Caribbean islands slammed with double financial hit

A year ago, tourists lined up to eat at Conch Fritters, a downtown restaurant here known for its blackened grouper, conch chowder and other local specialties. Yet, on a recent midweek night last month, tourists were scattered among just a few tables.

Across the bridge on pricey Paradise Island, honeymooner Kim Sessa of St. Louis says she and her husband watched TV in their room rather than sip $13 cocktails in an empty bar at the sprawling Atlantis resort.

"We would've stayed if there was a pulse," Sessa says.

The Caribbean is facing its worst tourism downturn since the Sept. 11 attacks, due to a double blow from the world economic crisis and sweeping airline cutbacks, especially by the region's dominant carrier, American Airlines. Though carriers such as JetBlue expanded and American restored some capacity, January non-stop capacity between the regions remains 9% below last year from the Lower 48 to the Caribbean.

While some islands have other industries, such as banking or oil refineries to pick up the slack, the Caribbean relies on tourism more than any other region in the world — with two-thirds of visitors coming from the USA.

Vincent Vanderpool-Wallace, the Bahamas' tourism minister, says this downturn differs from the one that followed the Sept. 11 terror attacks. "This is much deeper," he says. "All sectors, all price levels are affected."

The fallout, however, varies by island and by several factors, such as proximity to the USA, the quality of airline service, where tourists come from and the size of tourists' wallets. Both the Bahamas and the Cayman Islands, for instance, rely on the USA for more than 80% of their tourists, yet the Cayman Islands — which caters more to wealthy visitors and divers, and people who tend to book further in advance — isn't hurting as badly as the Bahamas, which draws more mass-market, spur-of-the-moment travelers.

"Some countries have been more adversely affected than others," says McHale Andrew, executive vice president of the St. Lucia Hotel and Tourism Association. "It's not the same across the Caribbean."

According to the most recent statistics for St. Lucia, the number of visitors in November fell 10%, to 19,803, from 2007. The number of cruise passengers fell by 17%. Arrivals from the USA, St. Lucia's biggest market, dropped 36%, due largely to American's reduction in flights from San Juan, Puerto Rico.

Bookings to many Caribbean islands started falling noticeably last fall, as the U.S. stock market crashed and a broad swath of the USA's traveling middle class lost confidence in the economy. "People were too afraid," says Nancy Yale of Cruise Resort & World Travel in Fairfield, Conn. "They weren't even calling. They were paralyzed."

People who did make plans to fly to the Caribbean for Christmas were shocked by the airfares, driven by American's capacity reductions, she says. Instead of $500 or $600 a person, fares during the fall months soared to about $1,000 each.

By mid-December, even the budget Comfort Suites on Paradise Island found itself struggling, and its bookings for New Year's week were about half what they were in 2007, says Arthurita Butler, the hotel's general manager. "That pretty much goes right into March," she says. "And, of course, your entire business is based on January, February and March. … We have to brace ourselves for what may be a very depressing 2009."

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