Bahamas boom.

INVESTORS ARE pouring billions of dollars into hotels, resorts, and golf courses in the Bahamas--by far the Caribbean's most poplar resort destination. But a new law that requires United States citizens to carry passports when they fly overseas could put a big dent in those plans.

Nearly five million foreigners visited the Bahamas last year, 86 percent of them from the US. Tourism comprises 60 percent of the country's Gross Domestic Product and has given the Bahamas a per-capita income of nearly US$18,000, one of the highest in the Caribbean.

At the moment, casino operator Harrah's is finalizing plans for a US$2 billion-plus resort on New Providence, which along with Grand Bahama Island is home to most of the Bahamas' 320,000 inhabitants.

The joint venture near Nassau's Cable Beach will be 57 percent owned by Baha Mar Resorts, a Nassau-based resort owner and operator, and 43 percent by a subsidiary of Harrah's. Starwood Hotels & Resorts Worldwide has agreed to manage four hotels under the St. Regis, Westin, and Sheraton brands.

The 1,000-acre Baha Mar complex is projected to have 3,000 rooms, with Harrah's operating a Caesar's Resort, with 1,000-plus rooms and a 10,000-square-foot casino. Construction is scheduled to start this year, with an anticipated opening in 2011.

Separately, Kerzner International is spending US$600 million on its Phase III expansion project of the Atlantis Paradise Island resort. This project alone involves 2,000 new jobs. The re-opening of Club Med in San Salvador and the recent announcement of a US$130 million project for Abaco will further strengthen tourism, as will a smaller project on Royal Island, located 190 miles east of Miami, near Harbor Island.

The uninhabited 440-acre Royal Island, when fully developed, will feature single-family estates in private enclaves, a boutique resort hotel, a spa, restaurants, and a Jack Nicklaus golf course. The resort will be managed by Kimpton Hotels and Restaurants and should open in 2009.

In 2004, hotel-room revenues stood at US$322.5 million, while occupancy was a healthy 65 percent and average room rates exceeded US$150 per night.

But the party may be over, at least temporarily.

The country's Ministry of Tourism projects that it will lose 233,000 visitors, 1.37 million visitor nights, and US$278 million in visitor revenues in 2007 because of the US Western Hemisphere Travel Initiative (WHTI). That new law took effect January 23 and requires US citizens returning from Canada, Mexico, and the Caribbean by air to possess valid passports in order to re-enter the United States. Cruise-ship passengers are still exempt from the law for the time being.

The only exceptions to the new law are Puerto Rico and the US Virgin Islands, both US territories.

On the surface, this decision may be seen as yet another valid security enhancement to protect US borders. However, it does impose a significant economic hardship for several Caribbean economies, which depend heavily on US visitors. Some 86.6 percent of all visitors to the Bahamas are from the United States.

Yet 25 percent of US citizens traveling to the Bahamas don't even have passports, leading the Nassau government to launch a recent campaign offering to reimburse travelers the cost of applying for a passport if they booked a vacation to the Bahamas. "This movement in traffic and need to get US visitors to apply for passports is not a temporary situation," warned the Caribbean Hotel Association in a recent press release. "It is a permanent change in traffic and market potential for Caribbean destinations that have previously enjoyed a freer flow and larger potential market of US visitors."