The Bahamas: Tourism recovering but worries remain

Economic News

22 Jul 2010
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The Bahamas’ tourism industry is showing signs of recovery from last year’s downturn, with arrivals numbers up in many of its islands. However, the massive oil spill in the Gulf of Mexico and Cuba’s possible emergence as a rival for the US market represent significant challenges.

Tourism plays a vital role in the Bahamas’ economy, accounting for almost 50% of GDP and directly or indirectly employing half the workforce. Last year’s downturn rippled through the entire economy as investments in new resorts and hotels were put on hold and tourist revenues dried up.

However, the central bank says that the tourism industry has rebounded so far in 2010, though some segments are recovering faster than others.

The 1.4m visitors welcomed in the first quarter represent a 9.2% rise on last year, when there was a 2.9% decline in the same period, according to the bank’s “Monthly Economic and Financial Developments” (MEFD) report, issued on July 4.

Arrivals by air climbed 5.4%, after a fall of 19% to just 300,000 in 2009, while by sea, including the important cruise factor, there was a 10.5% rise in visitors to 1m.

“Anecdotal evidence suggests that the majority of the growth was attributed to the leisure segment of the market, as the convention and corporate segments remained relatively flat,” the report said. The MEFD said discounts and other incentives being offered by hotel and tour operators had helped in the recovery.

A sharp rise in tourism arrivals to New Providence and Grand Bahama, up 16.7% and 14.9% respectively, was attributed to a rise in the number of ships visiting there. The Family Islands saw a fall of 4.8% as cruise lines chose alternative ports of entry.

While the Ministry of Tourism hailed the bank’s overall positive appraisal, it warned that the bounce back was dependent to some degree on the state of economic recovery in the US – the Bahamas’ prime tourism market – as well as in Canada and Europe.

The tourism industry also faces worrying political and environmental developments.

In early July, a US House of Representatives committee approved a motion to remove restrictions on trade and travel with Cuba. The half-century-old ban would take time to lift, with the backing of both the Foreign Affairs and Financial Services committees required before a floor vote is possible.

However, should the proposal pass the committee stage and later Congress, the Bahamas would face a strong new rival for the US custom it depends on, one with enough exotic appeal to tempt away visitors and cruise operators.

A more immediate concern is the potential impact of the oil spill in the Gulf of Mexico, with fears that the oil spill could wash up onto the islands’ popular beaches or, if not, still weaken demand for cruises throughout the region.

There is a 40 to 60% chance that the spill could reach some of the Bahamas cays, with a 20% risk of north-west Grand Bahama being affected, the US National Oceanic and Atmospheric Administration (NOAA) said in early July.

The Royal Bahamas Defence Force has been put on alert for oil while local fishermen were providing surveillance, Earl Deveaux, the environment minister, said on July 5.

“We get a lot of reports from people flying over, people boating,” he told local media. “The Bahamian public’s sense of alertness is commendable.”

Should the slick from the BP Deepwater Horizon have a major impact on the coastal strip in Texas, Florida and Louisiana, where many of the cruise ships that visit the Bahamas are ported, there could be a wave of cancellations.

Cruise lines operating in the region said in early July that while vessels were departing as scheduled, changing weather patterns and currents could impact how close the oil comes to cruise ports.

Any large-scale contamination of the Bahamas’ beaches could be devastating for the islands’ economy. Arrival numbers may be up, but the tourism sector has a long way to go before it comes close to matching pre-crisis performance.

The fragile nature of economic recovery in its chief markets, combined with the twin threats of a new rival and an environmental catastrophe mean that tourism operators in the Bahamas are likely to face a challenging second half of 2010.

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