Better air connections could lift Caribbean tourist arrivals by 6% within a year after airlines add capacity, a presenter from the International Monetary Fund’s Western Hemisphere Department said.
The research linked additional airline seats to higher visitor numbers after accounting for airlines’ tendency to expand services when they expect stronger demand. Weak transport connections also helped explain why Caribbean countries depend heavily on nearby trading partners, the presenter said.
The presenter spoke at an annual meetings session in Bangkok titled “Analytical Corner: Mind the Gaps—Caribbean Trade Patterns and the Connectivity Constraints.” The IMF published the recording on Oct. 21. The findings came from joint research by IMF and Eastern Caribbean Central Bank colleagues, the presenter said.
Countries can reduce their exposure to shocks from individual markets by broadening their trading partners, shipping routes and sources of tourists, the presenter said. But weak connections make that harder for the Caribbean.
“This diversification doesn’t happen automatically,” the presenter said.
Caribbean countries import much of what they consume from a narrow group of suppliers, leaving them exposed to disruptions affecting those partners, the presenter said. Tourism, a major export for the region, is similarly concentrated.
More than three-quarters of tourists arriving in the Caribbean come from the United States and Canada, the presenter said, citing the joint research. That dependence leaves the region sensitive to economic conditions in those two countries.
Caribbean shipping connections rank well below the global average, the presenter said. Shipping costs in many countries are about twice the global average and can approach three times that level in some countries.
Air connections also fall short of those serving other destinations, even after allowing for differences in economic and geographic characteristics, the presenter said.
The researchers compared actual goods trade with estimates based on countries’ economic size and distance from one another. Caribbean countries traded more within the region and less with outside partners than those estimates predicted.
Those differences largely disappeared when the researchers accounted for weak shipping connections, the presenter said. Distance constrained Caribbean trade more than trade elsewhere.
For tourism, the researchers sought to separate the effect of extra airline seats from the demand that prompts carriers to add them. A 10% increase in seats lifted arrivals by about 2% within a month, the presenter said.
The effect grew over the following year to the level cited above. “Air connectivity doesn’t just follow tourism demand,” the presenter said.
Improving connections would help countries broaden their markets and withstand shocks, the presenter said. The presenter set no timetable for improvements and made no funding commitment.
