As cruise arrival figures continue to drop, particularly in the off-season, retailers are being forced to rethink their yearly plans to ensure that the high season is maximised and overheads minimised when things are tight.
Chris Kirkconnell is vice president of operations at Kirk Freeport Plaza Ltd. and is well-placed to give an overview of what the retail sector in general has faced during 2011.
“From January through May business had been pretty good but once we got into the summer there was a huge drop-off in cruise tourism. That drop of about 30 plus per cent in cruise numbers made a huge impact.
“It was not just the cruise numbers but it was the higher end ships we were losing. So for luxury retailers that made a major impact, particularly during the summer. Getting into December we are only just seeing numbers getting back. So from what was looking to be a good year for us, even though there was an increase in hotel traffic, it was small and could not make up for the loss of cruise passengers,” said Kirkconnell.
The stayover market does not have the same spending habit as cruise, which is more dependent on volume.
2012 looks promising, he said, but the economic news coming out of the United States and Europe is still not as positive as it could be.
“We are still seeing people holding back; it is not quite where we were hoping it would be. Numbers look decent for hotel and cruise tourism but until we see what the sales are looking like we are still waiting to see what that means.”
Because the Royal Caribbean ships have swerved Cayman during the summer the demographic has altered within that industry toward the more affordable end of the cruise market. This means that the passengers have less buying power than in previous years.
“Spending has to be way down; it was the cheaper ticket cruises this summer which brings the average way, way below what the normal average is. This summer would have been completely different if we were getting some of those new Royal Caribbean ships, the higher end of the cruise industry.
“The ships that those new [Liberty-class megaships] were replacing were deployed to other parts of the world and we did not get those newer ships [because they are too big to make tendering effective]. Had they come here, we would have seen a major difference even if numbers were still down. We would have seen a major impact. We hear what business is being done through those other ports with those other ships,” said Kirkconnell.
The general feeling amongst retailers is increasingly that the sooner a cruise berthing project is completed, the better because these larger ships – which hold nearly 6,000 passengers – cannot come to Cayman at all at present.
Therefore, retail’s planning period is based on a new paradigm in which the high season must pay whilst the off-season is quieter in general than it has been in the past.
“We are looking at 2012 which will be a tough summer as well; we are having to start planning for that because of how soft the summer was this year.
“Other islands have major season swings from off season to high season and in the past we have not had that to the same degree that they do. There are a lot of islands that pretty much close shop during the summer and up to now we have not had to do that. There are some retailers on other Caribbean islands which completely shift inventory and staff and focus to Alaska in the summer to capture that business then shift back here.”
Previously, retail has not had to look at similar strategies in the summer months because the down trend had never been to the degree it was in 2011.
“Until the dock is built we will see the same seasonality for the next two years, even if they get the dock moving right now.”
Strategically, different seasons are now being looked at for this deep swing of business amongst the retail community. Some measures that in general may be looked at are different staffing levels. Although this is already a factor, number reductions in the summer may be a factor as businesses evaluate their stores to see which are performing and able to absorb a slower off season.
“Month by month we review and decide what our direction is, bit by bit, in this new paradigm. And to focus on which areas of business continue through the summer compared to what we do in the high season.
“Product wise that might be lower end items which keep turning when the budget ticket sales are out in the summer versus the higher end cruisers will be through the high season.”
In the summer there was a huge drop-off in cruise tourism.