The History of The Ministry of Tourism
The Early Years
The Bahamas first recognized the potential of a tourism industry way back in the middle of the last century when its Government passed a Tourism Encouragement Act in 1851. This was followed by a second act passed in 1854. A third act passed in 1857 authorized the Government to purchase land to allow the construction of a “grand hotel”.
In 1859 the government of the day entered into a business relationship with Samuel Cunard, the owner of the famous steamship line, to guarantee regular service to the islands at an annual cost of three thousand pounds. In 1861 a high quality hotel located in Nassau (which became the famous Royal Victoria Hotel) was opened after its construction had been financed by the Government at a cost of 25 thousand pounds. Little happened after the end of the US civil war and it wasn’t until 1873 The Bahamas received 500 tourists a year.
In 1898 the Government once again passed legislation designed to stimulate its tourism industry and in 1900 Henry Flagler opened The Hotel Colonial in Fort Nassau, the first beachfront hotel in the country and on the site of the present British Colonial Hotel. Flagler also started his own steamship line to transport tourists between Florida and Nassau.
A Tourism Development Board was set up in 1914 which had the power to advertise and market The Bahamas with an annual budget of three thousand pounds, this being the forerunner of today’s Ministry of Tourism. The first air service to Nassau commenced in 1919 with the introduction by Chalk’s of seaplane service between Florida and The Bahamas.
This led to the beginnings of tourism in The Out Islands with the opening of the Bimini Rod and Gun Club in 1924. Pan American added its daily air service between Florida and Nassau in 1929.
During the 1920s the tourism industry saw spectacular growth with the rebuilding of the British Colonial Hotel in 1923, after it had been destroyed by fire, and the construction of the Hotel Fort Montague in 1926. The solid growth of the 1920s came to a halt during the great depression of the 1930s and the tourism industry of The Bahamas, along with other economic activity, stagnated.
Between the 1850s and 1930s the overall economy of The Bahamas had mirrored that of tourism, showing sharp bursts of activity followed by long periods of economic stagnation. In the early 1860s Nassau had been one of the main centers for blockade running into the southern states during the Civil War and during those war years The Bahamas saw substantial revenues as a result of that traffic.
This came to a sudden stop with the end of the war in 1865. In the late nineteenth century the islands invested heavily in pineapple plantations but this success was short lived as production switched to Hawaii which offered better quality at lower costs.
In the 1920s, the era of prohibition of the manufacture and sale of alcohol in the United States, Nassau was a center for rum running and again profited substantially from revenues derived from that trade. Though not spoken loudly some of the islands’ most influential families can trace their wealth back to this period. But once prohibition was repealed in 1933 this economic activity collapsed.
The economic difficulties of The Bahamas in the 1930s were compounded by the collapse of the Bahamian natural sponging industry in 1938 when the sponge crop was wiped out by disease, similar to the “red tide”.
Natural sponges, which grow in shallow water under the sea, were widely used for personal washing and other purposes prior to the introduction of synthetic sponges and this had proved to be a lucrative source of income for many Bahamians.
The Government commits to developing a year round tourism industry The 1930s had shown the potential of a viable tourism industry. In 1938 The Bahamas received 57,394 tourists of whom 10,000 were stayovers. In 1941 Pan Am had begun its first nonstop non seaplane service between Florida and Nassau.
So it was that in the late 1940s, following the end of the Second World War, the Government looked back at its economic history of short lived booms followed by desperate slumps and decided it would develop two primary areas of economic activity, first a year round tourism industry and second an offshore financial services sector, in an attempt to create a stable economy. In 1949 The Bahamas received just 32,000 tourists.
It should be remembered that at that time tourism was limited to a short three to four month season and appealed just to affluent visitors from the USA and Europe escaping bad winter weather.
In 1949 the Government passed a Hotels Encouragement Act (substantially amended in 1954) designed to stimulate the construction of hotels by offering refund of custom duties and other similar concessions.
