Tourism to take centre stage as Trinidad and Tobago's economic diversification intensifies

As the government of Trinidad and Tobago continues to feel the impact of lower energy receipts following the sharp decline in hydrocarbons prices since mid-2014, the tourism sector is emerging as a strategic development priority. Elected in September 2015, the People’s National Movement government of Keith Rowley is placing a renewed emphasis on economic diversification to help the TT$175.99bn ($27.1bn) economy weather the downturn in the global energy market. Tourism, along with agriculture and manufacturing, has been identified as strategic in that quest.

Despite the recessionary environment – the economy contracted by 2% in 2015 and is projected to contract by a further 2% in 2016, according to Colm Imbert, the minister of finance – T&T saw an upsurge in visitor arrivals, highlighting the sector’s resilience in the face of uncertainty surrounding the future of the country’s energy industry.

To accelerate growth in the sector a number of efforts are under way to raise the profile of key tourist sites, improve service standards, develop human capital and address some of the challenges that continue to affect the sector’s performance, in particular limited inter-island connectivity and security challenges. Although the sector is likely to benefit from the current push to diversify revenue streams, efforts to this end are now likely to be constrained by budgetary limitations.

Diverse Offer

Located in the south-eastern region of the Caribbean, T&T’s tourism offer stands out for its diversity. Tobago, traditionally the epicentre of T&T’s leisure tourism industry, is the quintessential Caribbean sun, sand and sea destination. Characterised by its secluded beaches and charming villages, the island is also home to the Main Ridge Forest, the oldest protected reserve in the Western Hemisphere and named “world’s leading ecotourism destination” by the World Travel Awards on multiple occasions. By contrast, Trinidad’s business environment ensures a steady flow of business and convention visitors, while its rich biodiversity and cultural festivities create potential in the cultural, sports and ecotourism segments. The oil-and-gas-rich island, referred to as the “cultural capital of the Caribbean”, is home to the region’s largest Carnival celebration and is the birthplace of the steel pan.

Second-Tier

Unlike a number of Caribbean tourism-dependent economies, tourism has traditionally been of secondary importance in T&T, behind the energy sector, financial services and manufacturing. According to the World Travel and Tourism Council in 2014, the sector directly employed more than 27,000 people and generated an estimated TT$4.8bn ($739.2m) in annual revenues – approximately TT$3.94bn ($606.8m) in export receipts and TT$860m ($132.4m) from domestic tourism – representing an estimated 3.2% of GDP. It does, however, play a more important role in Tobago’s economy, where it accounted for 12% of GDP in 2014, according to the Tobago House of Assembly’s “Budget Statement for the Financial Year 2016”.

While this second-tier status has made T&T’s economy more resilient to downturns in visitor arrivals than some of its Caribbean peers, it has also meant that the sector has not always been at the top of policymakers’ priorities. “We became so dependent upon oil and energy that we haven’t done all that we could possibly do to advance the tourism industry,” Shamfa Cudjoe, the minister of tourism, told local media in late 2015.

Progress

The sector has nonetheless seen progress in recent years. T&T ranked 69th out of 141 countries on the most recent “Travel and Tourism Competitiveness Report 2015” produced by the World Economic Forum, with an overall score of 3.7 on a scale of 1 to 7, a 10-place leap from 79th out of 139 countries in 2011. The score highlighted the country’s strengths – its air transport and tourism service infrastructure ranked 28th and 35th, respectively – but also the significant challenges the sector still faces. T&T scored particularly low in the categories of safety and security (123rd) and human resources and labour market (83rd), offset nonetheless by high scores in price competitiveness (17th) and ICT readiness (53rd).

