BAHAMIAN TOURISM LOSING ITS COMPETITIVE EDGE

UNCLAS NASSAU 000353


STATE FOR WHA/CAR

REF: (A) NASSAU 0316

E.O. 12958: N/A
TAGS: EFIN ECON BF
SUBJECT: BAHAMIAN TOURISM LOSING ITS COMPETITIVE EDGE


1. (SBU)SUMMARY: CEO and Chairman of BahaMar Resort, Starkis
Izmirlian, told Chamber of Commerce officials that The Bahamas is in
jeopardy of losing its competitive edge in tourism if steps are not
taken to improve the educational system and infrastructure.
Izmirlian noted that the tourism arrivals to The Bahamas for 2008
were down while arrivals to competitive destinations increased. He
said that for the BahaMar project to succeed, action must be taken
to make the Bahamian tourism product more competitive. Izmirlian
also discuss the need for significant Chinese labor, if BahaMar is
successful in securing Chinese funding. END SUMMARY.

--------------
TOURISM ARRIVALS CONTINUE TO DECLINE
--------------


2. (SBU) Sarkis Izmirlian, CEO and Chairman of Baha Mar, told
Chamber of Commerce officials at its Annual General Meeting on May
27 that while tourist arrivals to The Bahamas declined by 4.3 per
cent in 2008, arrivals to Cancun were up by 7 per cent, Cuba up by 9
per cent, Jamaica by 4 per cent, and Aruba by 10. These sobering
statistics prevailed despite the Bahamas' proximity to the U.S., and
confirmed that the tourism industry needs immediate attention. He
noted that the closure of the Four Seasons Emerald Bay Resort in
Exuma was the only hotel in the globally branded chain to close.
(See Reftel A) Additionally, he said the government of Qatar chose
to invest in a $75 million dollar 250-room hotel in Cuba rather than
the BahaMar project.

--------------
TELL IT LIKE IT IS
--------------


3. (SBU)Izmirlian bluntly told the group about the many problems
within in the tourism sector and emphasized that The Bahamas'
education system and deteriorating physical infra-structure
desperately needed upgrading and government-owned utilities
privatized. He also said the 15 per cent mandatory gratuity was
hurting the industry because it provided compensation for poor
service. Other issues facing the destination included the high cost
of travel and accommodations, lack of tourist attractions, and the
poor state of downtown Nassau - the city's major tourist
thoroughfare. Izmirlian suggested that a public/private sector,
blue-ribbon partnership be formed to address these problems.

--------------
BAHAMAR - SIGNIFICANT CHINESE LABOR REQUIRED
--------------


4. (SBU)Sarkis Izmirlian did not address the status of the BahaMar
project in his presentation, but responded to audience questions on
the subject. He said that they are still in negotiations with the
Chinese and the Chinese Export/Import bank was continuing its due
diligence. Izmirlian said that he expects the project to
materialize despite its long delay and investor search.


5. (SBU) At a private press interview Izmirlian said that if Bahama
Mar secured Chinese investment it would require "significant Chinese
labor." He said that if the deal with the Chinese Import Export
Bank for a multi-billion dollar loan and the Chinese State
Construction company for $100 million is secured, their Chinese
partners would expect to bring in their own workers. It is also
expected according to Izmirlian that Bahamian contractors would have
an opportunity to participate in the project as well. However, the
Bahamian government would likely have a difficult time striking a
balance between the number of Chinese workers required for this
project and employing the large number of local construction workers
who are unemployed as a result of the downturn in the construction
sector.


6. (SBU) COMMENT: Sarkis Izmirlian's blunt public remarks
highlighted what many think has impeded the growth of the tourism
sector, specifically the high cost of operating in The Bahamas, poor
infrastructure, lack of tourist related activities, and across the
board gratuities. Tourism officials have long relied on the
proximity of the Bahamas to the U.S. to maintain a steady stream of
tourist arrivals. The worldwide economic downturn, low cost
alternate destinations, and the expectation that travel to Cuba will
eventually open has forced the government and private sector address
these problems. The question remains if their efforts will be too
little too late. END COMMENT.