Light at the End of the Tunnel

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Five reasons for economic optimism

by Jonathan Kent

Amid the ongoing economic hurt caused by the pandemic, Navigate Bermuda has found five reasons to be hopeful as we head into 2021.

1. Digital nomads
The Work From Bermuda Certificate, which allows international remote workers to live in Bermuda for at least a year, is providing a significant fillip to the economy, with both direct and indirect impacts. The 244 digital nomads living on island are renting local homes – some of them Airbnb properties that would have stood empty because of the dearth of tourists – and buying local goods and services. Some who have spoken about their experience are sold on island life and already say they will seek to extend their stay beyond a year. The indirect benefits could turn out to be even greater. Some intend to start businesses here and hire locals. Afiniti, the artificial intelligence data and software firm, has already brought 65 workers here on the WFB scheme and Zia Chishti, its CEO, plans to ramp up the staffing levels on the island to more than 100 by early this year and to about 1,000 within five years. Many of the digital nomads are technology entrepreneurs and hence the island is quietly building up a community of cutting-edge innovators, brainpower that will complement the island’s efforts in fintech. Could Bermuda become “Silicon Island”?

2. Insurance growth
Amid the economic pain caused by the pandemic, Bermuda’s international insurance sector has continued to thrive. A period of above-normal catastrophe losses, rising awards in US civil court cases and more insurance losses generated by the pandemic, have caused insurance and reinsurance rates to rise across the board. Investors have seen an opportunity and billions of dollars of new capital has poured into the industry, raised by both incumbents and a slew of start-ups, known as “the Class of 2020”, including Conduit Re and Vantage Risk. For Bermuda, this has supported existing jobs and created new ones, although the nature of the start-ups, built on hi-tech efficiency and the outsourcing of most back-office work, means they will not create the number of jobs that came with previous waves of island start-ups. That Bermuda has attracted the lion’s share of the new capital suggests it is still seen as the best place to start a new re/insurer, which bodes well for the future – especially while the hard market persists.

3. Tourism rebound in 2022
Few would realistically expect tourism to bounce back hard in 2021. However, there should be progress towards a potentially powerful rebound in 2022. As the rollout of several vaccines continues across the world, the confidence to travel will increase gradually over time. To vaccinate sufficient numbers to achieve herd immunity, both in Bermuda and its major tourism markets, will take several months. Then destinations will need to build new protocols around “vaccination passports” as we inch towards a world in which quarantines may not always be necessary. As this occurs over time, both airlift and visitor numbers should start to pick up as we go into 2022, when Bermuda will be well positioned for a tourism rebound. The Fairmont Southampton is set to reopen in April 2022 after a major overhaul and with new destinations like the St Regis and Azura also coming fully online this year, as well as a makeover for the St George’s Club, the island’s tourism product will be renewed. Pent-up demand to travel when pandemic restrictions finally start to ease is already apparent in the cruise ship industry. Carnival said, in an earnings call in January, that it had already taken more bookings for the first half of 2022 than it had for the first half of 2019.

4. Real estate and construction
It may seem odd to say it, but even during this economically devastating pandemic, parts of the real estate market are thriving. The work-from-home revolution has caused many to view their own homes with new eyes. The result has been a desire for roomier homes, large enough to accommodate an office, with more room for home-schooling and additional features like a pool or ocean view to make best use of the greater time spent at home. Also factoring in the similar wants and needs of the generally affluent digital nomads adding to the rental demand, then it should not be surprising that prices for this type of property are rising. Contractors’ orderbooks may also look healthy in the coming year, as some property owners decide to upgrade the homes in which they now spend more time, adding to the demand for small residential projects. The Government is playing its part with an infrastructure repair programme, with “shovel-ready” projects aimed at smaller contractors, worth more than $13 million in total. On the big-project side, the completion of the new airport terminal and the new St Regis hotel left some wondering what would be next, but the $180 million Fairmont Southampton refit should fill much of that gap.

5. Pent-up demand
Covid-19 has forced us all to miss out on so much. Big-occasion dinner celebrations like birthdays, anniversaries, promotions, and graduations, have either been skipped or scaled down. The same applies to vacations, business trips, even nights out for drinks and dancing. As more of us get vaccinated and restrictions are eased, the appetite for having fun again will increase. Those fortunate enough to have worked from home through the pandemic may have accumulated dollars that would normally have been spent on travel and eating out and, with the liberating feeling that will come as we emerge from the pandemic, they may be inclined to spend them, leading a strong rebound in the economic fortunes of the sectors that have suffered most over the past year. Cast your mind to the last time the world suffered such a devastating pandemic, the Spanish Flu, between 1918 and 1920. What happened next? The Roaring Twenties….

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