In 1950 Sir Stafford Sands, a leading member of the island’s Government, revived the Tourism Development Board, gave it a budget of $500,000 which it used for extensive advertising and the opening of five overseas offices in North America and Europe.
During the 1950s a number of new hotels were built and The Bahamas capitalized upon the growing economy of the USA next door to generate more business. In 1950 the country received 51,975 visitors, in 1951 76,758, in 1953 99,867, and 142,689 by 1954.
In Grand Bahama Billy Butlin, a British entrepreneur, bought a substantial amount of land at the western end of the island and developed a 250 room hotel designed to cater to middle income Americans. It quickly failed, but was reopened in 1955. In 1959 it became part of the Jack Tar group of hotels and closed again in the 1970s.
It should be mentioned that Nassau’s industry suffered a hiccup in 1958 when a strike by taxi cab drivers in Nassau escalated into a 19 day general strike which caused large numbers of tourists to cancel their trips.
The 1960′s and beyond
The main stimulus to the tourism industry however was the imposition of the trade embargo by the United States government on Cuba in 1961 as a result of Castro’s overthrow of the Batista government and his subsequent nationalization of American assets in Cuba. The imposition of this embargo essentially prevented Americans from travelling to Cuba and forced the tourism industry of the time to find alternative destinations. In the late 1950s Cuba had been an enormously popular vacation destination for Americans with its casinos and nightlife. As a result of the ban in travel to Cuba much of this traffic switched to The Bahamas.
The Hawksbill Creek Agreement. In 1946 Wallace Groves purchased a lumber company in Grand Bahama Island and began to expand its operation. In 1954 he sold this company to the National Container Corporation (which later became part of the Owens Illinois Company) and created the Grand Bahama Port Authority Ltd. Groves’ idea was to create a major port and industrial centre on Grand Bahama. In August 1955 Groves and The Government of The Bahamas signed the Hawksbill Creek Agreement under which the Grand Bahama Port Authority was committed to create a port and industrial community and was granted title of 50,000 acres of crown land.
The agreement guaranteed that here would be no import duties, stamp duties etc. for a period of 99 years and that for 30 years there would be no real estate taxes personal property taxes etc.. The Government allowed the Port Authority to administer the port area and to license businesses etc., thus becoming more or less government by contract.
In the late 1950s a deep water port was created and work started on downtown Freeport in 1959. However Grand Bahama did not succeed in creating the industrial community it planned and in the early 1960s gained permission to develop a tourism industry based on the opening of casinos. The Lucayan Beach Hotel was opened in 1963 with its casino. This was quickly followed by the construction of a 500 room Holiday Inn, also at Lucaya, and the 800 room Kings Inn (later known as the Princess Hotel) this latter also with a casino.
The Late 1960s. Nassau soon followed and casinos were opened on Paradise Island and Nassau by the end of the 1960s. By 1968 the country had experienced its first one million-visitor year. So the country saw substantial growth between 1949 and 1968, with the visitor count growing from 32,000 visitors a year to one million. Also in 1967 the ruling minority led party was defeated by the Progressive Liberal Party in a general election.
In 1969 the leader of the PLP Sir Lynden Pindling made a famous speech in Freeport, Grand Bahama pledging that Grand Bahama would either bend to the wishes of the new majority led Government or it would be broken. Investment dried up and the island’s tourism industry entered a period of stagnation.
It should be noted that the underlying causes for the substantial growth in tourism in the 1950s and 1960s were perhaps not fully understood at the time.
Yes the Government had aggressively pursued a policy of active development of tourism with the establishment of its Tourism Development Board and the introduction of the Hotels Encouragement Acts of 1949 and 1954. And yes the Government had marketed the destination aggressively during the 1960s. And yes the islands offered a wonderful climate, wonderful beaches and water and were in close proximity to the coast of Florida.
