The Bahamas has the potential to become an "Atlantic transshipment hub" between Latin America and Europe, a senior KPMG executive believes, adding that this nation's "60 per cent GDP" tourism dependency meant it was bound to suffer more than other nations during the recession.
David Slatter, a Bahamas-based associate director for the company's corporate finance arm, in a recent interview with Tribune Business, said the fact that many Europeans and Latin Americans preferred not to fly through the US due to visa issues opened up a potential opportunity for the Bahamas to act as an aviation "hub" between the two continents.
This nation's tourism industry, he added, could also receive a boost if some of these travellers decided to spend time in the Bahamas.
"Whether it's Europeans trying to get to Latin America, and Latin Americans trying to get to the Bahamas and on to Europe, there's the potential to become a hub - an Atlantic hub - between Europe and Latin America, Latin America and Europe," Mr Slatter told Tribune Business.
"Hopefully, that means people will also decide to stay here for a while if they use us for transshipment."
In a presentation to the Bahamas Hotel Association (BHA) earlier this year, Mr Slatter explained that given that the income elasticity of tourism demand was greater than 1.0, when this nation's major visitor source markets, such as the US, saw an overall income decline, demand for travel to this nation declined by a greater amount.
As a result, with 60 per cent of the Bahamas' GDP related to tourism, this nation's economy contracted by a greater amount than leading industrialized nations, such as the US and Canada, during the 2008-2009 recession.
"Given that in excess of 60 per cent of Bahamian GDP is based on tourism, and the income elasticity of demand for tourism is greater than 1.0, when effectively 100 per cent of your tourism market sees its income decline, the demand for the Bahamian tourism product will decline by a greater amount. Thus the Bahamian economy underperformed the economies of the US, Canada and Euro Area," Mr Slatter said in his presentation.
And he told Tribune Business: "Tourism's contribution is essential to our GDP. Sixty per cent of our GDP is dependent on tourism. The other 40 per cent can pick up the slack, but not for long.
"If you see the depth of our recession, it was deeper than the US recession. We're really dependent on the US market, but whenever we diversify our tourism markets, as in Latin America, it's a positive strategy."
Mr Slatter's presentation to the BHA focused in particular on Brazil, Panama, Colombia and Argentina, given that those nations accounted for the majority of Latin American tourists coming to the Bahamas. All those nations, bar Brazil, experienced positive growth in 2009, unlike the US, Canada and Europe, from where 95 per cent of visitors to this country are sourced.
"Given the increase in airlift that Copa has provided, in as far as direct flights from Panama, and the growth outlook for those countries, it's panned out to look like a very good strategy," Mr Slatter told Tribune Business of the Bahamas' Latin American focus.
"What it'll come down to is the quality of vacation they receive when they get here, and we have to make sure we have sufficient staff on hand to make sure what we deliver is the ultimate experience"
Wealth and the middle class were expanding in all four targeted Latin American countries, Mr Slatter said, and each was expected to maintain consistent GDP growth, within a 3.75-7.25 per cent range, between 2012-2016.
These growth rates were projected to beat the forecasts for the Bahamas' major source markets, the US, Canada and the Euro area, over the same time period.
"The Bahamian economy is expected to outperform the [US, European and Canadian] economies in 2012 and 2013, before growing at the same pace as the US economy," Mr Slatter told the BHA during his presentation.
"These projections support a strategy of targeting the Latin American markets in order to diversify the Bahamian tourist market. It is interesting to note that the newest market for the Bahamas - Panama - is the highest GDP growth market.
"The commencement of direct flights between Nassau and Panama by Copa Airlines in mid- 2011, and their subsequent increase in airlift, highlights the potential for targeted development of the Central and South American markets.
"The demographic and economic trends in the Americas support the strategy of the Bahamian tourism market investing resources in order to gain greater access to Central American and South American markets."
Mr Slatter told Tribune Business that the growth indicators "bode well" for Bahamian tourism and its strategy, with Latin America "becoming more significant as time goes on".
"The Ministry of Tourism did see the potential," he added, "and based on the numbers so far it looks like being a very successful strategy."
Further potential for tourist market diversification, Mr Slatter said, lay in Baha Mar and its $2.6 billion project's relationship with China.
Yet he warned in his BHA presentation that the recovery in stopover visitors was likely to be slow, and that these travellers may have been converted to lower-yielding cruise passengers during the recession.
"With an expected slow economic recovery, an increase in stop over tourists is likely to be slow," Mr Slatter said.
"The Bahamas has seen a marked increase in cruise tourists, due to new, bigger ships, but also potentially due to a conversion of previous stopover travellers to cheaper cruise vacations during the economic downturn, notwithstanding ongoing growth in the cruise traveller market."
Published: May 17, 2012