Title: Towards a Sustainable Tourism Product for Jamaica
1Towards a Sustainable Tourism Product for Jamaica
WORKING PAPER
- Jide Lewis
- Research and Economic Programming Division
- Bank of Jamaica
THE VIEWS EXPRESSED ARE NOT NECESSARILY THOSE OF
THE BOJ
2MOTIVATION
- Can the tourism sector be Jamaicas engine of
growth? - Low multiplier for the tourism sector on the
wider economy (McCatty Serju, 2006) (McDavid,
2003). - Increasing Employment with declining productivity
(High Investment Low Growth Paradox)
3OBJECTIVES
- Construct a model of tourism dynamics
- Apply the model to Jamaicas tourism market
between 1990 and 2005 - Present scenario type analysis to evaluate the
impact of shocks to the industry - Highlight policy implications arising out of the
framework
4OUTLINE
- Jamaicas Tourism Market (1990 2005)
- Data Description Sources
- Simulation Model (Intuitive)
- Simulation Results
- Scenario Analysis
- Discussion Policy Recommendations
5JAMAICAS TOURISM PRODUCT
- Annual Ave. Growth in Tourist Arrivals 2.75 per
cent - Standard Dev. Growth in Tourist Arrivals 2.3 per
cent - Highlight problem of high volatility
Disequilibrium Adjustments - Ave. Occupancy 59.0 per cent
- Ave. Direct Employment 30,000
6DATA DESCRIPTION/ SOURCES
Time-Series Data (1990 2005)
- Annual tourist arrivals
- Monthly tourist arrivals (Seasonality Index)
- Bed capacity
- Number of workers in the accommodation sector
(Direct)
Annual Travel Statistics, JTB
Cross-sectional Data (1990 2005)
- Average length of stay per visitor
- Expenditure per tourist
- Average bed to tourist ratio
- Average labour to tourist ratio
Annual Travel Statistics, JTB
- Profit margins of firms in the tourism sector
(1990 2005)
Jamaica Stock Exchange
7SIMULATION MODEL
NEXT
8SIMULATION MODEL
SHOCK
SHOCK
NEXT
9Labour Market
- Labour Market (t) Labour Force (tdt) (Hiring
Rate Attrition Rate Layoff )dt - Where
- Attrition Rate Labour/ Average Duration of
Employment - Hiring Rate Vacancies/ Time to Fill Vacancies
- Vacancies (t) Vacancies (t dt) (Vacancy
Creation Rate Vacancy Closure Rate)dt - where
- Vacancy Creation Rate MAX(0, Desired Vacancy
Creation Rate)
10Decision rules for the Labour Market Sector (Boom)
- Desired Vacancy Creation Rate Desired Hiring
Rate Adjustment for Vacancies
-
- Where
- Desired Hiring Rate Expected Attrition Rate
Adjustment for Labour - Adjustment for Labour (Desired Labour -
Labour) -
Time to Adjust Labour - Desired Labour Average Tourist Arrivals
Labour to Tourist Ratio - Adjustment for Vacancies (Desired Vacancies
Vacancies) -
Time to Adjust Vacancies
ANCHORING AND ADJUSTMENT PROCESS
11Decision rules for the Labour Market Sector (Bust)
- Layoff Rate MIN (Desired Layoff Rate, Maximum
Layoff Rate)
- Desired Layoff Rate MAX (0, - Desired Hiring
Rate) -
- Vacancy Cancel Rate MIN (Desired Vacancy Cancel
Rate, Maximum Vacancy Cancel Rate) -
- Desired Vacancy Cancellation Rate MAX(0, -
Desired Vacancy Creation Rate)
BACK
12Hotel Bed Capacity
Hoteliers
- Bed Capacity (t) Bed Capacity (t dt)
(acquisitions depreciation)dt - Where
- Depreciation Bed Capacity / average bed life
- Acquisitions MAX (0, Supply Chain/ acquisition
lag)
15 years
Manufacturing Sector
- Supply Chain (t) Supply Chain (t dt)
(orders acquisitions)dt (1) Where - Orders MAX (0, adjust SC desired acquisition)
Acquisitions MAX (0, Supply Chain/ acquisition
lag)
13Decision rules for the Supply Chain Process for
Bed Capacity
Decision rules for the Hotel Procurement Process
Desired Acquisitions MAX (0, depreciation
adjust BC) Adjust BC (Desired Bed Capacity
Bed Capacity)/ Bed capacity adjustment time
Desired Bed Capacity
Bed tourist ratio(Average Annual Tourism)
Decision rules for the Manufacturing Sector
Adjust SC (Desired SC Supply Chain)/ Supply
Chain adjustment time
Desired SC desired
acquisitionsacquisition lag
BACK
14APPLYING THE MODEL TO JAMAICAS TOURISM MARKET
15SIMULATION RESULTS
16SIMULATION RESULTS
BACK
17SCENARIO ANALYSIS - BOOM
18Boom in the Tourist Arrivals
In 2008, arrivals increase by 2.0 percentage
points (annually) to an average growth rate of
3.94 per cent for the next five years
19Labour Force Dynamics - Boom
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21Hotel Capacity Dynamics - Boom
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23 Bullwhip Effect Boom Scenario
Conjecture?
