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Plunging Tourism Threatens Caribbean, Puerto Rico Has Been Less Affected

October 27, 2002
Copyright © 2002 REUTERS. All rights reserved. 

FREEPORT, Bahamas - A sluggish U.S. economy and tumbling stock markets have taken a toll on travel spending -- leaving the island nations of the Caribbean region gasping for air as their No. 1 money-making industry dries up.

``It would be foolish to be optimistic at this point,'' said John Bell, director general and chief executive of the Puerto Rico-based Caribbean Hotel Association.

Cuts in airplane flight schedules and depressed hotel bookings that started with economic slowdown in 2001 and worsened after the attacks on Sept. 11 of that year, have hit hard in some Caribbean states, where tourism easily accounts for more than 50 percent of the economy.

It is so bad, Bell says, that the regional economic community Caricom has met with government heads to evaluate their fiscal position and some countries are questioning their ability to pay civil servants.

``If they don't have a respectable winter travel season, hotels are going to be faced with being unable to do business in the summer,'' he said.

The statistics this year are grim.

The Dominican Republic, annually one of the region's leading destinations, has seen the number of overnight stays at its hotels fall 9.1 percent from January through August.

Cruise ship visitor numbers in Jamaica fell 11.2 percent in the first half, contributing to the estimated loss of up to 7,000 tourism jobs in 2002.

The figures are worse by far for islands whose airports do not have regular traffic from a major airline, but depend instead on charter service. Turks & Caicos, for example, has registered a 17.4 percent drop in overnight stays. And Cuba has posted a 14.4 percent decline, according to figures from the Caribbean Tourism Organization.

That has only exacerbated the financial pressure on already poor and debt-burdened countries by increasing the number of unemployed and scaring foreign investors, economists said.

Government and tourism industry officials are due to address their options for the winter travel season at the annual Caribbean Tourism Conference in the Bahamas this week.


Puerto Rico has been less affected by the decline in tourism because its economy is more diversified than that of its neighbors, the U.S. commonwealth derives 40 percent of its gross domestic product from manufacturing.

But Dominica, on the eastern end of the Caribbean region, has had to seek International Monetary Fund assistance. The country's neighbors hope to establish a regional fund so that they too will not have to go palms up to the IMF.

Some government tourism officials say they are optimistic things will pick up, analysts say early data from hotels and airlines do not back that up.

Even if the U.S. economy begins to recover, the travel and hotel industry is expected to improve at a slower rate.

``It's difficult to see a significant improvement on the lodging side,'' said Craig Parmelee, corporate debt analyst with Wall Street firm Standard & Poor's. ``Demand for hotels lags a general economic recovery anywhere from three to six months.''

Parmelee said 2002 has been made harder by the robust period that preceded the economic downturn and the Sept. 11, 2001, attacks.

``Historical levels are part of the issue -- 2000 was unusually strong,'' he said. ``We don't expect to see that performance until 2004 or 2005.''

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