In 2004, Hurricane Ivan devastated the island nation of Grenada, destroying 90% of its structures, levelling its agricultural base and most of its tourism facilities. Hurricane Emily followed in 2005, further damaging the island. The cost of rebuilding from the twin catastrophes deepened the government’s debt to international lenders and derailed plans to grow tourism, the island’s main source of foreign exchange and major source of employment. Four years later, while still rebuilding its infrastructure and tourism facilities, the worldwide recession hit, slowing arrivals and revenue as well as much-needed foreign direct investment in the tourism sector.

Near-term signals are mixed. In 2011, stopover arrivals increased by 5.4% and may be a sign of a turnaround but cruise arrivals declined for the second consecutive year. In addition to a recovering economy, additional airlift from Canada and the UK has buoyed arrivals.

Tourism growth in Grenada faces many challenges. Since 2004, limited preparedness for severe weather has become a main issue. The UK’s 8% increase on air passenger duty (APD) to the Caribbean, which took effect in April 2012, could increase ticket prices by as much as £80 (US$125). Higher fuel prices, added to already costly air transportation, will reduce arrivals from all markets. A longer economic recovery in Grenada’s source markets may further delay much-needed expansion and upgrades in the hotel sector as well as enhancement of the tourism product and marketing.