FOR those wondering why the local economy is still in the dumps and, consequently, why the CNMI government is not collecting enough revenue, I suggest that you watch, in its three-hour entirety, the recent Senate Fiscal Affairs Committee hearing on MVA’s budget. (https://rb.gy/v6r0j1)
As everyone knows, the CNMI government can only collect the actual revenue generated by the economy, which is tourism-based.
According to MVA, overall arrivals were 61% lower than what they were before Yutu, and 37% lower than what they were before the pandemic. The CNMI’s primary tourism market, Korea, is 76% recovered. However, there are still no direct flights from what used to be the second largest market prior to the pandemic, China. MVA said this is due in large part to the suspension of Annex VI, which exempted the CNMI from a federal order that limits the number of round-trip flights between the U.S. and China. This is why HANMI, the Saipan Chamber of Commerce, CPA, the CNMI Senate and U.S. Congressman Kilili have asked the feds to reinstate the CNMI’s exemption through Annex VI, especially now that EVS-TAP will be implemented to screen Chinese visitors.
This was not mentioned during the Senate budget hearing, but Congressman Kilili, in a letter to DHS, noted that then-DHS Secretary Janet Napolitano herself “had recognized the importance of maintaining a flow of tourism from China to the Northern Mariana Islands.” Napolitano served under former President Obama, the main proponent of the “pivot to Asia” strategy.
Back to the Senate budget hearing.
MVA officials said even though there are still no direct flights from China, the CNMI is still getting visitors from that Asian nation through two weekly Hong Kong flights. Moreover, HK arrivals are “slightly outpacing” those from Japan where MVA is promoting the CNMI. Still, “the number of visitors we’re getting now without a strong third source market is very challenging — for some it’s simply unsustainable,” MVA said, adding, “There is a big hole that was once filled by China.”
How big?
According to the governor:
“The China market is a significant market for [our] tourism industry.” The lost income from the Chinese tourism market is “very significant. We’ve had to make drastic sacrifices in government operations and public services. People are leaving the Commonwealth because of the depressed state of the economy right now, because of the major impact of losing close to half-a-billion to a billion dollars’ worth of economic activities.”
That’s not from MVA or HANMI or the chamber of commerce. That’s a direct quote from the governor in his interview with Voice of America early this year.
A big elephant
Asked by a senator about MVA’s plans for “other” source markets besides Korea and Japan, an MVA official said: “I guess the elephant in the room is China. We don’t have an office there like we did, pre-Covid. We don’t have the same sort of network and intelligence we used to have on the ground in China so we began by sort of supporting [the] Hong Kong flights…which…allow for connections to mainland China. That’s sort of our first step back into this market, but funding is not there for us to be able to go full force with how we used to pre-Covid…. What we have now from that market is not enough — [it] is nowhere near what used to be before Covid.”
Another MVA official said: “We used to have 11 direct flights a week before from China.” And these involved wide-bodied aircraft from four different cities in China.
A senator asked the MVA officials why isn’t there a “greater push” in the Hong Kong market.
“Let’s just be real,” an MVA official replied. “70% [of the arrivals] from Hong Kong are not Hong Kong citizens — [they’re] Chinese. And because of the stance that we have with our administration, we cannot market in the places where they’re getting their customers [i.e., mainland China].”
US-China tourism summit
Another senator asked MVA why it didn’t participate in a U.S.-China tourism summit held in China last May.
An MVA official replied: “We do not market in China right now. Our competitors in the region including Guam, Hawaii, California, New York and all the other states and territories are marketing in China. We’re the only ones that [don’t].”
Another MVA official said, “And that summit that happened in May, we were invited. Brand USA. It was a U.S-China travel summit. Guam [participated].”
“Why didn’t you go?” a senator asked.
The MVA official replied: “We don’t market in China,”
Translation: the governor’s “pivot.”
According to a media release:
“Brand USA, the destination marketing organization for the United States, joined by the U.S. Department of Commerce and the Ministry of Culture and Tourism of the People’s Republic of China, hosted the 14th U.S.-China Tourism Leadership Summit in Xi’an, China, from May 21-23, 2024. The event brought together government and travel industry leaders from the United States and China to foster the return of Chinese visitors to the United States.
“Brand USA President and CEO Chris Thompson highlighted the significance of the return of Chinese travelers for the U.S. tourism economy, ‘The return of Chinese visitors is critical for the U.S. tourism industry and essential for the full recovery of our economy. The 14th U.S.-China Tourism Leadership Summit plays a crucial role in revitalizing this vital market segment.’
“ ‘Travel and tourism supports 9.5 million American jobs,’ said Assistant Secretary of Commerce for Industry and Analysis Grant T. Harris. ‘The U.S.-China Tourism Leadership Summit provided an important opportunity to further the Department of Commerce’s mission to enhance the international competitiveness of the U.S. travel and tourism industry. Through our participation, we hope to see more Chinese visitors experience the United States, which will support jobs and economic growth in communities across the country.’ ”
Where we at
To recap: the CNMI’s main tourism market, Korea, is recovering. Japan is still “very soft,” but there could be more arrivals soon, fingers-crossed, now that a new marketing strategy has been adopted and a new Japan agency will be hired to implement it. However, as in most things, it may take some time before Japanese arrivals can return to what they were 10 years ago. As for the potential new market that is Taiwan, let’s hear it from the CNMI senators themselves.
One of them said they visited Taiwan a couple of months ago and talked with some airline executive. “The message that we kind of got from them was that at this time it’s just not in the…books — I mean they just don’t see the CNMI as a destination for their people.” Another senator quoted a China Airlines executive as saying that “they don’t have capacity, the aircraft.” China Airlines is the government-owned flag carrier of Taiwan, whose official name is the “Republic of China.”
Prior to the pandemic, the CNMI has three main tourism markets: Korea, China and Japan. Now, we have one (Korea) and less than a half (Japan).
How are the hotels doing so far this year?
MVA said it’s “still down around 40% overall” in terms of occupancy rates. Hotels must have an occupancy rate of at least 70-80% to remain afloat. And there is no way that total arrivals will reach 500,000 this year. (There were 215,543 arrivals last year. As of May 2024, arrivals totaled 103,535.)
A senator noted that despite Hyatt’s closure, the administration’s FY 2025 revenue projection didn’t change. Well, in an election year, wonders will never cease.
Now if the administration and its allies in the Legislature are OK with the current numbers, then they have to tell the public — preferably before the election — to expect more budget cuts and/or more tax/fee hike proposals.
Some administration officials like to talk about “following the data” — except, apparently, if it’s tourism data. It seems that they prefer to cling to their faith-based belief that saying “pivot” repeatedly would earn cash rewards from Uncle Sam, preferably in this or the next fiscal year. Let us pray.
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