Unrest brings Bahrain's economy to a standstill

The violence that has sucked in neighbouring armies has sent investors and expatriates running, and Bahrain's hotel industry, which relies on a regular calendar of business conferences to keep rooms full, has taken a severe hit.

Shiites demonstrate outside King Hamad bin Isa Al Khalifa's Safriya palace in Sadad, Bahrain, southwest of Manama.

MANAMA // In the marble lobby of one of Bahrain's most prestigious hotels, smartly uniformed staff with polite smiles outnumber the few guests. The Saudi cars normally parked outside are conspicuous by their absence.

Once a relaxed and business-friendly island on the edge of Saudi Arabia, Bahrain's economy has been brought to a standstill by violence that has sucked in neighbouring armies and sent investors and expatriates running.

Gulf Hotel has closed some of its floors and cut back restaurant hours while some of its staff are on voluntary leave.

Aqeel Raees, chief executive of Gulf Hotel, said: "Our occupancy has dropped from the high 90s to the low 25 and 30s, so our business has been badly affected in all areas.

"Everybody in Bahrain has been affected. For the business to recover will take time, because all planned activities, conferences, exhibitions, meetings have been postponed or cancelled."

Bahrain has been gripped by violence since demonstrators took to the street last month, setting up camp at Pearl Roundabout. Last week, they cut off the road to the financial district, prompting the government to call in troops from the GCC, impose martial law and launch a crackdown that drove demonstrators off the streets.

Bahrain's four main shopping malls were cut off from customers for five days and shops around the city were shut as fear spread. They have begun to reopen, but business is slow.

"The unrest has not just affected us but the whole economy," said Ahmed Sanad, head of the hotel and restaurant association. "Our occupancy is down from near 100 per cent to 30 per cent. We can't do anything. People want one thing, the government wants another and business.is stuck in the middle and losing."

Bahrain's hotel industry, which relies on a regular calendar of business conferences to keep rooms full, has taken a severe hit. February-May is peak season.

Bahrain's Spring of Culture, a festival set to take place this month, has been cancelled.

Crown Prince Sheikh Salman al Khalifa decided last month to postpone the season-opening Formula One Grand Prix, which draws more than 40,000 visitors and was scheduled for this month. That delay has had knock-on effects across the economy.

Sitting on the terrace of Coral Beach Club, yachts bobbing in the jetty behind him, the general manager, Chadi Sleiman, said the restaurant could not last much longer, after business fell by more than 70 per cent and Formula One events were cancelled.

"We do three parties for Formula One: Fashion TV, Head Candy with Ministry of Sound and Formula One Rocks, which is the official afterparty. We had 4,000 people for each. These types of parties you book in advance, so we'd already paid," he said.

On Monday at lunchtime, two or three tables were full. The daily buffet was scrapped for lack of demand. Normally, Mr Sleiman would expect to serve 80 to 100 customers on a Monday.

Venues like Coral Beach rely on overseas visitors for more than half of their business, but that source has now dried up. The influx of tourists from Saudi Arabia, 35,000 of whom enjoy Bahrain's more liberal nightlife every weekend and spend their cash in Manama's malls and cinemas, has ceased in recent weeks.

Last weekend, a meagre trickle of cars could be seen crossing the King Fahd Causeway, which joins Bahrain to Saudi Arabia. That is in stark contrast to recent years, when visitors could wait for hours to get across amid heavy traffic.

Most Western nations urged their nationals to leave last week. Flights from Bahrain have been full as foreigners, who comprise over half the 1.2 million population, evacuate their families.

"Most people already left last week. All the expats left," said one taxi driver, who has sent his own family to India after 26 years in Bahrain. "Normally, we are always busy. Now, no one is busy. We are all sitting in the parking area."

Bahrain established itself as the Gulf's financial hub in the 1980s, when banks catering to the region's wealth left Beirut because of the civil war. Its financial sector accounts for about a quarter of GDP and is an important player in the government's effort to create jobs and diversify away from oil.

Along with Kuala Lumpur, Manama has established itself as a main hub of the $1 trillion (Dh3.7 trillion) Islamic finance industry.

But over a month of worsening unrest has prompted Fitch and Standard & Poor's to downgrade the sovereign debt of a small state that was once the Gulf financial capital.

On the day of the crackdown last week, the Bahraini dinar fell to multi-year lows in the forwards market. The central bank was forced to move to an alternate location. Some banks briefly closed their branches.