2006, July 27: Cayman Islands residents, conscious of the continuing increase in oil prices and petrol at the pumps, are becoming increasingly concerned about the effects this could have on the national economy.

This week, the regional conflict between Israel and the Lebanese Hizbollah guerrillas escalated, forcing oil prices to climb over the US$80/barrel mark. 

According to Cayman Net News, concern is being expressed in some circles about the effect that the Israeli-Hizbollah conflict would have on the tourism industry, which is a major pillar of the Cayman Islands’ economy. The fear is that tourists may choose to stay home in the US, Canada and the UK, all major markets for Cayman tourism. Higher oil prices could lead to an increase in the cost of travel, leaving some holiday-makers with no choice but to holiday at home.

That would indeed be bad news for resort, hotel and condominium owners who are only just recovering from the severe blow to Grand Cayman by Hurricane Ivan in September 2004. That hurricane almost wiped out the tourism sector. Most of the properties were either destroyed or extensively damaged.

Industry officials were already predicting gains, based on the bookings to date. The expectations for the upcoming winter season were for a good recovery.

Several properties had invested heavily in renovation and upgrades. New companies had recently set up shops on the Seven Mile Beach or other parts of the Island.

Mandarin Orient initiated plans to begin construction of a resort in East End later this year. Then, the Israeli-Hizbollah hostilities began and some are worried that the high oil prices may cause a further delay in the commencement date.

According to Cayman Net News, Government officials had often said they would not leave their eggs in one basket; that is, that they would not depend solely on the banking and financial sector, which is the other mainstay of the local economy. Against this background, the Cayman Islands’ government continued to inject millions of dollars into marketing the Cayman Islands as a tourist destination.

Over recent years, the cruise industry had exceeded local expectations with an average of 1.7 million guests arriving annually, according to Department of Tourism. And, Minister of Tourism and Commerce, Charles Clifford, announced that the country would construct its first cruise berth in the capital, George Town. He also indicated that he would expand tourism to the eastern districts of the Grand Cayman.

With these initiatives, significant new capital investment was recorded in Cayman Islands’ tourism. However, with ever increasing oil prices and visitor safety concerns mounting, not to mention increasing terror threats in the Middle East, the investment climate for the tourism industry is, at the moment, “fuzzy”, said the local news organization.

Another point of fear for Caymanians, as it is for the entire Caribbean cruise industry, is that new Western Hemisphere Travel Initiative will be operative in less than six months. As of January 1, 2007, everyone entering the United States of America, including its own citizens, must have a passport. It is estimated that, statistically, more than one of every two American citizens do not have a passport. This means they cannot travel overseas, including taking a cruise, without a passport.

Cayman, like most other Caribbean destinations, is very dependent on the US travel market. American travelers account for about 40 percent of its business head count and represent the largest single group of tourists to Grand Cayman, Cayman Brac and Little Cayman.