Contents

Executive Summary.....................................................................................................................................1
Environmental Analysis of Tourism Sector..................................................................................................3
Political Environment of The Bahamas....................................................................................................4
Political System and Structure of Bahamas.............................................................................................4
Stability of the Bahamian Government...................................................................................................4
Bribery and Corruption Index..................................................................................................................5
Economical and Business Environment...................................................................................................5
Population of The Bahamas.....................................................................................................................6
Minimum Wage in Accommodation Industry..........................................................................................6
Inflation Level and Exchange Rates.........................................................................................................6
GDP and Financial health.........................................................................................................................7
Covid19 Impact on Tourism and Accommodation Sector........................................................................7
Employment rate in Accommodation sector...........................................................................................7
Literacy level in Bahamas........................................................................................................................7
Barriers and Challenges for Accommodation Business............................................................................8
Potential Competitors.............................................................................................................................8
Recommendation........................................................................................................................................9
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10
Executive Summary

Like many other countries, who are dependent on tourism, Caribbean country’s economy

development has increasingly became reliant on the tourism and hospitality industry, because of

high influx of tourist (Oxford Economics, 2010) and Bahamas is one of the preferred destination

of many international tourist. One of the most dominant tourism model in the country is the Mass

tourism (Claver-Cortes et al., 2007), with large number of air and cruise ship travelers, with

lavishly built environment and average short stay of tourists (McElroy, 2006). Tourism sector in

any country depends on factors like: Political Situation, economic/business environment,

condition of the hospitality market and impact of international situation or issues.

Political Environment
Bahamas is one of the most favored destination of high spending international tourists. One

dominating factor that works behind tourism industry is the political environment of the country /

destination. In reference to the same Bahamas have a stable democratic government, which

provides a peaceful and favorable environment for investors. Bahamas government also have

strong commitment toward law and order which makes it easier for prospective tourist to choose

Bahamas as their primary destination (College of The Bahamas, 2008).

Economic/Business Condition of The Bahamas

Bahamas is among the top 5 economies in the Caribbean island and one of the richest countries

in the Americas. The economy of Bahamas is dependent majorly on Tourism and finance, where

the Country is having more than 700 island which attracts millions of tourist every year. One of

the most lucrative economic sector in Bahamas is the Banking and next to that is offshore
investment financial services which adds almost 15% to the national GDP. Bahamas have no

income Tax, corporate tax, Capital gain tax or Wealth Tax.

Accommodation industry in Bahamas

The leading tourism sector of Bahamas is the Accommodation, which is operated in three

segments, Day visitors, for the visitors who spend less than 24 hours in the country, then are the

Cruise Visitors: these tourists arrive in country via cruise ships for their accommodation, then

last are the Stopping visitors, who spend at least 24hrs in the county. The Bahamas has

approximately 270 hotels with around 15000 rooms.

Effect of Covid19 on Accommodation Sector in The Bahamas.

70% of The Bahamas’s GDP is dependent on Tourism, and with the sudden impact of the

Covid19 storm. The Bahamas, used to welcome around 15000 tourist and 4-6 cruise ships every

day, however, since February the Accommodation sector has witnessed a decline of more than

80% and this impact, will take years to recovers because of industry dependent economy.

Recovery options after Covid19

Accommodation sector can focus on the local tourism as a sustainable step, improvised

economic structure and support by the local government to help the businesses focus on new

initiative (Congressional Research Service, 2020). Showing the world that The Bahamas is

taking the best precautionary measures to fight with Pandemic.

Environmental Analysis of Tourism Sector
Tourism industry is a very sensitive sector, any change or imbalance in economical, political,

and social environment can have the long term effect on the industry. Countries whose economy

depends majorly on tourism industry, have to be ready to handle these challenges to keep the

industry going. The paper has focused on the effect of different environmental factors and how it

supports to blossom the industry.

