If Bermuda sees a major fall in its hospitality industry infrastructure and air links, the Island will move closer to an economic downturn from which it could take decades to recover.

That was the warning of Peter Everson, chairman of the Economic Division of the Bermuda Chamber of Commerce, expressed in a memorandum published just before the Elbow Beach resort announced it is to close its main hotel indefinitely from the end of next month.

The Island's airlift, hotel beds and restaurants were not only essential to the tourism industry, but also the international business sector, Mr. Everson argued.

He argued that it was "of national importance" to do everything possible to secure existing levels of all three.

"Any substantial reduction in the number of hotel beds, airlift capacity or restaurants will bring Bermuda closer to the edge of a downhill spiral from which recovery is uncertain and may not occur for a generation," Mr. Everson concluded.

Later he told The Royal Gazette that the comment referred to a "Doomsday scenario", but he had published it as a wake-up call.

"I think we are much closer to that point than most people think we are," Mr. Everson said. "We can't afford to be complacent."

He added that the biggest single threat to the Island's international business sector was a cut in the number of flights from gateway cities.

"International business will not be here if it takes too many flights to get here," Mr. Everson said. "Because we have daily flights to most gateway cities, most people can get here in a day. If an airline cuts back to four days a week, some people will then have to spend extra nights here and that increases the cost of doing business here.

"So far, Bermuda has fought its corner well and kept those flights and it is crucial that this continues."

His comments come in a week when economic indicators, such as flagging retail sales and a shrinking balance of payments surplus — as well as the 160 job losses announced by Elbow Beach yesterday — suggest that the recession is hitting the Island hard.

In his memo, Mr. Everson welcomed Government's talks with the Bermuda Hotel Association. "We all hope that Government, on behalf of all of the people of Bermuda, will provide whatever support to sustain the larger hotels through this difficult period," he added.

He warned of a difficult winter season in which airlines would cut their weakest routes and hotel operators would close down their worst-performing hotels.

"Once these decisions have been implemented, it becomes hard to get them reversed," he warned, citing the example of the Marriott chain relinquishing the lease on Bermuda's former Castle Harbour Resort, early this decade.

Mr. Everson said: "We can see on a daily basis the reduced numbers of customers in the Island's restaurants." While varying demand was an "occupational hazard" for restaurateurs, he added: "What is important at this time is the severity of the problem and the length of the recession."

Mr. Everson said while airlines could cut capacity in response to falling demand by mothballing planes, it was far harder for hotels or restaurants to cut costs effectively in a similar fashion.

"It is possible to reduce capacity by shutting some rooms in a hotel, for example a wing or certain floors, but the cost savings are not the same as in the airline industry and thus this is not as widespread," Mr. Everson said.

"In a similar manner, restaurants can close off some tables, but this is often visible to the customers and serves to reduce the ambience that the restaurant operator has so carefully cultivated. The cost savings are not large and thus this does not prove to be a popular course of action."

Bermuda's economy needs a constant influx of new business ideas and companies to make up for the inevitable losses through factors such as acquisitions that cost jobs, business failure, companies departing for rival jurisdictions, fraud and ratings actions.

But for this to continue to happen, business people need to feel comfortable with the jurisdiction, Mr. Everson added.

"A key component of Bermuda's early success was that it was relatively easily accessible; one flight from the northeast of the US; had good accommodation and good restaurants," he said. "This still holds true today."

Any erosion of those advantages would factor against the Island as a business domicile.

Restaurants also played a vital role in the promotion of new business ideas, as new ideas were often discussed outside the formal business environment, he added.