The Caribbean is economically the most tourism dependent region in the world. Covid-19’s impact on Caribbean tourism is proving to be more devastating than the 2008/9 Great Recession, or the post 9/11 drop in leisure air travel, or any other disease-based health scare. The current resurgence of the disease in the US, the prospect of a second spike later this year and the absence of a vaccination all reflect the utter unpredictability of the Caribbean’s immediate tourism future.
The Caribbean Development Bank is forecasting a 50% drop in annual tourist arrivals in the region - if restrictions continue until September - and a much greater decrease if they remain all year. The International Monetary Fund (IMF) predicts that the Eastern Caribbean, overly dependent on crisis impacted cruise lines, will be among the hardest hit.
Few Caribbean governments are in a strong enough financial position to aid the tourism sector, as Covid-19 has also worsened national budget shortfalls and balance of payments challenges.
How are hotels, marinas and other tourism dependent businesses to survive the consequent drop in revenue and the pressure of fixed and variable operating costs while, in most cases, servicing loans? The private sector must identify ways to save itself.
Grant Thornton and MacLellan & Associates have worked together on some of the most challenging business situations across the region and met recently to discuss how businesses can successfully navigate through this crisis situation.
The challenges might appear overwhelming but both firms agreed that there is a range of solutions still available for tourism companied, including;
- Building comprehensive business plans and trading projections to monitor risks, manage resources and inform critical decision-making processes through the crisis;
- Negotiating greater flexibility with tour operators, lenders and other key suppliers to ensure the flexibility and liquidity needed to weather any further challenges;
- Adapting or creating product offerings to maximize revenues and secure profitability;
- Adapting or identifying new marketing resources to capitalize on all opportunities;
- Sourcing additional equity/debt funding or renegotiating existing structures to maximize liquidity in the business over critical periods; and/or,
- Releasing value from redundant assets and operations of the business.
The two firms are joining forces to offer the Caribbean’s hospitality and tourism sector the professional advice needed to secure one or more of the above options in these tough times. Their mutually agreed focus is to offer practical assistance at as early a stage as possible and devise fee structures which are viable for struggling businesses.
Grant Thornton’s team provides the accounting and finance expertise and specialises in restructuring and rescuing businesses in financial crisis, while MacLellan & Associates has a 23 years track record in hands-on tourism and hospitality consultancy services in the region.