HOTEL LAYOFFS CONTINUE AS TOURIST ARRIVALS REMAIN LOW

UNCLAS NASSAU 000832

SIPDIS

STATE FOR WHA/CAR

E.O. 12958: N/A
TAGS: ECON EFIN ELAB BF
SUBJECT: HOTEL LAYOFFS CONTINUE AS TOURIST ARRIVALS REMAIN LOW

Ref: Nassau 765


1. (U) Summary: Tourism levels in The Bahamas have dropped to near
post-9/11 levels and led to a wave of layoffs in well-paying hotels
jobs - some 800 positions at the premiere, U.S.-owned Atlantis
Resorts in Nassau two weeks ago and another 150 terminated at other
hotels since then. With the economy highly dependent on tourism
receipts, Standard and Poor's Rating Service lowered its outlook for
The Bahamas from neutral to negative on November 24. Prime Minister
Ingraham addressed the nation on November 10 to discuss the economic
downturn, asserting the GCOB will launch unemployment programs and
aggressive marketing campaigns geared toward the U.S. market. End
Summary.

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Fewer Travelers Turns Economic Outlook Negative
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2. (U) Americans make up over 80% of tourists to The Bahamas and a
sharp drop in U.S. travelers to near post 9/11 levels is severely
hurting the local economy. Tourism dropped by 16% following the
events of 9/11 - today tourism levels have dropped by nearly 12%.
Harbourside Resort timeshare residences, located next to the
premier, U.S.-owned Atlantis Resorts, dismissed 140 workers on
November 18. This came only a week after Atlantis laid off 800
workers (reftel). The British Colonial Hilton, the main business
hotel in Nassau and a hotel thought to be coping better than most
with the drop in visitors, unexpectedly terminated 18 employees on
November 20. Hotel employees at Our Lucaya Resort, the largest
hotel in Freeport, are working reduced hours and layoffs are
expected. U.S. Customs and Border Protection (CBP) noted a 15%
reduction in air passenger traffic at Nassau airport in October and
November compared to 2007 levels. The Bahamas Chamber of Commerce
saw a 20% downturn in membership rates in October and November as
small businesses have had no choice but to close operations.


3. (U) Standard and Poor's Rating Service lowered its outlook for
The Bahamas from neutral to negative on November 24, confirming
fears about a continued downturn in 2009. Press and public reaction
to the recent lay-offs has been restrained and resigned. The
opposition PLP party said the GCOB should have interceded to prevent
hotels from letting Bahamian workers go. Yet a demonstration by
unemployed hotel workers on November 20 was not sanctioned by union
leadership and very poorly attended, with only some 35 former hotel
employees demanding more assistance from the GCOB. (In contrast,
hundreds of Bahamians marched in support of the death penalty only
days later - crime may remain a hotter political issue than the
economy for the moment.)

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PM Warns of Hard Times, Promises Stimulus
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4. (U) On November 10 Prime Minister Hubert Ingraham addressed the
nation on the current economic downturn and the GCOB's plans to
mitigate negative effects. The timing of the address was
significant, airing on the eve of a mass lay-off at Atlantis
Resorts, The Bahamas' largest private employer (reftel). The PM
shared his gloomy view of the Bahamian economy and the negative
impact the decrease in tourism has had on the country. The PM said
the GCOB will implement a temporary unemployment program to
alleviate the burden of the recent hotel layoffs and also said the
GCOB will increase tourism marketing, with particular emphasis on
the United States. The PM noted that The Bahamas is "the closest,
friendly, English-speaking destination which uses the same currency
and enjoys U.S. Customs and Immigration pre-clearance facilities" as
an alluring factor for Americans planning vacations. The opposition
PLP and the Bahamas Chamber of Commerce argued that the PM's speech
lacked a clear vision for the way forward and did not have new ideas
for attracting non-tourism related foreign direct investment.


5. (U) Comment: The GCOB is considering stimulus measures,
promising 1,000 new jobs in public works by 2009. As unemployment
rates rise and tourism falls, the GCOB is braced for more economic
bad news. Tourism accounts for nearly 70% of the Bahamian economy
and the government is anxiously watching travel levels for the peak
season of November to May. The Thanksgiving period will provide
important indicators, with observers hoping tourism receipts will be
adequate to sustain the sector at the current, albeit reduced
levels. End comment.

SIEGEL