Tourism has been rebounding in the territory since the 2017 hurricanes. Air visitors are up by 43 percent from a year ago, hotel tax revenue collections are up 40 percent and cruise ship arrivals are up only 3.8 percent, to just under a million passengers.
While the numbers for air visitors and hotel tax revenue collections are something to be celebrated, Tourism Commissioner Joseph Boschulte said of cruise ship arrivals, “this is one area we are under heavy siege from the competition.”
Boschulte brought the figures to the Revenue Estimating Conference held Wednesday in Yacht Haven Grande, where about 75 of the territory’s government and business leaders were evaluating territory fiscal trends. The Virgin Islands Code requires a Revenue Estimating Conference be held twice a year to establish a forecast of anticipated recurring and non-recurring territorial revenues that will impact the following fiscal year.
No projections were studied more closely than tourism and the impending dredging which will allow Oasis-class and Quantum-class cruise ships to dock in the territory.
Boschulte pointed to trends that could spell trouble for the USVI.
“A perfect example is St. Kitts. Back in 2012 St. Kitts was a blip and not really a competitor on the airline side or the cruise side,” he said, “but now St. Kitts is a major player surpassing St. Thomas in cruise ship passengers last year and very close this year,” Boschulte said.
He added St. Kitts is opening another cruise ship pier, which will be able to accommodate four Oasis-class ships. That creates a problem for St. Thomas as currently the island can only take one Oasis-class ship, a figure that has not changed for 10 years when, in 2009, St. Thomas was one of the first ports to accept ships of that size.
St. Kitts was not the only island to surpass the V.I. in this regard, and Boschulte mentioned a handful of others competing islands with the capability as well.
“In my mind this is a poor representation of our ability to compete in the region,” Boschulte said.
Boschulte had some good news in terms of the revenue generated by cruise ship passengers.
“For the first time in many years St. Thomas regained the number one spot in spending in the Caribbean. So people are coming to the territory and they are spending … we are back to number one now but the difference in the spending is that they are not necessarily spending at jewelry stores, but they are spending more on experiences. They are traveling out amongst our people and they are moving around the island.”
St. Thomas/St. John Chamber of Commerce President Sebastiano Paiewonsky-Cassinelli advocated strongly for the looming dredging projects to allow for larger ship classes to dock in St. Thomas.
“Dredging affords an incredible opportunity to have an immediate impact on cruise ship arrivals if we can get the inner and outer harbor dredged and then the north side of the Crown Bay dock … this seems to me to be a huge existential priority at the top of the list because potentially we increase those arrivals by several hundred thousand,” Paiewonsky-Cassinelli said.
But OMB Chief Economist Mark Wenner said the territory might want to be wary, because such efforts will increase traffic problems and may tarnish the tourism product as a whole if beaches become overcrowded.
Boschulte said the Legislature and Coastal Zone Management have already approved the dredging, which now is in the hands of the Army Corps of Engineers.
Air Visitor Arrivals, Inflated Flight Prices
Not all visitors to the territory arrive by ship. Boschulte said air arrivals neared 500,000 visitors between the months of January and September of this year.
Weekly air capacity has increased to 260 additional flights to St. Croix and 340 flights to St. Thomas, he said, roughly 6,100 seats available to St. Croix and 19,100 to St. Thomas each week.
The Department of Tourism works with 10 different airline companies to procure these flights and seats, which come in from Houston, Chicago, Boston and various other large cities throughout the country.
Boschulte said there are “strong signals of major airlines returning” and St. Croix is experiencing an increase in flights exceeding pre-hurricane numbers.
Boschulte said the St. Croix increase is coming from the type of passenger. The department has determined that those coming to St. Thomas are coming for leisure while the individuals flying to St. Croix are often flying for business.
“We have been pushing the Limetree expansion as a need for even more airlift into the territory and that conversation seems to be gaining traction. When we speak to airlines directly, we are telling them about what we believe will be the demand and the reasons why we need to secure more air lift,” Boschulte said.
The Tourism chief said the department is monitoring the change in ticket costs for flights into the territory.
“There has been a significant increase in fares to St. Thomas and to St. Croix over the last 90 days,” Boschulte said, which the department anticipated. With the storms two years in the past, airlines want to test the market, but the flights still continue to come in full.
“What that means is, the market is bearing the increase in fares,” Boschulte said.
Accommodations On the Rise
Of the more than 4,500 traditional overnight accommodations available pre-storm, Boschulte said 2,450 are available territorywide today, which is important to consider when “flights and hotels have a symbiotic relationship.”
Boschulte said the more hotel rooms the territory can offer, the easier it is to convince major airlines to offer more flights into the territory.
“We are on a nice trajectory and moving upwards on getting our hotel accommodations back,” he said.
By the end of 2020 the additional accommodations provided by the Ritz, Carambola, Divi, Noni Beach and Marriott’s Frenchman’s Reef will add 1,106 rooms, bringing it to a grand total of around 3,550. He added that Airbnb, a non-traditional accommodation, currently adds 2,100 rooms in the territory.
In fiscal year 2018 hotel tax revenue collections were only half of what had been seen in prior years, generating just $14.6 million, but in fiscal year 2019 Boschulte said revenue collections will be over $20 million – a 40 percent increase.
The numbers are important Boschulte said “because this shows our ability to market effectively against our competition by having the necessary resources, and importantly it shows the territory continues to rebound post-hurricanes in terms of people wanting to come to stay in the territory.”