But, at the same time, it tended to be forgotten that there was a strong expansion in the US and world economies as they recovered from the war, resulting in dramatic improvements in the standard of living, and this, combined with the introduction of economical long haul jet service, led to substantial overall increases in international vacation travel. At the same time many other countries in the Caribbean were ignoring tourism as a source of economic activity preferring instead to rely on agriculture, mining or oil income, so competition was very limited.
Finally, of course, there was the unforeseen and beneficial transfer of business from Cuba which also fueled the expansion of the Bahamian tourism industry.
The 1970s Unfortunately many of the favorable underpinnings of the 1950s and 1960s unraveled in the 1970s. In 1968 The Bahamas had achieved majority rule with the election of the Lynden Pindling Progressive Liberal Party and by 1973 The Islands of The Bahamas had achieved independence from the United Kingdom and became a self-governing country.
This created uncertainty in the investment community and a number of investors pulled out forcing the Government to take over a number of hotels and attempt to operate them itself in an effort to maintain employment levels. At the same time Bahamas Airways collapsed in 1970, to be replaced by Bahamas World Airways which in turn failed in 1972. Bahamasair was created in 1973.
Another result was that local attitudes amongst some service personnel worsened as many in the population felt that a service-based economy was inappropriate for their newly independent status. Many found it difficult to distinguish between providing service and a feeling of servitude. During the same period the world experienced its first oil crisis when the price of oil quadrupled as a result of the actions of OPEC, this leading to enormous economic recession and dislocation.
Despite these difficulties tourism showed some recovery in the late 1970s and, a number of major hotel projects were implemented resulting in tourism arrivals reaching a total of two million by 1982. The 350 room expansion of the Coral Towers (Britannia Beach) was completed on Paradise Island by 1982 as was the 360 room Grand Hotel. On Cable Beach the Government embarked upon the construction of the 690 room Cable Beach Hotel which opened in 1984. In Eleuthera the 130 room Cape Eleuthera Hotel opened in 1983 as did the 100 room Treasure Cay Hotel in Abaco.
The 1980s But again OPEC held the world hostage in 1979 and created a further oil crisis that plunged the world into recession in 1980, a recession marked by fierce inflation which lasted well into the early 1980s. The growth in the late 1970s and the opening of new hotel rooms resulted in The Bahamas receiving two million visitors a year by 1982. Of these however 1.1 million were stopovers, that is persons staying 24 hours or more whilst more than 700,000 were cruise visitors, the balance being day visitors.
By 1986 The Bahamas received three million visitors a year. However virtually all of the growth between 1982 and 1986 came as a result of cruise traffic which doubled from 720,000 visitors in 1982 to 1.5 million in 1986. As it takes the spending of more than 14 cruise visitors to equal that of one hotel visitor you can see that the rapid growth in cruise traffic, whilst boosting overall numbers, did little to boost revenues within the country. In fact it was at this time that the first effects of the conversion of potential hotel visitors to cruise visitors began to be noticed to the disbenefit of the country’s tourism industry.
It was in the 1980s that the hotel industry of The Bahamas began to experience serious difficulties with operating costs and return on investment. At the same time The Bahamas began to face a significant increase in competition as other destinations in the region began to wake up to the potential of tourism. Cancun came on stream in the 1980s and by the end of that decade offered almost 20,000 beachfront hotel rooms.
Jamaica launched its all-inclusive product in the 1980s. Puerto Rico, which had experienced similar problems to The Bahamas, reinvented itself in the mid 1980s and by the end of that decade was offering a substantially improved product. Aruba virtually invented a tourism industry out of nothing as a result of the closure of its oil refineries in 1984. In response to this deteriorating business environment only one major hotel was built in The Bahamas in the late 1980s and that was Carnival’s 867 room Crystal Palace Hotel in Nassau.
The 1990s Then in 1991 came the Gulf War and the subsequent North American economic recession. Despite this dislocation the number of tourists visiting The Bahamas peaked in 1992 at 3.7 million visitors but of this total, 2.1 million (57%) were cruise passengers.
