Is price a deciding factor in planning a Caribbean vacation?
Leisure travel to the region has increased in the post-outbreak landscape, however, a key airline association official said high airfares are likely to cause visitor arrivals to the Caribbean to soar.
“Caribbean destinations are at risk of withdrawing from the global travel and tourism market where passengers have more choice than ever before,” said Peter Cerda, Regional Vice President for the Americas of the Air Transport Association. internationally (IATA).
Speaking at a joint Caribbean Tourism Organization (CTO)/IATA conference held last week at the Ritz Carlton Grand Cayman, Cerda said taxes and fees levied on airlines by Caribbean governments contribute significantly to the high fares of regional airlines.
He warned that high fares would drive travelers to other destinations. “Passengers today have choices and the total cost of a vacation is increasingly becoming a decision factor,” Cerda said. “Governments must be careful not to deprive themselves of the market. Aviation taxes in the Caribbean far exceed the world average.
Cerda acknowledged that the taxes and fees have funded new transportation infrastructure in the area. But the IATA official questioned the “transparency” behind some governments’ tax policies.
“We understand that providing adequate infrastructure for aviation has a cost,” Cerda said. “But very often it is difficult to see the correlation between the level of costs and charges and the actual service provided.”
In his opening remarks at the Grand Cayman conference, Cerda said that globally, government taxes and fees account for 15% of airfares, while the average is double in the Caribbean, taxes and royalties representing 30% of the tariffs.
He said taxes and fees accounted for 56% of flight fares from Barbados to Barbuda. By comparison, taxes and fees on flights from Lima, Peru to Cancun, Mexico make up 23% of airfares.
In another example, Cerda said, “From Miami to Antigua we are looking at a $900 return ticket for the same dates in October. But Miami to Cancun averages about $310 for a round-trip ticket,” he said. “For a family of four, that’s a difference of over $2,000.”
Cerda said IATA was not seeking a unilateral reduction in taxes on Caribbean destinations and acknowledged that improving infrastructure in the region benefits airlines. “Industry is not asking for help, nor do we expect the infrastructure to be funded on its own,” he said.
“What we are looking for is a competitive market that is operated transparently and fairly. We want to be the catalyst and the strong strategic partner of the governments of the Caribbean.
Yet Edmund Bartlett, Jamaica’s Minister of Tourism, countered that high airfares in the Caribbean result from more than high taxes imposed by the destination.
Bartlett pointed out that airline yield management policies, which continually push fares to the highest possible levels, are at least partly responsible for the situation.
“What we are looking for is affordable travel,” he said. “This places some responsibility on the part of the carrier. It’s a problem when you see [rates at] $900 to fly from Grand Cayman to Miami,” Bartlett said.
“But where are the efficiencies of the airline operating this route?” He asked. “Airlift has a responsibility to enable affordability.”
Cerda replied, “More [governments] Craft [their] islands, the more competition there is, the lower the price will be. But he later admitted: “We charge what the customer will pay based on demand.”
Kenneth Bryan, Cayman Islands Tourism Minister and CTO Chairman, said at the press conference that Caribbean government officials will make a formal request to IATA “To say here are some things we would like to see, so that my colleagues and I can [conduct] a proper analysis on the pros and cons, which we can respond to.
According to Bryan, “It’s part of finding solutions to connectivity issues. Of course, the airlines will say “reduce prices”. But each of our members has responsibilities that they have, they look at that.
Bryan said Caribbean officials are “committed to discussing” taxation and fees with airlines through IATA, which he called a “really good first step.”
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