Guam Tourism Numbers Up, Spending Per Visitor Down

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Flat economy attributed to weak yen, decrease in federal spending

By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (Pacific Daily News, Oct. 26, 2013) – Guam's high tourist arrivals in recent months haven't translated into a major economic boost to the island because many of the tourists aren't shopping as much as they used to, experts said yesterday.

Two economists, the Bank of Guam's Joseph Bradley and the Guam Department of Labor's Gary Hiles, talked about economic indicators locally and across the globe during a seminar yesterday on the economic outlook for the island. The Guam Chamber of Commerce Business Focus and Development committee held the seminar at the Outrigger Guam Resort.

A third expert on the panel, David John, president and director of asset management at ASC Trust, helped to sum up why Guam's economy hasn't taken off this year -- despite strong tourist arrivals.

"(Tourist) arrival numbers are solid, ... and if you've seen some of the Guam Visitors Bureau reports, you'd think we're in the middle of a boom," John said. "But it's not transcending into the economy because that has to do with the yen to the dollar."

"People are coming down here, but they're not really spending that much," John said.

Bradley, a Bank of Guam senior vice president, showed a chart on "the fall of the yen" -- it cost 76.74 yen for every $1 in October 2011. This month, it took 98.58 yen to buy something worth $1.

Bradley said he's in agreement with Hiles and John that "our economy is relatively flat, ... up a little, down a little, but mostly sideways."

"Whereas visitor arrivals have recovered to 1997 levels, that doesn't seem to have as strong an impact on the rest of the economy as it should, and I attribute that to reduced out-of-pocket spending here," Bradley said.

"I do, though, expect that the Japanese will, No. 1, become accustomed to the weaker yen, and No. 2, experience rising incomes and employment as the nation's exports continue to expand, so that they are more willing and better able to spend."

Guam's fiscal 2013 visitor arrivals reached 1,337,665, one of the highest in the island tourism industry's history, and 14 percent higher than the previous fiscal year's total, according to Bureau of Statistics and Plans data.

However, the single largest source of Guam's tourists -- Japan -- saw arrivals dip 2.4 percent this calendar year, through September, to 683,092 compared to the same period last year. That reflects 17,136 fewer Japanese tourists, preliminary GVB data show.

The weakening yen against the dollar, said Mark Baldyga, chairman of the Guam Visitors Bureau board of directors in an earlier interview, "is having a major impact" on Guam's visitor arrivals.

"Increased regional competition is a factor as well," Baldyga said in a previous interview.

At the conference yesterday, some of the participants raised questions whether other markets such as the Philippines would draw tourists away from Guam. But if the yen continues its weakened strength against the dollar, participants stated, Guam's competition for Japan tourists might be Japan itself.

A First Hawaiian Bank economic forecast for Guam for 2013-2014 also points to the weakened yen as a factor in sluggish spending by Japanese tourists.

The weakened yen, according to a third quarter 2013 First Hawaiian Bank report that tracks debit and credit card spending, also shows transactions at Guam retail stores dip 18 percent to $17 million during this year's third quarter, compared to the same period last year.

The decline in debit and credit card transactions at retail establishments on Guam also is likely a result of the weakening yen, said Laura Dacanay, First Hawaiian Bank senior vice president and Guam/CNMI region manager.

Federal spending

Hiles, the local labor department's chief economist, said cuts in federal spending will be a factor in Guam's economic forecast.

Based on the Congressional Budget Office estimate, federal government discretionary spending nationwide will shrink $93 billion in fiscal 2014, or 8.7 percent, Hiles said.

"The Guam economy is anticipated to be characterized by continuing stability for fiscal 2014 without major expansion or contraction," Hiles said.

"Radically declining federal construction contract levels are likely to cause a dip in the construction industry until additional new projects are contracted," Hiles' presentation states.

This fiscal year, the total amount of federal construction contracts on Guam dipped to $49 million, down more than 60 percent from a year earlier and an 80-percent drop from five years ago, Bureau of Labor Statistics data show.

The military buildup's uncertain start and scaled-down size of Marine troops' move from Okinawa to Guam have dampened expectations in the construction sector, the experts said.

Diversifying industries

When asked what the government of Guam can do to pull the island "out of the economic doldrums," Bradley said Guam needs to develop a third major industry without taking tourism and federal/military spending for granted.

"We need to diversify our target markets for tourism, as well as the tourism products that we offer. More importantly, though, we need to diversify our economy beyond the precarious two-legged stool of tourism and federal expenditures -- primarily the military," Bradley said.

Although Guam's tourism marketing efforts "can influence our visitor industry fortunes, tourism is a 'luxury good' that is quite volatile," Bradley said.

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