The war and recession had the greatest impact upon our long stay stopover and hotel visitors and the number of stopovers, which totaled 1.37 million in 1985, had peaked in 1989 and fell back sharply to 1.39 million in 1992, barely ahead of 1985. Cruise traffic by comparison had almost doubled during that seven-year period, from 1.1 million in 1985 to its peak of 2.1 million in 1992. Thus by 1992 The Bahamas found itself with an aging hotel plant, virtually no new investment, and very poor return on operations and on capital invested. This in turn lead to run down and poorly maintained plant and as a result the destination gained a reputation as a cruise line port of call rather than a destination where one would want to spend a longer vacation.
By 1992 the hotel industry was in a state of shock with low occupancies and low average room rates. The economic dislocation following the Gulf War had also forced two major carriers out of business, Pan American and Eastern, decreasing the amount of airlift to the destination considerably. That year the hotel industry of Nassau Paradise Island experienced average room occupancies of just 52%. That is, over the course of the year, almost half of the 8,000 rooms ran empty. In 1990 the average room rate for large hotels in Nassau was $99.00.
By the end of 1991 the rate had fallen 12% to $87.00. 1992 saw rates fall a further $5.00 to $82.00 and the following year fell a further $2.00 to $80.00. To ensure reasonable occupancies hoteliers resorted to heavy discounting of room rates in an effort to maintain art least some share of market. Average room rates bottomed out at $78 in 1994, some $21.00 and 21% lower than in 1990. Given the combination of lower occupancies and lower room rates the hotel industry saw gross rooms revenue drop more than 26% between 1990 and 1994.
This led to substantial operating losses for many hotels. And it had a serious adverse impact on employment and salaries within the industry with many employees working just two and three day weeks. As can be appreciated our tourism industry was on the brink of economic disaster. In 1992 the electorate of The Bahamas dismissed the incumbent government and elected The Free National Movement to be its new government.
The turnaround in the mid 1990s. One of the first decisions made by the new Government was that it would no longer be in the hotel business. In 1992 the Government owned the 690 room Radisson Cable Beach Hotel, the 390 room Ambassador Beach Hotel, the 175 room Royal Bahamian Hotel all on Cable Beach, Nassau, as well as the 175 room Lucayan Beach Hotel and Casino and 550 room Lucayan Holiday Inn, both in Grand Bahama.In The Out Islands the Government owned two small hotels in Andros and one small hotel at Winding Bay, Eleuthera.
In 1992 the Ministry of Tourism was revamped with a new Minister, Brent Symonette, who came from the private sector, and a new Director-General, Vincent Vanderpool-Wallace, who also came from the private sector, in fact from Resorts International’s hotel on Paradise Island. Their joint view was that no improvement could come to the tourism industry until there was a transformation in the quality of the product and this could only come as a result of new investment and new ownership of the plant.
Tourism reached a low point in 1993/1994. Hotels in Nassau/Paradise Island saw average year round room occupancies of between 55% – 60% and annual average room rates of less than $80 per room per night. The situation in Grand Bahama was little different, except average room rates were even lower. The tourism industry in The Out Islands also struggled.
In May 1994 the renaissance of The Bahamian tourism industry began with the sale of Resorts International’s Paradise Island hotel to Sun International. In the space of eight months the property was transformed and after a $250 million makeover reopened in January 1995 to extensive accolades. Also in 1994 the Government was able to sell the 390 room Ambassador Beach Hotel to John Issa’s Superclubs hotel chain which closed the hotel in September 1994 and reopened it one year later as Breezes. The Royal Bahamian Hotel was sold to Mr. Butch Stewart’s Sandals group in 1995. That hotel was closed for 12 months and reopened as Sandals Royal Bahamian in September 1996.
Carnival sold The Crystal Palace Hotel and Casino to Mr. Ruffin in 1994 who immediately placed a Marriott flag on the property. Mr. Ruffin later purchased the adjacent Nassau Beach Hotel from Forte hotels in 1997.