Visitor Arrivals

The past decade saw a degree of fluctuation in arrival numbers. According to data from the Tourism Development Company (TDC), visitor arrivals peaked at 457,434 in 2006 but were subsequently hard hit by the global financial crisis in 2008, which had its most visible impact on the sector in 2010, when arrivals reached a low of 387,559. This was followed by a steady recovery in 2011 and 2012 – arrivals rose by 11.2% and 5.5%, respectively – though the momentum was again lost in 2013 and 2014, with the sector experiencing a contraction of 4.5% and 5%, respectively. The year 2015 proved to be a rebound one yet again, with arrivals growing by 6.6% to reach 439,749 visitors, in line with wider regional growth trends. According to the Caribbean Tourism Organisation (CTO), visitor arrivals to the region increased by 7% in 2015, reaching 28.7m.

Carnival remained the country’s top attraction in 2015, with the month of February recording the highest number of visitors at 48,000, compared to a monthly average of 36,600. According to the Central Statistical Office (CSO), which measures Carnival arrivals by calculating tourist arrivals in the 19 days prior to Carnival Tuesday each year, the annual festival attracted 38,625 visitors in 2015, though that figure declined by 6.9% in 2016 to 35,959, in part a reflection of the wider slowdown in the energy-based T&T economy.

Since 2008 the performance of the cruise ship segment has been particularly volatile, with total cruise arrivals increasing dramatically from 44,505 in 2008 to 114,763 the following year, before declining to a low of 33,714 in 2014. In 2015, however, the segment reflected the sector’s wider growth pattern, with total cruise passengers increasing by 135% to 79,317, though this is still well short of 2009 levels. Growth was driven primarily by a rise in arrivals to Tobago, which rose by 213%, with the island attracting 64,569 of the 79,317 total cruise arrivals. By contrast, arrivals to Trinidad increased by 13%. The potential for growth has increased, however, as several cruise lines announced T&T as a destination to their upcoming itineraries in 2016.

Market Profiles

According to the TDC, the US remains the largest source market for incoming tourists, accounting for 39% of arrivals, followed by Canada (13%), the UK (9%), Scandinavia (2%), Germany, Austria and Switzerland (2%), India (1%), the Caribbean (18%) and the rest of the world (16%).

The two islands differ considerably in terms of their visitor profiles, with a large portion (43.18%) of Trinidad’s travellers visiting friends and relatives (VFR) in 2015, a trend reflected in peak arrival periods of Carnival, Christmas and summer months.

Representing 22.01% and 19% of arrivals, respectively, business/convention (including work and study) and leisure were the second- and third-most-common reasons for travel to Trinidad in 2015, according to the Ministry of Tourism (MoT), followed by incentive vacations (5.32%), sports and ecotourism (1.68%), and wedding/honeymoon (1.05%). Meanwhile, Tobago’s arrivals were primarily for leisure (69.23%), followed by VFR (13.1%), incentive vacations (5.72%), business/convention/ work/study (4.59%), sports and ecotourism (2.61%), and wedding/honeymoon (0.53%).

According to TDC estimates, the average length of stay in T&T as a whole is 14 days, with an average daily expenditure per person of TT$580 ($89.32).

Focus On Connectivity

T&T accounts for a relatively modest share of tourism to the Caribbean. According to the CTO, the country hosted 7% of total air arrivals to the region in 2014. Its location at the southern end of the Caribbean archipelago, more distant from airline and cruise ship transport hubs such as Miami, has traditionally put it at a disadvantage relative to other Caribbean destinations when competing for the North American market.

According to the Airport Authority of T&T (AATT), passenger movements at Trinidad’s Piarco International Airport (PIA) increased by 14% in 2015, reaching nearly 2.04m, from 1.79m in 2014, and are projected to surpass the 2.09m mark in 2016. Meanwhile, international arrivals to ANR Robinson International Airport in Tobago declined from 32,904 in 2014 to 28,105 in 2015, according to the AATT, the lowest figure recorded since 2008.

