Cayman Islands: Economic Impact Study On Proposed Seven Mile Beach Renourishment
Conducting an Economic Impact Study (EIS) on any proposed intervention gives decisionmakers the data (and identifies gaps in said data / information) necessary to objectively make informed decisions, and to have greater desired impact. Of all the EISs my team and I have conducted, this particular one was especially close to our hearts, and one we are grateful to have had the honour of doing, because Seven Mile Beach (SMB) with its warm crystal waters and stunning sunsets is truly a Caribbean treasure. Through rigorous data collection and analysis, we assessed the economic contribution of SMB to the Cayman Islands economy. This includes measuring SMB’s direct and indirect economic benefits such as tourism revenue, job creation, and fiscal revenue. Additionally, we looked at the social value of SMB, considering its importance to the local community. This involved evaluating the recreational, cultural, and aesthetic benefits that SMB provides, as well the preservation of coastal communities, protection of infrastructure, and enhancement of livelihoods, particularly considering the vulnerability of the Cayman Islands population to rising sea levels. Furthermore, we compared the long-term impacts of doing nothing, versus conducting beach renourishment.
The Cayman Islands are low-lying, and the Caribbean Catastrophe Risk Insurance Facility (CCRIF) found in 2010 that coastal flooding / storm surge accounted for about 45% of total damage potential to Cayman. Beach renourishment was found by CCRIF to have net economic benefits, with a cost / benefit ratio of around 0.3 and significant capacity for averting losses. Damage driven partly by coastal flooding / storm surge is exacerbated by construction activity and the absence of natural sand nourishment cycles on SMB.
| WITHOUT AN ECONOMIC IMPACT STUDY, YOU COULD MAKE THINGS WORSE
We estimate that the total gross economic impact of SMB on the Cayman Islands economy approaches USD1 billion annually. Properties on SMB are valued at around USD6 billion — roughly USD4.9 billion on the North and USD1.2 billion on the South (we use 19.32311 latitude, near Royal Palms, as the breakpoint to separate North versus South SMB). The current estimate of the initial cost of beach renourishment is USD25.2 based on estimates from the Government’s budget, and USD6 million every five years based on Danish Hydraulic Institute (DHI) and Dart’s calculations. These beach renourishment costs are small relative to the overall property values on SMB (even on the South, taken in isolation), and the potential for losses in the absence of beach renourishment.
Total revenue generated by Short Term Rentals (STRs) in South SMB surpassed that of North SMB prior to 2021, however with a proliferation of STRs on North SMB, there was a notable shift in the pattern. In 2023, based on 132 more properties than South SMB, North SMB generated 29% more revenue, with an average daily room rate (ADR) 22% higher than South SMB. Our modelling shows that post-2019, STRs located in South SMB lost around USD13,000 yearly in rental income compared to North SMB due to beach erosion.
From an economic standpoint, we concur with the conclusions of CCRIF, the Government of the Cayman Islands Department of Environment (DoE), and the DHI study, that beach renourishment is necessary to maintain the economic impact of the tourism sector and SMB more specifically. The cost of beach renourishment (as currently estimated) pales in comparison to the potential costs and losses associated with a do-nothing scenario. We therefore recommend that appropriate beach renourishment be conducted at SMB with urgency. It is important to note that we did not identify all the possible causes of beach erosion (whatever the cause, the economic impact was our focus), nor did we consider other possible solutions apart from those suggested by CCRIF, the DoE and DHI, as we are unaware of other studies specific to SMB. The experts in the field should be the ones to determine the best solution(s) for SMB, on a cost-benefit analysis basis, whether beach renourishment and / or managed retreat, or otherwise. Bottom line — the longer we wait, the higher the losses / costs, and the lower the likelihood of success. We urge the authorities and relevant stakeholders to demonstrate decisiveness and leadership and take appropriate action on an urgent basis. The clock is ticking.
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