Political Environment of The Bahamas

Bahamas is one of the most stable countries in the Caribbean Islands. Since gaining

independence in 1973, Bahamas has made every possible effort to maintain the country as

vibrant as possible. The country has taken care of all the fundamental rights of the people, The

Bahamas has modeled their legal system around the British system

Political System and Structure of Bahamas

Bahamas, follows the democratic political system, where the country is having a stable

government (Lloyds Bank, 2020). In The Bahamas citizen above 18 years of old can cast their

vote. Historically Bahamian women remain unpoliticized till as early as 1950, however some

strong changes happen after 1962, and by the year 1982, country have their first female

parliamentarian. The political structure is designed to provide equal rights to every citizen. In

context of the tourism industry, countries with the stable political structure are always prioritized

by the tourist. The dependence of the economy on the tourism industry, directs the government

to have favorable to tourists and tourism companies.

Stability of the Bahamian Government

Any country whose economy is tourism driven, needs a stable government to keep the industry

flourishing, in that context Bahamas is no exception (Lloyds Bank, 2020). According to the

political stability index published by the Global Economy (2020), Bahamas is among the top 50
in having the most stable government. Where is developed countries like US and UK and

between 50 to 100. A stable government provides perfect environment for the development of

business activities and can attract investors on the basis of their political and economic system

(Finley-Brook et al., 2010).

Bribery and Corruption Index

The major reasons of the political instability, of any country, are considered as the crime and

corruption (Sandler, 2014), however, in case of corruption, it is believed that it has the negative

impact on the growth of economy (Saha, 2014), there is some controversy by the fact that, there

are countries who have achieved rapid economic growth on the base of crime and corruption (Li

& Wu, 2010). Tourism and corruption are always interconnected to each other, wherein

according to the Poprawe (2015) every 1 percent rise in the corruption perception index

(Meaning corruption is decreasing) results in the 5 to 7% increase in the tourism. When looking

at the corruption and bribery index of Bahamas the country falls in top 30, meaning the low

percentage of corruption. Tourists coming for the long stays always prefer the destination where

they can get the value of money, and they don’t get cheated (Atasoy, 2010).

The Bahamas is always considered as one of the most stable country in the Caribbean island, and

having after gaining independence in 1973, they have strictly followed the democratic

government, gaining the trust of the citizen, travelers and other countries. The Bahamas has very

strong ties with the US government where US officials also operates at the Customer facility of

the Nassau and Freeport airport of the country. Even after the Coivd19 Pandemic the country has

tried to maintain the political and economical balance to gain the trust of their citizen and have

avoided any political unrest (Mera, 2020).

Economical and Business Environment.

A stable Economic and business environment is the key to growth for any Country. Favorable

economic environment, attracts FDI and give opportunity to new businesses across different

domains. The factors which drive the favorable Economical and business environment depends

upon the number of factors:

Population of The Bahamas

Bahamas is having a population of 384,000 and with a growth rate of 0.9%, the population

density of Bahamas is 39/Km2 with the land area of 10,010 KM 2 (World Population review,

2020). Bahamas is one of the least populated countries of the Caribbean island and provide

amazing infrastructure and facilities to the tourist visiting the country.

Minimum Wage in Accommodation Industry

In recent years, the accommodation sector of Bahamas has seen a decline that is somehow

because of the global economic crisis in the last few years beginning 2011. Even though there is

a decline in the employment, the annual wages has seen a rise in the accommodation industry,

wherein the wages are increased by almost 3.2%. The average weekly wage for the professional

working in the accommodation sector is $412 USD, whereas the minimum weekly wage in the

accommodation sector is $327 USD (Mera, 2020).

Inflation Level and Exchange Rates

Before covid19, the inflation rate in The Bahamas, 2.27% (Ministry of Finance, 2019), though in

previous years inflation rates were even went to below zero figures, but change and introduction

of VAT has helped the economy a bit. The major part of that goes to the Tourism industry, which

is the driver of the Bahamian economy. Exchange rates are dependent on the inflation rate of the

country (De Vita, 2014), Bahamas dollar is equivalent to the USD and comparatively have strong
value internationally (Ministry of Finance, 2019). The value of the exchange rates and supportive

inflation rates makes it even favorable for the tourist to visit and spend in the country.

GDP and Financial health

According to the number published in 2019, the GDP of Bahamas was $12.38 Billion USD

(Ministry of Finance, 2019), with the with a growth rate of 1.8% (Ministry of Finance, 2019).