Coming In For A Landing

A number of airlines – including the UK’s British Airways and Virgin Atlantic; US-based United Airlines, American Airlines and JetBlue; and Panama’s Copa Airlines – connect North and Central America as well as Europe to T&T’s two main airports. However, the availability of convenient and competitively priced flights to T&T remains a determining factor in international arrivals. In the first half of 2014 JetBlue introduced new direct flights from New York and Fort Lauderdale to Port of Spain, a move which seems to have a positive effect on the sector, with US arrivals up by 12.7% in 2015, according to the TDC. The return of Air Canada to the Trinidadian market in late 2016 will add to the growth prospects for North American visitors in the near term. The carrier announced in April it would launch a seasonal direct flight from Toronto to Port of Spain, subject to the government’s approval, from December 2016 to April 2017, running twice weekly.

Long-Haul Lull

Arrivals from the European market, however, declined by 4.1% in 2015 and could continue to be affected in 2016, particularly to Trinidad. The national carrier Caribbean Airlines announced in November 2015 that it was withdrawing its long-haul flight from London’s Gatwick airport to Port of Spain in January 2016, as part of cost-cutting measures.

Tobago’s airlift capacity has also been affected by a number of changes in recent years. Monarch Airlines ended its charter service to Tobago in April 2015, one of several fleet reduction measures undertaken by the Luton-based airline following the transfer of ownership to Greybull Capital.

All Go To Tobago

Interest in the Tobago market could nonetheless be picking up. The loss was offset by the introduction of an additional flight from London to Tobago, with a stop at Antigua and Barbuda, by British Airways the same year. Virgin Atlantic followed, restoring its service from London’s Gatwick to the island – a flight it had discontinued less than a year earlier – offering weekly departures between October and March. Meanwhile, Condor Airlines increased its flight frequency from Frankfurt and Munich from one to two weekly flights, and Thomas Cook Airlines announced in late 2015 that it would be launching a direct service from Manchester to Tobago, scheduled to start in November 2016 and run through the end of March 2017.

Untapped Potential

Outside of Europe and North America there is considerable room for improving connectivity to other potential tourism markets, in particular the largely untapped South American market. Tobago is making inroads having received its first direct flight from Brazil in 2015, following the start of a São Paulo-Tobago-Bahamas flight by Brazilian low-cost carrier Gol.

The potential establishment of an open-skies agreement within the Caribbean and the streamlining of bureaucratic procedures would also undoubtedly have a positive impact on T&T’s connectivity and its ability to market itself as part of a larger Caribbean travel package.

According to data from SABRE Market Intelligence, Trinidad’s average airlift load factor stood at 81.76% in 2015, considerably above Tobago’s 58.61% as per data by the Tobago House of Assembly (THA), suggesting considerable room for efficiency gains in the latter’s air transport sector.

Domestic Tourism

The domestic market is an important component of T&T’s tourism industry, generating an estimated TT$860m ($132.4m) in annual receipts, according to the TDC. In recent years it has played a particularly important stabilising role for the country’s tourism industry, with the Trinidadian market helping to fuel demand for tourism services and smaller-size accommodations in Tobago, and to a certain extent helping to offset a decline in European arrivals to the smaller island.

Connected by a quick 20-minute flight or a two-and-a-half-hour ferry service, Tobago is seen as an quick getaway. According to the Port Authority of T&T, inter-island arrivals by ferry to Tobago fell by 3.44% in 2015 to 466,969 from 483,628 the previous year. The decline was nonetheless offset by a 4.16% increase in domestic arrivals by air in the same year to 482,957, up from 463,667 in 2014, according to the AATT.

In Trinidad, the local market also helps sustain the hotel industry, particularly on weekends, when business tourism tends to follow a downward trend. A number of hotels in Trinidad, including the Hyatt, offer discounted rates for local residents, in a bid to attract weekend business.

Diversification

In October 2015 the Rowley administration said that tourism, along with agriculture and manufacturing, was part of an urgent priority to diversify the economy and offset uncertainties facing the energy sector, signalling what could be the beginning of a new development phase for the country’s tourism industry. The sector’s ability to generate foreign currency is of special relevance at a time when ongoing US dollar shortages continue to affect business.

