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UNCLAS SECTION 01 OF 03 BRIDGETOWN 000162 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ETRD PREL XL
SUBJECT: EASTERN CARIBBEAN: TOURISM ECONOMY WAITING FOR THE 
BOTTOM TO FALL OUT 
 
REF: BRIDGETOWN 136 
 
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Summary 
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¶1. (SBU)  Governments across the Eastern Caribbean continue 
to put on a brave face about the effects of the global 
economic recession; however, sources in the business 
community paint a different picture.  Local tourism 
associations and hoteliers are very concerned about the depth 
and duration of the downturn.  Many explain that the steep 
drop-off coming this May will likely lead to the shuttering 
of hotels across the region.  Local governments for their 
part have sought to provide economic stimulus via tax 
holidays for the hotels and increased unemployment insurance 
for laid-off workers.  Many speculate that a prolonged 
recession starching into 2010 could lead to large increases 
in unemployment, crime and regional instability.  End Summary. 
 
--------------------------------------------- ---- 
Barbados: Holding Steady But Bracing For Downturn 
--------------------------------------------- ---- 
 
¶2. (SBU)  The GOB continues to maintain that they have yet to 
be more than marginally affected by the global economic 
downturn.  The Central Bank of Barbados estimated that 
long-term hotel stays dropped by two percent for all of 2008 
and predicts moderately larger drops for 2009.  Such rosy 
pronouncements were contradicted by Susan Springer of the 
Barbados Hotel and Tourism Association, who explained that 
the hotel industry in Barbados has been significantly 
affected by the crisis.  Bookings for most of the hotels, she 
said, are off by 20 percent from the previous year across the 
industry; however, on an individual basis some hotels are off 
more that 50 percent.  There has been a flight to the middle 
in tourism bookings, according to Central Bank Research 
Director Dr. Daniel Boamah, leading to a crunch in the 
high-end properties as well as the low-end properties, with 
the budget hotels being hit the hardest.  According to Silver 
Sands Resort General Manager Randal Ward, his hotel has seen 
bookings off by 20 percent, noting that as a larger 
mid-priced property he was faring better than most. 
 
¶3.  (SBU)  Ward explained that in order to deal with his loss 
of revenue, he has implemented a program of revolving 
furloughs of 15 percent of his staff where they are let go 
for one week per month.  The government and the unions have 
agreed to work with most of the major hotels to prevent 
layoffs.  Under this agreement, furloughed employees are paid 
training wages by the government, which covers a portion of 
their lost wages and was agreed to by the union.  Mounting 
job losses in the tourism sector led the government to 
provide a $15 million bailout to support hotels on the 
island, with the promise of more money if necessary. 
 
----------------------------- 
Antigua: Economy Fading Fast 
----------------------------- 
 
¶4. (SBU)  The Antiguan government continues to claim publicly 
that the country is weathering the current economic downturn 
quite well and that arrivals remain buoyant.  Antigua 
property values have not yet started to fall, but there are 
no transactions either, so it is difficult to assess the 
values accurately, local real estate developer Bruce Baxter 
explained.  Tourism also seems to be holding up in terms of 
occupancies and airlift into and out of the island; however, 
most agree that Antigua is still benefiting from bookings 
made during the middle of 2008 and that the real effects will 
be felt after the peak season, starting in May.  The fall out 
from the Stanford indictment (reftel) has yet to be factored 
into the current economic situation, according to Lestroy 
Samuel, Chairman of the Antigua and Barbuda Investment 
Authority, but could be significant. 
 
¶5.  (SBU)  Many of the largest properties in Antigua have 
already announced large layoffs and more are expected to 
follow.  MinFin Erol Cort told PolOff that the government has 
plans to increase support for the tourism sector, including a 
tax holiday for hoteliers and a yet to be finalized 
unemployment insurance scheme for people who lose their jobs. 
 The constitutional legality of the unemployment insurance 
plan was challenged by Opposition Leader Stedroy "Cutie" 
Benjamin, who explained that it would require changes to the 
 
BRIDGETOWN 00000162  002 OF 003 
 
 
law that the ruling party has not sought to implement. 
During an election cycle and a concomitant economic downturn, 
Embassy sources have speculated that such legal nitpicking is 
not the best political strategy. 
 
