US embassy cable - 04NASSAU341

UNCLAS SECTION 01 OF 02 NASSAU 000341 
 
SIPDIS 
 
STATE FOR WHA/CAR/D.OCONNOR, 
USDOC FOR ITA/TD/OETCA/BUSBY, 
3134/USFCS/IO/WH/MANN, AND 
4322/ITA/IEP/WH/OMCB/MBROOKS 
 
E.O.12958: N/A 
TAGS: EINV, BEXP, ETRD, BF, Tourism 
SUBJECT: TOURISM UPDATE FOR 2003 
 
 
1.   SUMMARY.  Led by cruise ship arrivals, particularly to 
the Family Islands, overall tourism arrivals to The Bahamas 
increased in 2003 for the fifth consecutive year.  However, 
there was a downturn in hotel room revenues and arrivals to 
Grand Bahama also declined slightly.  After highly 
contentious negotiations, the tourism industry recently 
concluded a major a 5-year contract for tourism workers. 
The Ministry held the first annual National Tourism 
Conference in an effort to inform tourism officials about 
changes in the industry and to strategize on keeping The 
Bahamas competitive.  END SUMMARY. 
 
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TOURISM YEAR END 2003 STATISTICS 
-------------------------------- 
 
2.   In 2003, tourism arrivals for the entire Bahamas 
increased to 4,594,042 up from 4,405,971 in 2002.  However, 
hotel room revenues for the entire Bahamas fell by 4.8 
percent in 2003 compared to 2002 levels, dropping to 317 
million dollars from 333 million dollars in 2002. 
 
3.   Overall average daily room rates for 2003 increased by 
5.1 percent to 163.97 dollars over 155.97 dollars in 2002. 
The average room occupancy level stood at 59.6 percent for 
2003 compared to a 62 percent for 2002. 
 
4.   The Nassau/Paradise Island hotel industry represented 
268 million of overall room revenues for the first 11 months 
in 2003, with an average daily room rate of 187.68 dollars 
and an average occupancy level of 66.7 percent.  Both 
figures fell short of 2002 levels. 
 
5.   In 2003, Grand Bahama generated 35 million dollars in 
room revenues, with an average daily room rate of 83.95 
dollars -- an increase of 3.1 percent over 81.46 dollars in 
2002.  The average occupancy level for 2003 stood at 48.5 
percent -- a decrease of 6.3 percent over 2002 levels. 
 
6.  Room revenues in the Family Islands fell 10.1 percent 
from 15 million dollars in 2002 to 13 million dollars in 
2003.  Average room rates stood at 160.74 dollars, only a 
slight decrease over the 2002 level.  Occupancy levels 
increased slightly to 35.3 percent. 
 
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CHALLENGES AND OPPORTUNITIES FACING THE TOURISM INDUSTRY 
--------------------------------------------- ----------- 
 
7.   The Ministry of Tourism held its first Annual Bahamas 
Tourism Conference during the week of January 26 to discuss 
challenges and opportunities facing the tourism industry. 
The Director General of Tourism Vincent Vanderpool-Wallace 
said that the Ministry's target is to attract five million 
visitors to The Bahamas, and increase tourism spending to 2 
billion dollars per year by 2005.  Some of the challenges 
facing The Bahamas that he discussed include: the relatively 
high cost of flights to The Bahamas; attracting the best and 
brightest Bahamian talents into the industry, and increasing 
hotel occupancy.  The Ministry also has to tackle the many 
complaints by visitors about the high price of the 
destination; uncleanliness of the islands, and the request 
for more guided tours. 
 
