Calling the taxes and fees on airline tickets to Caribbean nations “counterintuitive”, former Minister of Tourism Vincent Vanderpool-Wallace said it took the COVID-19 pandemic for the governments in the world’s most tourism-dependent region to fully grasp how airline taxes and fees act as deterrents to maximizing tax income and employment from tourism.
Vanderpool-Wallace said a pledge by the Caribbean Community (CARICOM) to review the taxes and fees on airline tickets in the region could lead to increased economic activity and more tax collection and employment for Caribbean citizens.
“Governments are beginning to recognize the substantial increase in tax collection and employment that can be derived from tourism by increasing visitor arrivals and occupancies of accommodations. The very simple analysis is that for countries running 60 percent annual occupancies, the contribution from tourism can be increase by 50 percent by growing occupancies to 90 percent,” he said during an interview with online magazine Caribbean Journal.
“If decreasing the price of airfare leads to increases in visitor arrivals and occupancies, as every study has shown, the income and employment derived from guest night taxes and the induced and indirect taxes will most assuredly deliver significant tax increases and more employment for citizens. Finally, there is the aforementioned benefit of attracting private carriers. The Caribbean has some of the highest airfares in the world measured on a per mile flown basis. If we can adjust the taxes and fees applied to airline tickets downward, it just might be the tonic needed to stimulate increased intra-Caribbean business and leisure traffic and allow the carriers to earn a little more per seat toward sustainable profitability.”
Vanderpool-Wallace noted however, that given the high cost of tickets to the Caribbean, the kind of visitor that travels to the region may not be so affected by high ticket prices. Still, he said there is the argument that lower prices can spur more interest in the region.
“Studies by IATA and the Caribbean Development Bank have shown similar prospects for the Caribbean. And if you run an average of 40 percent of your rooms vacant every year as we do in this region, there is much space available for those who might be stimulated to travel by better airfares. Further, we congratulate CARICOM heads for some insight that is often missed by many. We do not oppose all taxes and fees on airline tickets, we have always been against high fixed taxes and fees, especially on low airfares. The reason is not difficult to understand,” he said.
“If the base airfare on a ticket is $100 and the fixed taxes and fees on a round trip ticket is $100, we have just raised the price of that ticket by 100 percent. But if the base airfare for some far away source market is $1000, the fixed taxes and fees of $100 raise that total ticker price by only 10 percent.
“So you see that high fixed taxes and fees punish our nearby markets the most. Never mind how we love to brag about visitors from faraway places, nearby markets deliver far more business because of the opportunity for impulse travel and for multiple trips by the same individuals during the course of a year. Take a look at Orlando (50 percent of its business from the state of Florida), Las Vegas (25 percent of its business from southern California) and Macao (40 percent of its business from the nearest province in China). And yes, the nearer markets still outperform more distant source markets when lengths of stay are taken into consideration.”