Sun International purchased the 565 room Holiday Inn on Paradise Island in 1996 and demolished it making way for the construction of the 1,200 room Royal Tower and casino complex which opened in December 1998 to enormous publicity and great success. In 1998 Sun decided to close the Paradise Island Airport and continued to further develop its property. In late 2000 they added 50 rooms to the prestigious Ocean Club and completely revamped the 18 hole golf course on the island. By the end of 2000 Sun had invested close to $1 billion in Paradise Island.
In late 1998 the RHK Group out of Canada purchased the old downtown British Colonial Hotel which they closed for complete renovation in May 1998 and reopened after a $68 million facelift in October 1999. Other hotels, notably the Club Med on Paradise Island, and the Sheraton Grand both on Paradise Island also invested heavily in upgrading their facilities. In late 1999 and early 2000 the old Paradise Island Fun Club changed ownership and was completely refurbished and reopened in July 2000 after a period of closure as the Holiday Inn Sunspree on Paradise Island.
As a result of the problems the industry faced in the early 1990s many airlines cutback on their service to Nassau. Delta ceased jet service from Fort Lauderdale and Orlando and cut back on its New York and Atlanta service. British Airways pulled out. Pan American which had served the destination for many years went out of business as did Eastern. Charter carriers filled the void in the early/mid 1990s but as the product improved the scheduled airlift returned and in the late 1990s scheduled nonstop jet service was increasingly common.
By 2000 Nassau’s renaissance was almost complete. Expenditures by tourists jumped 46% between 1991 and 1999 and the quality of visitor improved significantly.
The turnaround in Grand Bahama came more slowly. The Government was not able to sell its hotels until 1997 when both the Holiday Inn and Lucayan Beach and Casino were sold to the Hong Kong company Hutchison Whampoa, the company developing the container terminal in Freeport. Hutchison also purchased the 170 room Atlantik Beach hotel (located between the Holiday Inn and the Lucayan Beach Hotel) which it demolished in July 1998. The renovated 550 room Holiday Inn reopened in April 1999 and the complete 1,350 room resort is scheduled to open in December 2000. The 965 room Princess property was put up for sale by Lonrho, its British owners, in 1994 but it wasn’t until 1999 that it was sold and is presently undergoing a substantial refurbishment and renovation.
The Out Islands have seen little change in the 1990s although the quality of the product has improved significantly and expenditures are also up. Part of the problem lies with the fact that Bahamasair has yet to show any substantial improvement in its performance which significantly hinders the movement of tourists to the Out Islands. A number of small hotels have been constructed in The Out Islands during the late 1990s, many geared toward bonefishing.
In September 1999 Eleuthera and Abaco were particularly badly hit by Hurricane Floyd which caused a great deal of devastation to beachfront properties. Whilst Abaco’s tourism industry recovered quite quickly and was fully functional by mid 2000, the 280 room Club Med on Eleuthera remained closed as result of storm damage and as of December 2000 has yet to reopen.
The cruise industry went through a period of contraction during the mid 1990s falling from 2,139,383 passengers in 1992 to 1,543,495 by 1995 as ships began to develop new itineraries in the lower and Western Caribbean and Key West opened up to the short three and four day cruises. At the same time ships calling at Nassau began leaving earlier and earlier in the day as the cruiselines attempted to make more money on board by leaving port and immediately opening their shops and casinos.
In 1995 the Government passed legislation designed to encourage ships to stay longer in port and to increase the overall volume of traffic by offering incentives to the cruiseline companies. This began to pay quick dividends and reversed the decline in traffic. However it was the advent of the Disney Magic in August 1998 with its twice weekly calls on Nassau which really boosted business, to be followed by the Disney Wonder one year later. Disney had purchased and completely redeveloped Castaway Cay in Great Abaco as a port of call for their ships leading to a big jump in numbers of cruise visitors to The Out Islands. This was emulated by Holland America which also purchased their own private island and developed it as Half Moon Cay.