Annual tourism revenue to plunge $339M—MVA

The CNMI will lose $339 million in annual tourism revenue with the exclusion of Chinese and Russian tourists from the federal visa waiver program, Northwest Airlines’ impending reduction of flights, and the continued dip in visitor arrivals from Korea, according to Marianas Visitors Authority projections.

This amount is equivalent to 35.2 percent of the annual tourism revenue of the CNMI, whose business gross revenue reached only $1.688 billion in 2009 based on the quarterly economic indicators report released yesterday by the Department of Commerce.

The year 2008 was the third time in the last five years that overall business income failed to reach the $2 billion mark.

“There is no doubt that 2009 will be a challenging year,” Saipan Chamber of Commerce president Jim Arenovski told members of the business group in his report yesterday, referring to the visa waiver program’s impact on the CNMI and the reduction of Northwest Airlines flights.

MVA, in a statement yesterday, said it is seeking the delayed implementation of the federal immigration regulations excluding visitors from China and Russia, which accounted for 20 percent of the CNMI’s tourism revenue in fiscal year 2008.

Northwest Airlines will use smaller aircraft starting March 29—from the current 298-seater A330 to a 182-seater B757. Northwest will also cancel all its nighttime flights from both Osaka and Narita in May.

Arrivals from South Korea, the CNMI’s second largest market, have been declining over the last several months.

“These changes are going to decimate the CNMI economy if seats can’t be recovered. The CNMI will become a ghost town,” MVA managing director Perry Tenorio said, referring to lost airline seats.

The U.S. Department of Homeland Security issued regulations excluding China and Russia from the list of countries whose citizens are exempt from the visa requirement effective June 1—unless the implementation is delayed.

Despite the federal estimate of a $6 million negative impact on the CNMI, the Chamber’s Arenovski said the impact will be much more severe.

“A sharp decrease in Russian and Chinese tourist arrivals will hurt hotels, airlines, tour agents, retail stores, and all of this will trickle down to many of our individual businesses, even if we’re not directly in the tourism industry, and will certainly negatively impact government revenues,” he said.

The U.S. DHS has yet to issue proposed regulations on the CNMI-only transitional worker program.

“We still need to see the new regulations on how to get these new visas, to determine if they are truly more difficult or expensive to obtain and detrimental to commerce on our islands,” Arenovski said.

Although visitors from China and Russia accounted for only 10 percent of total visitor arrivals, they contributed $56,790,108 in direct economic impact and $185,659,450 in indirect economic impact to the local economy due to longer stays and higher spending than other visitors, said MVA.

The CNMI also stands to lose 656 public sector jobs and 733 private sector jobs, if it loses visitors from China and Russia.

“The urgency of delaying the implementation of the regulations is further compounded by additional reductions in airlift from our main market of Japan,” said Tenorio.

The China and Russia markets will become increasingly important in FY 2009 as Northwest has announced a series of service reductions in the coming months, including the use of smaller aircraft on March 29 followed by the cancellation of its nighttime flights from both Osaka and Narita in May.

Based on a 75 percent load factor and with an estimated $827 in direct and $2,709 in indirect economic impact per Japanese visitor, the CNMI will lose 26.8 percent of its total air seats by Northwest and $51,341,514 and $168,118,515 in direct and indirect economic opportunity, respectively, by the end of fiscal year 2009, the MVA chief said.

“The loss of the [Northwest] Osaka-Saipan flights means 20 percent fewer air seats from Japan. That’s a tremendous loss from our major tourism market,” Tenorio said.

Arrivals from Korea have been decreasing over the last several months due to the economic downturn in Korea and the weakened Korean won.

MVA is meeting with its travel partners to look at ways to replace the loss of seats.
According to Tenorio, the new Osaka-Saipan flights by Asiana Airlines starting in December 2008 will help mitigate some of the loss.

Asiana Airlines is operating three times weekly for an anticipated six months using A321-200 aircraft, which provides 177 seats (12 business class seats and 165 economy class seats), or about 12,744 total seats for the operating period.

“Further assistance from our travel partners is desperately needed right now. However, given the fact that tourism is down worldwide, the timing could not be worse, and we are making a tremendous request,” said Tenorio.