A more detailed and long-term growth strategy for the sector is expected to be outlined in 2016 by the government. A Standing Committee for the Strategic and Sustainable Development of Tourism for Trinidad was formally established with Cabinet approval in early 2016, and a stakeholder’s forum is scheduled for mid-year, which will provide sector players with an avenue to discuss the challenges facing the industry. Declining public revenue, however, is likely to constrain the government’s ability to facilitate growth. Despite a series of spending cuts having already been introduced, the IMF in March 2016 projected the budget deficit for the 2016 fiscal year to reach 11% of GDP.

Nonetheless, in 2016 TT$48.8m ($7.5m) was allocated to the tourism sector under the Public Sector Investment Programme (PSIP) to be directed primarily at improving service delivery, fostering industry and product development, safety and security, and institutional strengthening. On the infrastructure side, the sector is set to benefit from a TT$37m ($5.7m) allocation, under the Infrastructure Development Fund, for various tourism projects (see analysis).

Growth Strategies

The MoT, along with the TDC, is directing its efforts to five key areas: data collection and analysis, product development, marketing and public awareness, investment facilitation and quality assurance. Efforts to improve and streamline data collection led to the January 2016 launch of the Baseline Survey Project, an initiative which will enable the country to more effectively assess the sector’s impact on the national economy and guide future policy decisions.

To better measure the economic impact of Carnival specifically, the TDC is also in the process of implementing a Mas Economic Observatory through the Mas Information Secretariat, funded by the Development Bank of Latin America.

A key component of the strategy to attract more visitors is to ensure the country’s beaches and other key tourist sites meet international standards. To this end some TT$4.4m ($678,000) was spent on the development, improvement and maintenance of beach infrastructure in FY 2015, and another TT$2.5m ($385,000) on tourism safety and security, according to the PSIP 2016.

This is being complemented by a series of key initiatives to raise the country’s service standards, through a range of professional development programmes including the Service, Training, Attitude, Respect programme and the Caribbean Small Tourism Enterprises Project (see analysis).

Ensuring the sector’s workforce is effectively trained remains a key challenge for the sector. A strategy for improving tourism-related training will entail raising awareness and support for the industry within the government and with the public at large. This task is overseen by the TDC’s corporate communication department, whose efforts are “focused on building, maintaining and improving the industry’s image, stakeholder relationships and general awareness and appreciation of the tourism industry as a viable sector for employment, entrepreneurship and national development”.

According to the TDC, in 2016 T&T will also adopt strategies to realign marketing efforts with the country’s core product strengths in key markets. “We keep engaged in promoting the two islands as a whole destination, the complete package, with a strong leisure offer in Tobago and business, meetings, incentives, conferences and exhibitions (MICE), ecotourism and sports niche markets in Trinidad,” Warren Solomon, general manager of marketing at the TDC, told OBG.

T&T’s international marketing programmes target six key source markets, namely North America, the UK, Germany, Scandinavia, India and the Caribbean, while Latin America has been identified as a potential market currently under observation.

Ecotourism

With assets including tropical forests, bird and butterfly sanctuaries, and large fresh- and salt-water swamps, T&T has a solid offer for ecotourism. The country is an important turtle-watching destination in the Caribbean, with an estimated 80% of all endangered leatherback turtle nesting in the region taking place in Trinidad’s north-eastern coast shores from March to August. Trinidad is also home to the world-renowned Asa Wright Nature Centre, a not-for-profit nature resort in the northern part of the island, covering 607 ha of forested land in the Arima and Aripo Valleys in a former cocoa-coffee-citrus plantation. The centre often receives working trips for environmental research and, along with a number of small tour companies, organises excursions to the Caroni swamp and other destinations.

As part of ongoing efforts to lay the foundations for sustainable growth in the segment, in 2015 T&T launched the Sustainable Ecotourism Trail Development Project, which aims to rehabilitate a total of 1000 km of nature trails. The project – the implementation of which will begin in the Blanchisseuse and Chaguaramas mountains in north Trinidad – will establish a series of new biking and hiking trails running through rainforests and along coastlines, with vending facilities at various points. Given its potential, the segment is likely to be the focus of increased attention in 2016 and beyond, as efforts to accelerate growth in the sector continue.

