Tourism figures mask a worrying trend

We really need to climb out of Wonderland and get into the Land of Reality. The tourist figures for the second quarter 2010 were delivered with an emphasis on arrival numbers; great emphasis on the almost 25 per cent improvement in cruise arrivals, and glossing over the much smaller three per cent increase in air arrivals.

 The amount of money Bermuda earns from tourism is the most important issue. If Bermuda squeezed in 240 mega-ship cruise visits in one year, with each mega-ship bringing in its maximum of 2,500 cruise visitors per visit, Bermuda would get 600,000 cruise visitors. Bermuda’s total income from the 600,000 cruise visitors would only be around $140,000,000.

Proof? Look at what happened three years ago in the bumper year 2007. In 2007, Bermuda had 354,000 cruise visitors. They spent a recorded total of $70,500,000.  If you double that to 708,000 cruise visitors, Bermuda would have had $141,000,000 income from cruise visitors.

Projecting 240 ship visits — six ships a week during a 39-week season — giving a 2010 income of $140,000,000 is both reasonable and conservative.

The absolute maximum that Bermuda can expect to extract from the cruise industry is $140,000,000;  and that would require  the industry to send ships so that Bermuda’s four dockspaces have a mega-ship alongside seven days a week for the whole nine-month cruising season (March to November).

 For the two quarters just passed and reported, the Minister for Tourism is reporting around 172,000 cruise visitors. That is about 48,000 or 38 per cent better than in 2009. This increased count of cruise visitors is likely to provide about $10,000,000 more in income for the two quarters.

Income

If this kind of cruise visitor increase over the 2009 figures holds to the year-end, Bermuda could easily see up to 435,000 cruise visitors by year-end.

That’s a whopping great total. It would be 22 per cent better than bumper year 2007. But it would still only provide about $90,000,000 in Income.

In 2009, total tourism income fell 17.6 per cent. It fell from 2008’s $402 million to $331 million — a drop of $71 million. Air arrival income in 2008 was $344 million (cruise was $58 million).

In 2009, air arrivals fell about 27,500. But income from air arrivals plummeted from $367 million to $293 million — losing $74 million.  This is the problem area. It is air arrivals that make or break Tourism. It is air arrivals that need to improve.

In 2010, there was a small first quarter decline and a small second quarter increase in air arrivals. Combined, and relative to 2009, there was a net DECREASE of 843 air arrivals. Overall, income from air arrivals for the first two quarters of 2010 will likely be about $1,000,000 LESS than the income from air arrivals in the same two quarters of 2009.

Overall, for the first two quarters of 2010, the total income from all tourist arrivals (both air and cruise) is likely to be no more than $9,000,000 (+$10 million Cruise - $1 million air).

According to the Department of Tourism 2nd Quarter Report, Bermuda got about 47,000 additional numbers of visitors. That is an increase of about 21 per cent overall, when comparing 2010 to 2009.

However, for this two quarter 21 per cent increase in numbers, Bermuda will only get about $9,000,000 more dollars. In 2009, two quarter income was $141.8 million.

For the same two quarters of 2010, my projection is $151 million, a total seven per cent increase in income from Tourism. (Dept. of Statistics will provide the definitive answer in its 3rd Qtr Bulletin, usually out in September. Watch out for it).

Do you see the arithmetic imbalance? Income seven per cent up versus arrivals 21 per cent up?

Do you see where that leads? Income growing at one pace while overall arrivals grow three times faster?

Do you see that we must watch and grow air arrivals and thus grow income faster?

I believe that we are on course to have a year in which tourist numbers could actually hit a new high of 650,000 to 680,000 all told. That would be a whopping great improvement over bumper year 2007.

However, even with this huge improvement in 2010, income would still struggle to reach and surpass $375,000,000 (cruise - $90 million; air - $285 million).

That $375,000,000 would still be seven per cent UNDER the $402 million earned in all of 2008 which, in turn, was 21 per cent down from 2007.

Gabriel’s trumpet ought not to have sounded for those numbers for the first two quarters of 2010. Those numbers are bad.