8.  A special guest speaker at the conference, marketing 
expert Dr. Peter Yesawich, conference attendees of schemes 
that would make The Bahamas seem "fresh" to American 
travelers.  He noted that revamping the Nassau International 
Airport is only the first step The Bahamas must take in 
order to keep its product "fresh."  Yesawich said that there 
is a growing interest among Americans for family vacations 
and weekend travel, which is a good market for The Bahamas 
to target.  He also suggested that The Bahamas reach out to 
weekday vacationers.  Instead of complaining about "slow 
months" in the tourism industry, he suggested that the 
country build a convention center.  He further stated that 
The Bahamas should exceed visitor expectations through 
exceptional experience and service and fortify and sustain 
visitor arrivals through marketing and promotion.  He 
emphasized that most Americans are looking for something 
different when searching for travel destinations and that 
The Bahamas should promote diversity by highlighting its 
uniqueness and combining it into the visitor's experience. 
 
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HOTEL UNION CONTRACT SIGNED 
--------------------------- 
 
9.   After 16 months of contentious negotiations, leaders of 
the Bahamas Employers Association, The Bahamas Hotel and 
Allied Workers Union and the Minister of Labor finally 
signed a 17 million dollar, five-year industrial agreement 
for hotel union employees on January 29.  The contract 
provides for an across-the-board increase in salaries for 
hotel workers retroactive to January 7, 2003, and is valid 
to January 7, 2008.  The 16-month contract negotiations have 
been the longest in the history of negotiations between the 
two bodies.  Additionally, the extended negotiation process 
resulted in a targeted "slowdown" during the December visit 
of South African President Tabo Mbeki, which caused great 
embarrassment to Prime Minister Perry Christie. 
 
10.  As a result of the long negotiation period and the 
labor unrest experienced during this time, the Prime 
Minister announced plans to review labor laws in order to 
avoid future disruptions in the tourism sector, which 
generates 40-60 percent of GDP.  The government is 
considering the Barbados Protocol Four as a model.  The 
Protocol is aimed at ensuring the resolution of industrial 
issues without causing disruption to the economy. 
 
11.  Hotel Union President Pat Bain has, however, stated 
that the union resents the position taken by the government 
regarding changes to the labor laws and said that such 
changes would be met with "strong and endless" resistance. 
Bain further stated that whoever is entertaining such a 
thought is moving in the wrong direction.  Mr. Bain noted 
that the union believes that all laws should be progressive 
and not regressive, nor should laws be changed as a reaction 
to unions exercising their legal right.  He stressed that 
labor laws should not be made without consultation with all 
social partners. 
 
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ATLANTIS - THE ANCHOR FOR THE BAHAMIAN TOURISM INDUSTRY 
--------------------------------------------- ---------- 
 
12.  Kerzner International's Atlantis Resort continues to be 
the anchor for the Bahamian tourism industry.  Kerzner 
reported a net income of 3.0 million dollars for the 2003 
fourth quarter, compared to a net income of 0.9 million 
dollars for the same period in 2002.  Adjusted net income 
for the quarter was 4.8 million dollars compared to 4.4 
million dollars in 2002.  Adjusted net income per share for 
the quarter was 0.16 dollars as compared to 0.15 dollars 
achieved in 2002.  Butch Kerzner, Chief Executive Officer of 
the company, said that in 2003 they combined strong earnings 
performance with major future growth initiatives.  During 
the 2003 fourth quarter, Atlantis achieved an average 
occupancy rate of 73 percent with a 218 dollar average daily 
room rate, compared to an average occupancy of 72 percent 
and average daily room rate of 216 dollars during the same 
period in 2002.  The company expects its average room rate 
to increase this year by an additional 3 percent for 
selected visitors.  The high occupancy levels it is 
currently experiencing bode well for this prediction. 
 
13.  COMMENT:  The tourism industry is expected to remain 
stable, but sluggish throughout the year.  The Ministry of 
Tourism has much work to do, however, to maintain its 
competitive edge in the industry.  Given the slow pace that 
the government is moving to launch plans for the 
refurbishment of Nassau International Airport, it is 
unlikely this major project will be completed in order to 
coincide with the scheduled completion of Atlantis Phase III 
by the end of 2005, unless Kerzner also delays his project 
start date.  END COMMENT. 
 
Witajewski