Following an important discussion and debate of 2005 Travel & Tourism results and forecasts among leading industry players in the Dominican Republic, the World Travel & Tourism Council and its research partner Oxford Economic Forecasting has issued the following details of its research in order to address and resolve misinterpretations and misrepresentations of the situation in the country.
The bottom line is simple, the WTTC statement explains. Although there has been a significant increase in Dominican Republic Travel & Tourism as calculated in terms of traffic and visitor exports expressed in current US dollars, the recent appreciation of the local currency against the US dollar together with domestic price trends have meant that growth rates expressed in constant US dollar and local currency terms have taken significant hits. Expressed in yet another way, because of the appreciation of the Dominican Republic peso, which has been exacerbated by inflation, inbound visitors have lost 30% of their spending power, causing significant hardship for the local travel & tourism industry.
WTTC explains that these declines are what have been reported in the WTTC 2005 Tourism Satellite Account Research for Dominican Republic Travel & Tourism. The research forecast that the DR in 2005 is expected to generate US$7 billion of economic activity (Total Demand). Likewise, The DR’s Travel & Tourism Economy (direct and indirect impact) in 2005 is expected to account for 22.9% of GDP and 696,272 jobs (19.8% of total employment). Travel & tourism in the DR is expected to decline by 14.4% in 2005 and to grow by 4.2% per annum, in real terms, between 2006 and 2015.
In the WTTC World Ranking, the Dominican Republic’s travel & tourism economy is ranked number 63 in absolute size worldwide, number 28 in relative contribution to national economies, number 117 in long-term (10-year) growth, amongst 174 countries.
WTTC highlights that in reviewing the WTTC’s Tourism Satellite Accounting research for the Dominican Republic government officials, industry leaders and the media should know that the growth results and forecasts for the Dominican Republic, expressed in constant US dollars, are significantly affected by the very sharp swings in the exchange rate since mid-2002 and the lagged response in domestic prices. In particular, in 2003 the average exchange rate fell to RD$30.8/US$ from an average of RD$18.6/US$ in 2002, and then it depreciated further to over RD$50/US$ early in 2004. Since then it has appreciated equally dramatically to under RD$29, before in recent weeks selling off to over RD$33/US$. The sharp depreciation boosted prices in 2004, with inflation gradually falling as the exchange rate re-strengthened. As a result, the changes in the real exchange rate have been significant in the past three years and these changes are reflected in the WTTC/OEF estimates for real tourism demand, GDP and employment.
According to the latest World Tourism Organization Barometer, visitor numbers rose 7% year-on-year in the first 8 months of 2005, resulting in a 17.8% year-on-year increase in US dollar tourism receipts in the first half of the year. The WTTC/OEF forecast was for a 10% rise in nominal dollar visitor receipts for the year as a whole, with overall tourism GDP up 24% in current price dollar terms. However, given the exchange rate appreciation discussed above, that 17.8% rise in US dollar receipts translates into a drop in local currency terms of almost 20% even before price rises (inflation) are considered. At the end of the day, the decline in tourism demand and GDP in real terms (US$ constant prices, reflecting dollar purchasing power in 1990 prices) could well turn out to be greater than that forecast in January by WTTC/OEF.