Though the unemployment rate in The Bahamas has improved significantly but it is still as high

as 8% which is lower in comparison to the international standards. Still Bahamas is the

wealthiest country among the Caribbean nations.

Covid19 Impact on Tourism and Accommodation Sector

The sudden impact of Covid19 is surprising for the world, and the global economy has plunged

drastically. The countries which are worst affected are the once, who has travel and tourism

dependent economy. Tourism sector contribute around 75-80% to the Bahamian economy

(Ministry of Finance, 2019). In the March 2020 there was a 70% dip in the stop over tourist

(Ministry of Finance, 2019), increased by almost 800%, to the decrease in February which was

9% (Ministry of Finance, 2019).

Employment rate in Accommodation sector.

The Accommodation sector accounts for 50% employment in Bahamas, which includes direct

and indirect employees. Wherein 32% are direct employees and 20.3 are indirect employees

(Mera, 2020). The Accommodation sector was expected to grow by 7.3% as per the recent

projection (Ministry of Finance, 2019). Though there was a impact of Covid19 on the industry,

but post covid19, as soon as the travel opens the industry is expected to see a boom.

Literacy level in Bahamas

The Bahamas have a literacy level of as high as 95% and the country has one of the highly

educated people in the western hemisphere. The major reason behind that is the compulsory
education for the children between age 5 to 18, where the schools record the attendance rate of

92.2%. Even after having the high literacy and education rate, there is a shortage of skilled

labors, in the accommodation industry. Most of the people working in the accommodation sector

are either expats or unskilled.

Barriers and Challenges for Accommodation Business

Tourism industry in Bahamas is not properly regulated. Getting into the accommodation sector

involves multiple steps and process, and can be challenging for the new entrants. The primary

objective is to following the environmental guidelines, before starting the business which are

very robust and strict. Then the cost of land and building the infrastructure which is higher and

reliable like electricity, which is costly and highly unreliable (Mera, 2020). Then unavailability

of skilled worker is again a challenge, there is a lack of basic infrastructure on many of the

islands in Bahamas.

Advantages for the Business

 Government provide number of incentives to the new entrants in the hotel industry one of

which is no taxes, either personal or corporate (Ministry of Finance, 2019) .

 The hotel encouragement act, allows the duty-free entry to the destination for approved

construction material.

 According the act, the minimum number of rooms required for new hotel is also reduced,

which makes it easier to start a new business.

 American backed banks are also providing funding to the hotels who will be

environmentally sustainable.
Potential Competitors
Bahamian accommodation industry is much diversified, having all range of hotels (Ministry of

Finance, 2019), however to establish in the market branding has to be must and competing with

the established brands will help to get the marketing advantage. The potential competitors in the

market can be:

1) Baha Mar Casino Hotel

2) Atlantis

3) Grand Hyatt

Recommendation
Accommodation business rely on tourist and post covid19, the accommodation industry is

devastated and need motivation and government support to be fully operational again. Big brands

and financially backed chains can survive the break, but it can be difficult for standalone

business. To overcome the challenge there are few recommendations:

1) Focus on the local visitors and capitalize on ties with the US and European countries, local

visitors should be offered group packages at affordable pricing, to keep the money inflow.

2) Using the technology, concept of virtual tourism should be started to stay in touch with the

prospective and loyal visitors and showing the beauty of Bahamian islands.

3) Government should come upfront and support the business, to be operational again and

prepare new policies which can attract new customer, which can include reduction in VAT and

other taxes on tourists.

Conclusion
The Bahamas is one of the most beautiful countries in the world with the combination of 700

islands, however with the recent impact of Covid19, the backbone of Bahamian economy, the

tourism industry is the worst affected, especially the Accommodation sector. Though Bahamian

government have an open market policy for the new entrants in the hotel industry, but still lack

of skilled workers and infrastructural challenges makes it difficult in starting a new business. To

overcome the challenges presented by Covid19, Bahamian government should propose tax

reforms, considering the prospective tourist and also should open the borders with the

neighboring countries to bring the economy back on track.

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