Impact of BREXIT on the Caribbean’s Tourism Industry:
Wilson Jn. Baptiste
The immediate impact of BREXIT on the Caribbean’s tourism sector may not be a reduction of arrivals from the UK to the Caribbean resorts. The impact may have to do with the state of Balance Sheets, through Accounts Receivables.
There are two major factors which will affect the Balance Sheets of Caribbean resorts. These factors will be affected by the devaluation of the pound vs the US dollar. For example, on June 22, 2016, US$1 was worth 0.7314 pounds. However, after BREXIT on June 25, 2016, US$1 was worth 0.8994 pounds. What does this mean? This means that between the two dates and the event, one will have to find 0.1680 more pounds to purchase US$1. As a result, the cost of vacations to the Caribbean by British visitors has increased. However, this may not have an immediate impact on arrivals to the Caribbean because vacationers normally plan and book their vacations in advance. On the other hand, if the following happens, then both Caribbean arrivals will plunge and the Caribbean could lose billions of dollars in the now term.
The second factor which could impact Caribbean resorts will be Cash Flow. Let us assume that Caribbean Resorts have huge Accounts Receivables with Travel Agents and Tour Operators which have declared bankruptcy. As a result, these resorts will have to struggle to meet their expenses while at the same time experiencing low occupancy levels. Will this scenario result in sending Caribbean resorts into bankruptcy?
As a result of an analysis of the above, one can anticipate two pieces of Breaking News this week. Firstly, bankruptcy of UK Travel Agencies and Tour Operators and secondly, the Caribbean losing billions of dollars. The absence of strategies to cushion against these negative occurrences leaves an already fickle industry more vulnerable to global changes. Finally, whereas climate change has been highlighted as the biggest threat to the Caribbean, BREXIT may very well be the event to cause the most damage.
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