Mice

Plans are also under way to accelerate growth in the MICE segment. Since its establishment in 2009 the T&T Convention Bureau (TTCB), under the purview of the TDC, has been working to position T&T as a key MICE destination in the Caribbean, promoting facilities and assisting meeting planners. The country regularly hosts the three-day regional Energy Conference, which attracts over 2500 visitors annually. The Caribbean Investment and Finance Forum as well as the Caribbean Medical Providers Practising Abroad conference were some of the meetings the country hosted in 2015, while 2016 will see T&T host the Lions Club Multiple District 60 Convention, expected to attract some 500 visitors, as well as the Caribbean Shipping Association’s annual general meeting, with an estimated 350 delegates expected to be in attendance. Longer term the country is set to host the International Society of Radiographers and Radiological Technologists World Congress, scheduled for the first quarter of 2018, which is expected to attract some 500 delegates. According to the TDC, the average stay for MICE visitors is four days.

With the segment still representing a relatively small percentage of visitors – in 2015 business and convention tourism represented 15.4% of arrivals to Trinidad and 2% for Tobago – there is significant room for further growth and enough capacity to support industry expansion in the near term. The Hyatt Regency Trinidad in Port of Spain, a waterfront property, is a key venue for the country’s MICE industry. Located around 40 minutes from PIA, the Hyatt offers 43,000 sq feet of flexible meeting space, including a 16,000-sq-foot ballroom, seven 3000-sq-foot banquet rooms and four meeting rooms ranging from 1000 to 1500 sq feet. “Though it fluctuates through the years, at present meetings and events represent less than 50% of our hotel revenue,” Russell George, general manager of Hyatt Regency Trinidad, told OBG. “The industry would benefit significantly from a collective strategic vision to guide nationwide efforts, and a re-thinking of how we can position ourselves and work more closely with Tobago to ensure our product is aligned in both islands,” George added.

Sports Segment

Identified as a key area of development and a potentially lucrative niche market, sports tourism is set to benefit from increased institutional support and a strategic vision in the coming years. In March 2016 the T&T Olympic Committee (TTOC) met with local entrepreneurs, and business and public-sector leaders with the goal of building a multibillion dollar, sustainable sport industry by 2030. TTOC plans to establish a think tank to brainstorm strategic policy decisions regarding its implementation with the aim to generate commercial revenue.

Institute & Infrastructure 

An oversight body is also expected to be set up. “We will establish a sports institute of T&T mandated to modernise the sports industry with the ultimate objective of developing and promoting sports tourism. […] In the coming years we would have created a sporting brand for T&T with international recognition,” Imbert said at the 2015/16 budget presentation.

Future growth will be supported by recent infrastructure improvements, in particular three new facilities – the National Cycling Velodrome, National Aquatic Centre and the National Tennis Centre – all due to become operational in 2016. The nearly completed National Cycling Velodrome in Couva has a fixed seating capacity for 2504 and features a 250-metre Siberian spruce track. “We have now put ourselves on the sporting world map and will now be known to have the best cycling arena in the Western Hemisphere,” Brent Sancho, former minister of sport, told local media on the occasion of the unveiling of the TT$18m ($2.8m) track. “This is also great for sport tourism, and we anticipate this location being a number-one destination for foreign cyclists.”

The facility is located next to the new TT$241m ($37.1m) National Aquatic Centre – as part of the Ato Boldon Stadium Sports Complex – which features four separate pools and recreation facilities. Meanwhile, the new National Tennis Centre in Tacarigua includes one indoor court with a seating capacity of 1500 and six outdoor courts.

In line with the government’s vision to position T&T as a training and competition destination for sports teams around the world, SPORTT has plans to construct five regional sport facilities, each of which will have a multi-purpose indoor floor for basketball, netball and badminton, as well as volleyball courts, an outdoor football field, a cricket pitch, and outdoor tennis and basketball courts.

