Economically speaking, 2026 promises to be a pivotal year for Bermuda. While the opportunities are enormous, so are the challenges that come with seizing them.
In the realms of tourism and taxation in particular, there is potential to meaningfully improve the prosperity of the island and its residents for the long term. But in both cases, the question is: are we ready?
Overall, the statistics suggest the economy is healthy. Gross domestic product, a commonly used measure of economic activity, grew for nine quarters out of ten through the first quarter of 2025.
Employment too is on the up. Despite the hundreds of baby boomer Bermudians leaving the workforce annually, the economy added more than 2,000 full-time jobs between 2021 and 2024, an increase of 6.8 per cent over three years. The island’s total employment income swelled to nearly $4.4 billion in 2024, up 8 per cent from the year before.
However, stark inequity is evident. In terms of sectors, the bulk of economic gains have come in international business, which represents 15 per cent of the island’s jobs and more than 40 per cent of the compensation.
Generally speaking, highly qualified professionals have seen their living standards rise, as their income gains outstrip inflation. But pay rises in most other occupations have lagged inflation, leaving workers worse off.
At the Association of Bermuda International Companies’ annual meeting in November, guest speaker and economist Nathan Kowalski displayed a slide encapsulating this story, a K-shaped line graph showing real employment income over the past 15 years. Two white-collar categories showed a steady upward slope, while all other categories were sloping downward – a clear indication of an inequality gap that is widening year by year.
The “K-shaped economy” is something many countries are struggling with today. High-income individuals and sectors like tech, finance, and large corporations see strong wage growth and expansion.
Lower-income individuals on the K’s downward slope, in industries like hospitality, retail and some small businesses, see their purchasing power shrink and struggle with the rising cost of living.
Wealthier individuals drive the consumer spending that fuels economic growth, masking the effect of lower-income consumers pulling back.
Add to that the lack of housing availability and affordability, and the ever-increasing cost of healthcare, and it is clear why many residents believe this statistically successful economy does not reflect their own experience.
Here, we look at two factors that could be powerful influences on the Bermuda economy in 2026.
Fairmont revival
The reopening of the Fairmont Southampton after more than five years, expected in 2026, will be a seismic economic event.
The completion of a comprehensive renovation by owners Gencom represents a tangible sign of renewal for the tourism industry. It will bring 593 fully refurbished guest rooms and suites, growing the island’s hotel room inventory by about 30 per cent at a stroke.
The new hotel will help to boost air visitor numbers, airlift, corporate group visits and conferences, and inject new energy into a sector that has struggled to regain its footing since the pandemic.
Additional airline capacity and Fairmont’s global marketing power will help to boost Bermuda’s attractiveness as a destination, bringing spin-off benefits to other hotels, guesthouses and vacation rentals.
For tourism-related businesses — taxi operators, restaurants, retailers, tour operators, water-sports companies — the economic effect could be transformative. A full Fairmont Southampton represents thousands of additional visitor nights every week during peak season. It means more tables filled, more excursions booked, more rides, and more cash circulating through the local economy. For many small businesses, the reopening could be the difference between survival and growth.
To grasp these opportunities, Bermuda’s labour market and visitor services must live up to the challenge.
The hotel will employ an estimated 700 people, another economic gain. However, in Bermuda’s tight labour market, and with unemployment estimated at just 1.5 per cent, it is clear that most of them will have to be recruited either from overseas, or lured away from other local businesses.
According to Marico Thomas, president of the Bermuda Chamber of Commerce, this is “a national labour issue”, with local businesses already struggling to find the staff they need.
“So, what happens when 700-plus new jobs open up and there are insufficient people?” Mr Thomas said. “Businesses will start picking each other’s pockets to survive.”
While he was broadly supportive of the Government’s recently announced revised work permit policy, Mr Thomas said it did “not address the real challenge, which is simply that Bermuda needs more persons in the workforce”.
With a surge in visitor numbers expected to follow the Fairmont’s reopening, there will also be a strain on transport services, already straining to service cruise ship visitors arriving at Dockyard. And any workers coming in will need somewhere to live – another challenge given the dearth of affordable housing.
The Fairmont Southampton can only be a sustained success if guests have a good experience – and that will depend on having staff of sufficient number and quality to deliver value for money. Ensuring the hotel’s return can be turning point the tourism sector craves will require planning, investment, and responsive policy.
Tax bonanza
There is no doubt international business has led the Bermuda economy for the past two decades or more. IB directly contributes 29 cents of every dollar of gross domestic product. If its indirect contribution could be calculated and added, then IB probably represents more than half the economy.
International business has been an extraordinary success story for Bermuda. It provides more than 5,000 full-time jobs that come with a mean income nearly two-and-a-half times that of Bermuda’s overall workforce. And IB dollars fuel much of the island’s service economy and the real estate sector.
The implementation of the Corporate Income Tax now means the largest multinationals, mostly re/insurers, will contribute potentially hundreds of millions of dollars more annually.
Over time there is great potential for CIT revenues to get Bermuda’s fiscal house in order, pay off chunks of the $3.2 billion of the national debt, act to reduce the cost of living, invest in infrastructure and fund solutions to our biggest social problems.
While the immense potential is tantalising, there are dependency risks that come with the CIT:
• CIT revenues will fluctuate – a year of windstorms, earthquakes and wildfires in heavily insured regions could lead to a loss-making year for many of the largest taxpayers
• The CIT was Bermuda’s response to the OECD-instigated global minimum tax, but international tax standards may change over time and Bermuda will need to adapt
• The tax base may erode if CIT payers relocate to competitor jurisdictions, emphasising the importance of reducing the overall cost of doing business.
Such considerations suggest it would be unwise to count on CIT revenues as a substantial contributor to future government budgets.
With the Bermuda Corporate Income Tax Agency up and running, the island has put in place the infrastructure to manage the CIT windfalls separately and in a measured fashion.
What happens in 2026 – in terms of efficiency, transparency and how CIT funds are used – will have a powerful influence on whether the tax will generate a recurring windfall and whether the island’s most valuable companies continue to see Bermuda as the best place in the world to do business.
