WEDNESDAY, NOV. 7: There was a jarringly odd sentence in the Throne Speech. Page three, last paragraph: “It is projected that Bermuda will attract more than 340,000 cruise ship visitors who will pump more than an estimated $80 million into the Island’s economy in 2013.”

Standing alone, there’s nothing wrong with that statement. However, in context, it’s a disconcerting statement because although it doesn’t shout it or spell it out, that statement actually forecasts a decline in cruise visitors.

For context, see the table below.


Cruise Visitors

2007

2008

2009

2010

2011

 2012

2013

354,024

286,408

318,528

347,931

415,711

400,000

340,000


The 340,000 cruise visitors promised for 2013 will be close to the cruise visitor numbers of three years earlier. Those 340,000 cruise visitors will be 18 per cent lower or 75,000 fewer than the 415,711 reached in 2011. That was the first shocker.

The second shocker was the “estimated $80 million”.  For the context, see table below.

 

2007

 2008

2009

2010

 2011

2012

 2013

Cruise Visitors:

354,024

286,408

318,528

347,931

415,711

400,000

340,000

Spending

$70.5m

$57.7m

 $54.8m

$62.6m

$86.4m

$83.0m

$80.0m?

$$ per cruiser

 $199

$201

$172

$180

 $208

 $208

$235?

 

This suggests that the individual 2013 cruise visitor will spend 13 per cent more per visitor than in 2011 and possibly 2012 [2012 season is not over but indications are that per cruiser spending trends/patterns are close to 2011].

What new on-Island factors will cause that 13 per cent jump in spending by each individual visitor? It is far more likely that, at best, on-island spending will at least match that or be similar to the 2011, 2012 patterns.

If 2013 spending patterns match those of 2011/2012, then the income from the 75,000 fewer cruise visitors of 2013 will be much closer to $70 million than to the optimistic $80 million quoted in the Throne Speech.

Without a big increase in air arrivals, Bermuda’s tourism industry looks scheduled to finish 2013 with a relatively anaemic total income somewhere between $410 and $425 million.

It also looks as if tourism income for 2012 will fall closer to $425 million, which means no real increase from 2011. Finally, total tourist arrivals could slip under 600,000. For context, see table below.

 

2007

2008

 2009

 2010

2011

2012

2013

Total Income

$513.2m

$401.8m

$331.3m

$383.4m

$434.9m

$430.0m

$420.0m?

Total Tourists

659,572

550,021

554,394

580,193

651,749

640,000

590,000


Despite the grand promises enunciated in the Throne Speech, reality still exists and it is reality that we must deal with.

The hidden and unstated promise in the Throne Speech is of another year of flat-lining tourism income coupled with another year of flat-lining GDP.

This means a third successive year of steadily reducing total as well as net Government spending. This pattern of spending reduction by Government helps maintain and prolong Bermuda’s recession. (Net spending is all Government spending after subtracting all Debt Service Costs.)

Net spending was $1,158.1m in 2010/11. It was $1,041.7m in 2011/12. It will be around $966m in 2012/13. This will be followed by something like $945m in 2013/14.

Three consecutive years of reducing spending mean that Government’s net spending is providing a sustained and now three-year long downward pressure on economic growth. This Government generated downwards pressure is sustaining and maintaining a Bermuda recession.

This downward pressure follows the economic slap-down of 2010/11 when Government grabbed for an unprecedentedly large —for Bermuda — slice of over 18 per cent of GDP [Gov’t reached for $1.058bn in tax revenue in 2010 when GDP was dropping to $5.757bn and was in its second year of decline. This was the year of the 14 per cent increase in Payroll Tax, an increase that was reversed in 2011].

“All the King’s horses and all the King’s men, couldn’t put Humpty together again.”

The Throne Speech’s many paragraphs of promise don’t change the arithmetic of Government’s high and still rising Debt Service Costs which are a primary factor keeping a downwards pressure on Bermuda’s still declining economy.

• Figures from 2007 to 2011 are from Department of Statistics Quarterly Bulletins of Statistics which follow a long term and consistent reporting format. Figures for 2012 and 2013 are estimates.