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THE ANATOMY OF A FALL-OUT IN THE TOURISM SECTOR

Scenario The negative shock to tourism capacity arises from a hypothetical hurricane which damages the infrastructure of the sector. In particular, bed capacity is assumed to decline by 20.0 per cent to 45, 519 beds at end 2008 from 57,024.0 beds at end 2007. The decline in destination attractiveness also elicits a decline in stay-over visitor of 5.0 per cent and 2.0 per cent in 2008 and 2009 respectively.13 This shock would also result in average annual occupancy rates from decline to a low of 55.0 per cent in 2010 before recovering to 59.0 per cent in 2013, from 63.5 per cent at end 2007.

Bust in Tourism Scenario

1,650,000

4.0

Annual Average Occupancy Rate

66.00

1,600,000

2.0

64.00

Number of Stay Over Visitors

1,550,000

1,500,000

1,450,000

1,400,000

1,350,000

Annual Tourism Growth Rate in Tourist Arrivals

-

  • -

    2.0

  • -

    4.0

  • -

    6.0

Growth in Tourist Arrivals (Per cent)

Occupancy Rate (Per cent)

62.00

60.00

58.00

56.00

54.00

52.00

1,300,000

  • -

    8.0

50.00

2007

2008

2009

2010

2011

2012

2013

2007

2008

2009

2010

2011

2012

2013

Labour Market Response The reduction in both the capacity of the industry and the reduced demand for Jamaica’s tourism product results in excess labour market conditions to prevail. In response, hoteliers reduce both their demand for desired vacancies and desired labour force decline by 64.0 per cent and 8.0 per cent, respectively. The vacancy creation rate drops precipitously by 66.0 per cent to 400.0 persons per month and the hiring rate declines to 940 per month from the third quarter of 2008 from 1 231 persons per month at end-2007. Initially, therefore hiring rate falls below both the lay-off rate and the attrition rate which induces a decline the number of workers in the industry. In particular, the labour force declines by 6.0 and 3.0 per cent in 2008 and 2009. Thereafter, the sector grows at an

13 This shock represents a marginally larger reduction in the 99th percentile reduction in annual arrivals between 1990 and 2005.

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