For the past two consecutive years, the country has hosted the finals and semi-finals of the Caribbean Premier League T20 cricket tournament and is additionally likely to benefit from greater international exposure in the near term.

The Kolkata Knight Riders, one of the top franchises in the Indian Premier League, led by prominent Bollywood star Shah Rukh Khan, is in the process of acquiring the T&T franchise. “Cricket has over 3bn fans, so this is a nice opening for international exposure, particularly in India, where cricket has a large following,” Solomon told OBG.

Hotel Industry

A solid accommodation offer is another key aspect for the future development of T&T’s tourism industry. According to the MoT, the country’s room stock, which comprises hotels, guesthouses, and bed and breakfast establishments, is estimated at 7768, with Tobago accounting for 51% of the offer. Hotel occupancy rates follow the wider seasonal trend of arrivals, peaking during the Carnival season in Trinidad, when rates reach nearly 100%. According to SRT Global data, Trinidad registered an average hotel occupancy rate of 67.5% in 2015, while occupancy in Tobago stood at 38.7% for that year, though this data, which is collected from a pool of larger hotels, is likely to not accurately reflect occupancy rates at smaller-size accommodations. While a number of major hotel brands already have a presence in T&T, including the Hyatt Regency, Hilton, Marriott and Radisson, market activity in T&T’s hotel industry was subdued in 2015. An election year, 2015 naturally saw a slight slowdown in market activity, particularly in the more business-oriented Trinidadian market, where the availability of prime real estate land remains a challenge and has partly limited hotel development. Trinidad’s Capital Plaza hotel, however, underwent refurbishment of its 243 rooms and was rebranded to a Radisson.

More Room

The more leisure-focused Tobago market is set to see its room stock rise in the coming years. The trend was set in late 2014 when the 40-room Chic Tobago hotel opened 2 km from ANR Robinson Airport. New properties currently being built include the four-star 79-suite Indigo Bay hotel in Lambeau and another 66-unit property, both of which are scheduled to open in 2016. In a sign of renewed investor interest, regional hotel chain Sandals Resorts International is reportedly eyeing the development of a property in Tobago. Gordon Stewart, the CEO of Sandals, visited Tobago first in January 2016 and for the second time in February 2016 to undertake an extensive aerial tour of Tobago’s western peninsula, where the chain is looking for prime real estate properties for investment, local newspaper Guardian reported.

Incentives

To attract further investment into the sector, authorities are in the early stages of conducting a thorough review of the industry’s incentive framework. A range of incentives are currently available under the Tourism Development Act of 2000, in the form of tax, Customs and excise duty exemptions to be granted to operators of tourism projects with the potential to contribute to sector growth. Moreover, the TDC oversees the Tourism Accommodation Upgrade Incentive Project, an incentive scheme for accommodation upgrade works for small and large properties (between one and 150 rooms) in the form of a partial reimbursement of the costs (see analysis).

Outlook

The government’s renewed focus on tourism comes at an opportune time, when the country is attempting to raise its profile as a Caribbean destination in an increasingly competitive regional environment, particularly after the normalisation of relations between Cuba and the US, Trinidad’s main source market.

Although the opening of the Cuban market is likely to have a more pronounced effect on other mass-tourism destinations in the Caribbean, a successful strategy for sector development will necessarily entail leveraging the country’s main asset – its diverse offer and proficiency in smaller niche markets – an area where there is significant potential for regional cooperation.

Authorities seem to have understood this; the country signed a tourism cooperation agreement with Cuba to further boost and diversify the industry in both countries. The agreement is expected to increase cooperation in areas including facilitating the development of tourism packages, joint ventures and training programmes. Regional cooperation will also be key to overcoming another challenge in 2016 – the threat of the Zika virus.

With current oil prices as of May 2016 at below $50 a barrel and the IMF projecting a further contraction in GDP growth by 1.1%, the pressure to successfully diversify revenue streams is mounting.