Joe M. Arnett
Tax Advisor
Deloitte & Touche LLP

By Joe M. Arnett

I would like to start by thanking the business owners that took the time to meet with us and give us their views on their industry and the island’s economy.

Business contraction continued through 2020, as more small businesses closed their doors for good.  Continuing COVID-19 restrictions kept many businesses from being able to work sufficient hours — or find enough employees — to remain open and profitable.

Thanks also to the American taxpayer for sending billions of dollars to the Government of Guam for continuing operations throughout 2020 and now into 2021. This allowed the government of Guam to pay all government workers fully and bring support to private sector employees who became unemployed.

The tourism industry has been devasted by the COVID-19 pandemic, but also received funds from the federal government as necessary, local restrictions prevented travelers from visiting Guam when the pandemic spread among the source countries for most if not all of the tourism industry. It appears that this situation will remain the same for the remainder of 2021 and possibly all of 2022. Full recovery back to pre-Covid visitor levels may not return until 2023
or later.

Required travel quarantines both in Guam and the country of origin make vacation travel significantly more expensive and less attractive. The number of visitor arrivals is expected to slowly improve over time as the source markets slowly emerge from pandemic restrictions.  Even at this, reopening will be a difficult task for the tourism industry. Arrival projections will determine how quickly staged reopening of the properties are accomplished. Determining the hotel outlets to reopen and finding employees to man those outlets based upon expected arrival numbers will be a
challenging task.

U.S. government dollars in the form of Department of Defense expenditures continues to drive the local construction industry by providing jobs and tax revenue. The building of necessary protections from outside adversaries is necessary to fully protect the people of Guam.   This financial assistance is expected to continue for the next five to 10 years. After major construction is completed, the continued support of these facilities and personnel will provide significant financial revenue for the Government of Guam, as well as personal safety.

Other industries that have performed reasonably well during these tough economic times include financial institutions, grocery stores, convenience stores, restaurants offering carryout or delivery services and gas stations, to name a few.

Supply chain issues have also resulted in the next financial challenge for the economy —inflation.  Almost every product imported to the island is affected. This reduces the income available to residents, families and businesses. Necessary price increases will result in less disposable income for all.

It is also becoming more difficult to find qualified workers. Many have retired during the pandemic and many others have moved off island. Filling those vacated positions is becoming increasingly difficult and more expensive. We are still hopeful that the community and government leaders can address these financial issues on a fully collaborative basis.