-------------------------------------------- 
St. Kitts: Bad Timing -- Too Much, Too Fast 
-------------------------------------------- 
 
¶6. (SBU)  Prime Minister Denzil Douglas' multi-year plan to 
convert the St. Kitts and Nevis economy from a sugar 
cane-based economy to a tourism economy has come to fruition. 
 The sugar cane industry has virtually shut down and the pace 
of tourism development is astonishing.  Several new 
developments are scheduled to be finished in 2011, including 
five-star hotels, private homes and a luxury marina.  Many 
speculate, though, that the timing could not be worse, as 
these properties need to be performing assets soon after they 
open if investors have any hopes of keeping up with finance 
charges.  Meanwhile, cruise ships are still arriving -- 22 
ships visited with 40,000 passengers disembarking from 
February 1st to the 18th.  Large hotels are still seeing 
decent bookings.  The Marriott corporation's new "vacation 
villas" property is enjoying 94 percent occupancy, and opened 
an additional 22 three-bedroom units in January.  Industry 
sources tell us that most current visitors booked their 
travel plans before the downturn, and a much slower 2009 is 
expected. 
 
¶7.  (SBU)  In December 2008, Finance Minister Timothy Harris 
predicted the tourism industry in St. Kitts and Nevis will 
experience a depressed 2009 as hotels are already 
experiencing lower bookings compared to the previous year. 
For now the tourists keep coming, propping up the economy 
while tourism development projects by large corporations keep 
the population employed.  The government and its development 
partners are betting heavily on a speedy global recovery, but 
the business community is beginning to get nervous. 
 
-------------------------------------------- 
St. Vincent: Pinning Hopes on the Uber-Rich 
-------------------------------------------- 
 
¶8. (SBU)  Ken Boyea, a key player in the local economy, told 
PolOff that the global economic downturn is having a slightly 
negative effect on business and on the SVG economy as a 
whole.  His expectations for 2009 are not favorable and he 
fears the worst is yet to come.  In preparation, Boyea is 
adjusting course a bit and importing lower-end food products 
catering to a population with a little less income.  Business 
at his KFC franchise is actually up as diners move from 
higher-end restaurants to the cheaper fast food option.  Not 
discouraged for the long term, Boyea is moving ahead with 
plans to build a small shopping center which will include a 
second KFC franchise.  Betting that the global economy will 
be rebounding by beginning of 2010, the project is due for 
completion in March, 2010. 
 
¶9.  (SBU)  The SVG economy, not as tourism-dependent as other 
Caribbean nations, is less affected by reduced bookings. 
Hotels operating on the SVG mainland are suffering more than 
their Grenadine counterparts.  The bulk of SVG's tourism 
industry is located in the Grenadines.  Famous for super 
high-end, low-volume tourism, the Grenadines cater to the 
world's wealthiest individuals, who can still afford a luxury 
vacation during a global recession.  Eighty percent of 
Boyea's food import business is in the Grenadines with 
smaller high-end hotels and private residences.  As the 
mainland is hit by harder economic times, the Grenadines 
should fare better, he speculated. 
 
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Comment 
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¶10.  (SBU)  Governments across the Eastern Caribbean have all 
tried to put on a brave face; however, it is becoming clear 
that the number of tourists coming from North America and the 
UK, which together account for roughly 70 percent of all 
arrivals and virtually all the high-end tourism, are falling 
fast.  As tourism accounts for as much as 50 percent of 
private sector employment in some countries in the region, 
this is a very bad thing.  To make matters worse, the one 
area of economic diversification for many of the regions, 
economies is offshore banking -- the sector that is leading 
 
BRIDGETOWN 00000162  003 OF 003 
 
 
the global recession.  Despite increasing fiscal stimulus 
packages, few in the business community believe they will 
have staying power beyond Fall, 2009.  If the recovery is 
delayed until late 2010 or 2011, all bets are off. 
Unemployment and the concomitant crime and instability it 
will bring has many in the region very concerned.  The 
business community fears that unemployment could lead many, 
particularly the youth, to criminal activity such as drug 
smuggling, which is already a growing problem in the region. 
HARDT