Must Read Translated from Dutch

PhD research on tourism economy recommends: ‘Increase productivity, cut overhead.’
Only through continued expansion of the tourism sector, which as a result lost productivity, has it been possible to keep many people with relatively expensive jobs in government and in other ‘high-overhead sectors’ that make limited contributions to the economy.This is an important conclusion from a doctoral research into the tourism economy of Aruba and Sint Maarten.
by reporter Jan Jager, translated from Dutch

Both the Aruban government and the government of Sint Maarten have not intervened sufficiently over the decades to prevent tourism on the islands from entering a downward spiral, in which an ever-growing volume coincided with an ever-declining productivity, while the limits of the carrying capacity of the islands were exceeded, with serious consequences for the quality of life and the environment.

That is one of the findings in the PhD research ‘Small island tourism economies and the tourism area lifecycle – Why Aruba and Sint Maarten have exceeded their carrying capacity,’ by development economist Arjen Alberts, which he will defend next Monday at the University of Amsterdam (UVA).

That is hardly news. Alberts, who has worked and lived in Aruba, Curaçao and Sint Maarten for the past 22 years, wants us to know what role the government plays or doesn’t play in this development and why / why not.

He comes to interesting conclusions. That volume-growth was necessary to support a privileged class of officials from government departments, government companies, insurers and bank employees, who, according to Alberts, are not only a burden, but also overpaid.

He compares it with a pyramid, where the base of hotel workers maintains the top of unproductive government and bank employees. According to Alberts, it is precisely local Arubans who, thanks to the arrival of more and more labor migrants, had the opportunity to end up in these jobs at the top of the pyramid. And where wages stagnated at the base, theirs at the top, got better and better. After a while, labor migrants also managed to successfully free themselves from the base, after which their place was taken by new labor migrants.
Tourism collapsed because the added value per hotel room decreased continuously, the base of the pyramid had to become wider and wider to maintain the top. That meant an insatiable hunger for more hotel rooms. That is a dead end, says Alberts, who was appointed PhD candidate seven years ago, when he began his investigation.

According to him, both Aruba and Sint Maarten are in a stagnating phase of the tourism area lifecycle. The recent collapse of the tourism sector caused the base under the above pyramid to disappear, putting jobs at the government, public companies and support service level under heavy pressure. This validates the criticism of the International Monetary Fund (IMF) that government overhead is too large, and it makes that claim hyper-urgent and newsworthy. This also applies to the banking sector. “There is hardly any country in the world with so many bank employees. The banking and insurance sector and the government and semi-government entities are overcrowded and overpaid. That privatized class made more money than their productivity accounted for, “Alberts says.
According to Alberts, there are two ways to overcome the impasse in the prosperity level. The first is to increase productivity at the base of the pyramid, for example by developing new tourism products such as medical or culinary tourism or incentive travel, as long as no new hotel rooms are added, as they only put extra pressure on the already congested environment and the extra added value is low.

Alberts defines productivity as ‘added value per employee.’ Just to maintain the level of prosperity, productivity must increase, he says. Raising productivity compensates for rising prices in the real estate market and rising government costs as a result of the growth that tourism has experienced in recent decades. Remember? Investment had to be made in new road infrastructure and other facilities to carry the increase in people.

A second solution is more painful but just as necessary. According to Alberts, cuts should be made in the overhead of government organizations, government companies, banks and insurers, which are oversaturated. “You have to retrain people,” he advises, “and have them move gently to more productive sectors, in fact to all activities that generate dollars.”
Alberts also delivers good news. Unlike old industrial areas in the US, Aruba and Sint Maarten are typical immigration countries, who are blessed with a group of residents with a dynamic, flexible disposition which rises to new challenges. Immigrants are extremely enterprising people, otherwise they would have stayed at their homelands, he explains. They are the opposite of workers who are stuck in the pattern or a dead industry. Migrants tackle basically everything and climb up the ladder, sometimes from the illegal status to a better job with health insurance and to higher positions. In his thesis, Alberts makes another sobering conclusion that SITES (small island tourism economies) have shown high resilience to external shocks, being embedded in regional migration networks. Sudden economic downturns cause less unemployment than expected as migrants choose to leave the islands when jobs disappear.”
Notwithstanding, the government of Aruba continues to say it tries to create new jobs with a diversification of the economy. That one according to Alberts is incorrect.
“People continue to argue for diversification, but it is a ghost, a phantom. For a small island, everything has been tried before, from chemical industries to mining activities. You really need to have a comparative advantage before you can successfully develop a new activity. You will need positive production conditions, and investment in human capital. If not, you will get another version of that company that wanted to launch spaceships from Curacao.”

In the first phase, he advises developing activities that are close to the island’s current activities. “If I were a boss in Aruba then I would order the fleet of rental cars to be fully electric. Where can this be done better than in Aruba? The distances are short and there is access to cheap, sustainable electricity. With an electric fleet of rental cars, you provide tourists with a unique selling point (USP): Sustainable Island Tourism! Moreover, with such a strategy you create a need for expertise. After all, we deal with thousands of cars. And this expertise can be sold in the region.”
Do what you are good at, and create new added value from there. That is what it is all about, according to Alberts.

“In island terms this is called speciation, from the word ‘species’ that Darwin used. The tourism animal has to adapt to a new environment and new circumstances, but it remains at heart, the same.” According to Alberts, this added value must come from the culture, from things that a specific island has that other islands don’t. But precisely the opposite has happened. The accommodations deteriorated into a standard formula, and at timeshares and all in-inclusives guests were asked to spend as little as possible time outside the property. In the meantime, the same tourists put a strain on the island’s infrastructure, be it the roads or the sewage treatment plant that can no longer cope with the supply. “If you let hotel chains do their thing, they prefer to build all-inclusives. That is what the market wants, they often say.”
During the early years of tourism, the market invested mainly in the top segment. There was no policy for that. As the islands was flooded with guests and the quality of the product deteriorated that laissez-faire approach no longer worked. “Then you have to intervene,” says Alberts.
According to Alberts, the island authorities have been aware of the negative spiral in which tourism finds itself for decades. “Both Aruba and Sint Maarten have been publishing reports since the turn of the century stating that quality and productivity must be increased and volume growth must be slowed down. But every period of government starts with good intentions, but in practice always ends with the construction of another hotel.”

According to Alberts, all kinds of private interests may lie behind this, but through his research work he came across the pattern described above that, according to him, underlies the growth model of Aruba and Sint Maarten: An ever-growing base of low-paid hotel workers is necessary to maintain a privileged class of well-paid workers in government departments and companies and in other heavy overhead sectors.

 

 

 

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September 21, 2020
Rona Coster