TOURISM TAKES A NOSE-DIVE IN FIJI

UNCLAS SECTION 01 OF 03 SUVA 000524 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON CASC PGOV PREL FJ SUBJECT: TOURISM TAKES A NOSE-DIVE IN FIJI Summary -------------- ¶1. (SBU) Managers of several of Fiji's top hotels told us the tourism industry is "bleeding" due to RFMF Commander Bainimarama's repeated threats to take action against the government. Occupancy for most major resorts in Fiji is 40% or below, when it should be in the 70-75% range this time of year. This has led to revenue losses of millions of dollars for hotels, restaurants, retail shops and tour operators. While the number of travelers from Fiji's main markets of Australia and New Zealand are down significantly, flights from the U.S. remain nearly full. This may reflect the fact that, unlike Australia and New Zealand, the United States has not advised its citizens to defer travel to Fiji. Tourism, including from the U.S., is likely to drop much further in the weeks ahead unless a solution to the crisis is reached without a coup. If a coup takes place, tourism could take years to recover. End summary. Hotel Occupancy Low, Set to Drop Much Lower -------------- ¶2. (SBU) Hotel managers we talked to during a recent swing through Fiji's west, where most large resorts are located, were uniformly glum about near-term tourism prospects. David Hopcroft, General Manager of the Shangri La Fijian Resort, told us that on the day prior to our visit, November 20, occupancy was 40%, probably the lowest daily rate since the hotel opened in 1979. Several large groups planned for November and December had canceled, including one mega group of 500 persons. That cancellation alone, he said, cost the hotel over FJ $500,000 (US 300,000). Prospects for the future are even worse. January bookings are currently at a minuscule 13%. Unless the military-government crisis ends very soon, said Hopcroft, that figure won't pick up appreciably. ¶3. (SBU) Other hotels are facing a similar crunch. Mark Rice, Chief Financial Officer at the Sheraton Denarau Hotel, told us that the Sheraton resorts in Denarau, near Nadi, had more than 2,000 cancellations to date for the November and December period. He insisted that the Sheraton Denarau was holding up at over 50% occupancy, but admitted its sister hotel, the Westin, was not doing as well. Other sources told us occupancy at the Westin is below 30%. The Sofitel at Denarau is reportedly doing no better. Even hotels that have not yet opened are feeling the impact. Alex Aluwalia, the General Manager of the Marriott being constructed at Momi Bay in western Fiji, scheduled to open in August 2007, said several large groups that had tentatively made bookings for late 2007 have now delayed finalizing their plans. If the impasse continues, he said, the Marriott will likely lose those bookings for good. Aluwalia added that a protracted impasse could also have a negative impact on the sale of residential resort properties in Momi Bay, a key part of Marriott's business plan. Commander's Rhetoric, Travel Advisories Depress Demand -------------- -------------- ¶4. (SBU) Hopcroft, Rice and others said there is a direct connection between the language used in the travel advisories issued by Australia and New Zealand and occupancy rates. When Australia issued an advisory suggesting that travelers should exercise a "high degree of caution" in coming to Fiji and should avoid Suva altogether, advance bookings plummeted. Frequent reports of Commander Bainimarama's relentless rhetoric against the government, combined with reporting about Australian ships off the coast, ready to evacuate Australian citizens, have made potential tourists even more on edge. Dixon Seeto, the head of the Fiji Hotel Association, told us November 27 that the upgraded Australian and New Zealand travel advisories urging their citizens not to come to Fiji, will put the nail in the coffin for most near- and medium-term group bookings. Soon, he said, "our hotels will be empty." Seeto noted that the U.S. travel advisory (our Public Announcement on Fiji) has not called on U.S. citizens to defer travel or leave Fiji. While this is "very helpful," U.S. visitors are a relatively small part of most hotels' business. (Note: The U.S. Public Announcement on Fiji, revised November 22, urges U.S. citizens "to continue to monitor events closely and remain vigilant in regard to their personal security," and "to avoid any political or military demonstrations." Australia's travel SUVA 00000524 002 OF 003 advisory, revised November 26, urges its citizens "to reconsider your need to travel to Fiji at this time." The New Zealand travel advice, also issued 11/26, states that "we recommend against non-essential travel to Fiji at this time." ) Layoffs Coming -------------- ¶5. (SBU) Hopcroft and Rice said all seasonal workers have already been let go, and employees are being urged to take annual leave now. They insisted that their hotels are not contemplating laying off permanent staff at this time, so close to Christmas. Seeto told us, however, that smaller hotels and one large hotel have already laid off permanent staff. Other hotels will have to follow suit sooner or later, he said. Using what must charitably be called hyperbole, Fiji Visitors Bureau Chief Viliame Gavoka told reporters on November 27 that 50,000 jobs could be lost due to the tourism slowdown. According to the Ministry of Tourism, 40,000-48,000 people are employed in Fiji's tourism industry, including both direct and indirect tourism-related employment. Air Travel From the U.S. Still Holding Up -------------- ¶6. (SBU) John Campbell, CEO of Air Pacific, told us November 29 that the airline's flights from the U.S. and Canada are running at 86% capacity. Load factors in November are only about 5% off prior projections. December reservations are also very strong - most flights are overbooked. Flights from Australia and New Zealand, on the other hand, are significantly lower than prior projections, down up to 20%, depending on the specific route. Flights are averaging 50-60% capacity, and Air Pacific is using smaller aircraft on many routes. In another category altogether are flights from Japan. Demand is so low, said Campbell, that Air Pacific has cancelled many flights and is now flying on a very infrequent schedule. The drop in Japanese travelers was expected, given the many choices Japanese travelers have and their strong sensitivity to security issues. Campbell said the relative strength of Air Pacific's North American routes reflect a diverse customer mix of tourists and local residents with families in North America, and the fact that, unlike Australia and New Zealand, the United States has not issued an advisory urging its citizens to defer travel to Fiji. The strong Australia and New Zealand travel advisories, he noted, have serious legal and insurance ramifications for tour operators. ¶7. (SBU) Campbell said bookings for January are down system-wide, reflecting a "wait and see" attitude from travelers and travel agents. Air Pacific is only receiving about 50 reservations a day for January flights, while it would normally expect about 500 reservations a day. Campbell said in the event of a coup, cancellations system-wide would be "massive and immediate." He was confident that if the situation was resolved without a coup, air travel would pick up in relatively short order. Could the Tourism Industry Survive Another Coup? Opinions Differ -------------- --- ¶8. (SBU) Several of the hotel managers we spoke to said the continuing impasse is almost as bad, if not worse, than an actual coup. Hopcroft and Rice said they want the situation resolved soon "one way or the other," even if that solution is a coup. Like in 1987 and 2000, the tourism industry will recover. Seeto disagreed strongly. Tour operators have long memories, he said, and two coups within six years would set a pattern that could tarnish Fiji's tourism reputation permanently. The tourism industry can only live with a peaceful resolution to the crisis. (Note: observers tell us it took more than two years for tourism to bounce back to pre-coup levels after the events of 2000.) Comment -------------- ¶9. (SBU) We agree with Seeto that, even if the current impasse drags on indefinitely, that is far better than having to deal with the after-effects of a coup. It is by no means certain that, even with special deals, tourists will flock SUVA 00000524 003 OF 003 back to Fiji after an undemocratic change of government. As much as it would like to, Fiji's tourism industry can never fully divorce itself from the political/military and social divisions that pervade Fiji. DINGER