24SCENARIO ANALYSIS- BUST
25Hurricane Direct Hit!
26LABOUR FORCE DYNAMICS - BUST
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28SUPPLY CHAIN DYNAMICS - BUST
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31DISCUSSION AND POLICY RECOMMENDATIONS
32DISCUSSION AND POLICY RECOMMENDATIONS
- Labour Market Insights
- Hoteliers demand for labour responds
aggressively to annual tourism changes - Lack of pool of well-trained individuals during
boom can reduce productivity - Solution
- Pool of well-trained personnel who are able and
ready to meet increased demand for labour
33DISCUSSION AND POLICY RECOMMENDATIONS
- Labour Policy Recommendations
- Personnel need to be cross trained in areas which
have a low correlation with the accommodation and
entertainment industry - RESULT
- Reduced magnitude of the structural unemployment
that would emerge in a scenario of a downturn
would be minimized.
34DISCUSSION AND POLICY RECOMMENDATIONS
- Insights into Low Multipliers for the Tourism
Industry - Supply Chain Instability source of low
spin-off for Tourism Industry on Manufacturing
Sector - Manufacturing Sector managing production cost,
inventory costs, quality of output - Hoteliers need for on-time, on-quality, on budget
products - Result Hoteliers Increase Import Content for
Manufactured Items
35DISCUSSION AND POLICY RECOMMENDATIONS
- Supply Chain Policy Recommendations
- Information sharing (Inter-Sectoral) Reduce
Bull-whip Effect - High Frequency Data Information of beds on
order, obsolesce -gt inform demand estimates -
- Medium-term alliances with domestic producers to
improve supplier integration - Detailed Evaluation of Contracts FDI
- (Policy Makers)
36THANK YOU
37Stylized Facts on Jamaicas Tourism Product
- Labour force employed to the Hotel, Restaurants
Clubs was 287,852 in 2005 - The industrys supporting sectors
(transportation, agriculture, manufacturing,
construction) represent 60.0 per cent of GDP - Average net surplus of US1,100 million on the
travel account in the balance of payments - Gross tourism foreign exchange earning
represented 89.8 per cent of the value of
merchandise imports
BACK
38Tourism Multipliers
39Tourism, Economic Growth, Employment (McCatty
Serju, 2006)
- The expected boom in the industry over the medium
term should have noticeable effects, the
estimates of the impact multipliers suggested
that the contribution of the sector to the wider
economy would be below potential. - Estimated sectoral multipliers indicated
- The output multiplier was 1.217. For every 1.00
spent by the sector, 1.217 in output would be
generated from the other sectors of the economy.
An Input-Output Analysis of the Jamaican
Hospitality and Tourism Sector (Mc David, 2003)
- The output multiplier was 1.269. For every 1.00
spent by the sector, 1.27 in output would be
generated from the other sectors of the economy.
BACK
40SYSTEMS DYNAMICS
- Stock Flows Principles e.g.
- System of differential equations
- Decision rules behavioral equations determine
changes in flows which in turn informs changes in
levels - Agents are do not have perfect foresight, nor are
they Profit/Utility Maximizers instead they
use Heuristics to guide decisions
BACK
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42MODELLING PROTOCAL
43Tourist Arrivals (Annual)
Logistic or Verhulst growth sub-model used to
capture transition from exponential growth to
equilibrium
- Annual Tourism (t) Annual Tourism (t dt)
(come go) dt (1) - Where
- Come growth fractionAnnual Tourism(1 step
(step height) -
- Go (Growth fraction/Carrying Capacity)Annual
Tourism2 -
- Carrying Capacity (t) Carrying Capacity (t
dt)
2.3 per cent
THIS FORMULATION IS NOT FOR FORECASTING PURPOSES
44Tourist Arrivals (Monthly)
- Monthly Tourism (t) Monthly Tourism (t - dt)
(arrive depart)dt (2) -
- Where
- Arrive Tourism Seasonality(Annual Tourism)/12
- Tourism Seasonality GRAPH(month,1,1,0.418,0.58
2,0.887,1.12,1.17,1.14,1.47,1.55,1.29,1.12,0.672,0
.571) -
- Depart Tourism/average length of stay
7.9 days
BACK
45SIMULATION RESULTS
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