Retailers will be "devastated" if a turn-around in tourism does not materialise this year.

The industry is crying out for an increase in cruise ship visits to make up for the continued drop in air arrivals, with shopkeepers saying cruise ship passengers do spend money in local shops, said Chamber of Commerce retail division head George Grundmuller.

The Bermuda Hotel Association has forecasted that 2002 occupancy levels will be 15 percent below those for the comparable period in 2001, Mr. Grundmuller said: "What concerns us is the possibility of another 15 percent downturn. That would be devastating for many of my colleagues in the retail sector.

"Retailers believe that if the Island is not attracting enough hotel visitors every effort to attract cruise ship business must be made. If we cannot turn around air arrivals then it is imperative to increase the number of cruise ship visitors," he said.

"Contrary to what some believe, cruise ship passengers do spend in the shops. The way the figures are calculated air arrival visitors appear to spend more as it factors in hotel and restaurant spending as well. But there is not actually a significant difference between what a cruise ship passenger and an air arrival visitor spends in the shops."

Mr. Grundmuller said some Bermuda retailers, including HA&E Smith's, have actually collected data to support that.

Roger Davidson, president of HA&E Smith's said its in-store survey, which he said Smith's has conducted "for years", supports that cruise ship passengers on average spend as much as hotel guests.

"On dollars per sale we get as much from cruise ship passengers as visitors staying at one of the Island's better hotels," Mr. Davidson said. And he said the number of cruise ship visits per season will have a real bearing on how retailers do.

The number of cruise ship visits this year is scheduled to be 147 which is down from 154 in 2001 and 173 ship visits in 2000.

Mr. Davidson added that he thought store closures this year were "probable" if there was no rebound in the tourism sector.

Mr. Grundmuller said another area of concern for retailers was the amount of Internet shopping done by locals. A Consumer Affairs survey done last November with 400 respondents revealed that 91 percent engaged in overseas shopping. Of those, more than 95 percent shopped while abroad and nearly 45 percent shopped over the Internet.

He said retailers were surprised to see that on average respondents spent as much as $756 annually on Internet shopping. The most popular reason for Internet shopping cited was convenience followed by greater variety and lower costs. And 20 percent of Internet shoppers said they had made Internet purchases more than ten times over the course of the year.

"While retailers have traditionally been concerned about the amount of good coming through the airport which is revealed in the Government statistics. There is now even greater shopping overseas through the Internet, catalogues and bringing in goods through courier services, but those amounts are not factored in to the statistics on shopping overseas" he said.

He continued: "What that shows us is that competition for retailers is not really even from within the Island anymore. Increasingly we have to compete against giant multi-chain stores like Wal-Mart with buying power ten times the GDP of Bermuda. So how can a small shop, or even a larger Bermuda shop, compete?" he asked.

"These things concern us and long-term it does not bear well for retailers in Bermuda. Bermuda has a really good choice of product for the size of its market but it cannot retain that diversity over the long term is shops are forced to close. If there are more shop closures, that will limit choice and will affect the pricing structure as it will be a less competitive pricing environment. It is important to do everything to maintain a healthy competitive retail industry. When we look at the Internet numbers, how much is actually brought in those shops do not nearly have the same overhead costs that we have in terms of price per square foot and sales salaries.

"Against this background it is very difficult for businesses to compete as retailers are not only losing business from a drop in visitors but also with greater shopping overseas."

He said Bermuda has much greater diversity than a US town with 60,000 population. He said the Island has Washington Mall, several large department stores, 13 grocery stores and numerous convenience stores. "How long is this diversity sustainable?" he asked.