Monthly Economic and Financial Development, June 2019

Published: Friday July 26th, 2019

Domestic Economic Developments

Overview

According to preliminary data, the modest-paced improvement in the domestic economy was sustained over the review period, with tourism sector output remaining buoyant, as evidenced by the continued record growth in high value-added stopover arrivals. In addition, ongoing small and medium-scale foreign investment projects undergirded construction sector activity. Monetary sector developments featured an expansion in bank liquidity, owing mainly to an increase in Central Bank financing to the Government, while the seasonal rise in foreign currency demand led to a decline in external reserves.

Real Sector

Tourism

Indications are that the tourism sector continued to strengthen during the review period, reflecting the gains in the high value-added stopover segment of the market.

Based on the latest data from the Ministry of Tourism (MOT), total visitor arrivals rose by 17.8% in May, outstripping the 6.6% improvement recorded in the prior year. Specifically, air arrivals firmed by 16.6%, following an 18.9% expansion in 2018, while the growth in the sea component accelerated to 18.3% from 2.6%.

A breakdown by island, showed that arrivals to New Providence rose by 11.8%, a turnaround from the 3.0% reduction recorded in 2018, with a 20.2% strengthening in the air segment. In addition, sea passengers reversed to a moderate gain from the prior year's contraction. Further, total arrivals to the Family Islands advanced by 33.3%, extending the 25.1% growth recorded a year ago, with the key Eleuthera and Abaco markets anchoring the gains in air arrivals. In contrast, the growth the Grand Bahama market slowed to 7.2% from 21.8% in the prior period, with the contraction in air traffic partly offsetting the expansion in sea arrivals.

A longer-term analysis showed a sustained improvement in the tourism sector over the five-month period, buoyed by the increase in room capacity. Total arrivals firmed by 13.2%, outstripping the 3.1% increase recorded during the same period last year, as gains in the air segment quickened to 17.5% from 15.0%, while sea arrivals rebounded from a marginal 0.2% contraction in the prior period, to an 11.8% improvement. A breakdown by market, showed robust growth in visitors to New Providence by 23.4%, while a smaller increase of 6.3% was reported for the Family Islands. In contrast, total arrivals to Grand Bahama fell by 16.5%, amid reductions in both the air and sea segments, attributed in part to declining calls to the island by large cruise ships.

Buoyed by the robust gains in stopover visitors, data from The Bahamas Hotel & Tourism Association (BHTA) and the MOT for the month of May, showed improvements in the key performance indicators for the hotel sector. Specifically, room revenue firmed by 26.0%, as the average daily room rate (ADR) rose by 6.6%, year-on-year, to $237.93 and the average occupancy rate increased by 9.1 percentage points, to 72.6%, while the number of room nights sold advanced by 18.0%. Similar developments were noted over the January to May period, with the number of room nights sold firming by 21.0%, contributing to the 11.3 percentage point strengthening in the average occupancy rate to 76.8%. In addition, amid a 9.9% expansion in the ADR to $288.08, total room revenue advanced by 33.0%.

Initial indicators for June showed that the positive trends in the industry were sustained, as data from the Nassau Airport Development Company Ltd. (NAD) revealed that total departures--net of domestic traffic--increased by 16.9%, extending the 10.9% growth in the prior year. Specifically, the expansion in the dominant U.S. component accelerated to 18.8% from 8.8%; however, accretions to the non-U.S. departure segment decelerated to a mere 1.8% from 31.4%. Over the first six months of the year, aggregate departures firmed by 19.4%, extending the 12.4% expansion recorded for the corresponding period of 2018, as the U.S. segment strengthened by 21.1%, outpacing the 11.6% increase recorded in the prior year, while non-U.S. departures increased by 10.0%, a slowdown from the previous period's 17.2% expansion.

The latest data from AirDNA showed that part of the improvement in stopover arrivals was attributed to the sustained growth in the short-term rental market. Total room nights sold increased by 33.4% in June over the same period of 2018, with bookings for both "hotel comparable" and "entire place" listings advancing during the month. Moreover, an analysis of the major markets revealed gains in bookings for the key markets of Exuma, New Providence, Abaco, and Grand Bahama of over 30% each. In contrast, the ADR for both the "hotel comparable" and "entire place" segments contracted by 17.2% to $147.29 and by 7.9% to $402.32, respectively, as broad-based declines were reported across all major destinations, due in part to the addition of lower priced listings.

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