By Lin Noueihed
MANAMA (Reuters) - 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 the conservative kingdom of Saudi Arabia, Bahrain's economy has been brought to a standstill by unrest that has sucked in neighboring 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.
"Our occupancy has dropped from the high 90s to the low 25 and 30s, so our business has been badly effected in all areas," Gulf Hotel CEO Aqeel Raees told Reuters in an interview.
"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 canceled."
Bahrain has been gripped by unrest since protesters 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 Gulf Arab troops, impose martial law and launch a crackdown that drove protesters 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 percent to 30 percent. We can't do anything... People want one thing, the government wants another and business...is stuck in the middle and losing."
"If everyone pulls in a different direction we will all suffer. We must all offer concessions or we are all losers."
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 in the Gulf Arab region, where searing temperatures make summer too hot for outdoor activity.
Bahrain's Spring of Culture, a festival set to take place this month, has been canceled.
Crown Prince Sheikh Salman al-Khalifa decided last month to postpone the season opener for the Formula One Grand Prix, which draws over 40,000 visitors annually and was scheduled for March.
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, General Manager Chadi Sleiman said the restaurant could not last much longer, after business fell by over 70 percent and Formula One events were canceled.
"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, Sleiman would expect to serve lunch to 80-100 customers on a Monday.
Venues like Coral Beach rely on overseas visitors for over 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 meager 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 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."
DESTROYING THE ECONOMY
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 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.
The Bahraini dinar fell to multi-year lows in the forwards market last Wednesday, the day of the crackdown, and the central bank was forced to move to an alternate location. Some banks briefly closed their branches due to fears about staff safety.
The General Federation of Bahrain Trade Unions said on Monday that it would continue a general strike, and complained that workers were being hampered by checkpoints around Manama.
Akram Miknas, a Lebanese businessman who has 77 offices in the Arab world but whose companies are all headquartered in Bahrain, said the unrest in the Gulf had come as a big surprise.
His public relations company operates across the Arab world, and was first affected by the revolutions in Tunisia and Egypt.
"All our work in Bahrain is affected and Bahrain has affected the rest of the Gulf. We have offices in Saudi Arabia, in the UAE... We are worried about our staff. In my companies we have 4,000 staff and that is a big responsibility," he said.
"I'm afraid of the situation... If it continues we are destroying an economy that will be very hard to rebuild."
(Additional reporting by Warda Al Jawahiry)