Pink slips were being handed out at resorts and restaurants in Tofino, B.C. Wednesday as officials ordered a shutdown of most commercial water use in the popular tourist destination by Friday.

"This is incredible because it seems to be one of the wettest places in the world, with the highest rainfall, and there's a drought," tourist Johnny Guilford told CTV News. "We're going to have to cut our vacation short as a result."

Tourists would normally be coming from all over the world to watch whales, go snorkeling, and enjoy Tofino's spectacular scenery around the Pacific Rim National Park. World-renowned resorts, including the posh Wikckaninnish Inn, would normally be packed this Labour Day long weekend.

Now, visitors are cancelling their reservations and businesses are scrambling to call their clients, telling them to stay away.

The town issued the notice to all commercial businesses Monday after a combination of heavy demand and a shortage of rain since July forced the District of Tofino to order a move to Level 5 regulations.

Level 6, the highest level, means a complete shutoff of taps.

"We just don't have enough water to supply them and we have to keep the water for firefighting issues and residential areas," said Mayor John Fraser.

The order will stay in effect until there is significant rain in the area -- two day's worth should be enough to bring levels back to normal, said Fraser. All hotels, restaurants, bars, retailers and bed-and-breakfasts will be affected.

The economic impact "is going to be severe, no doubt about it" Fraser admitted.

With their profits about to evaporate, many resorts have started layoffs and announced they will close this weekend, the last busy weekend of the season, although a few have said they will try to stay open by trucking their own water in.

The Pacific Sands, a major resort in the area, said it will be laying 25 people off and operate with minimal staff over the long Labour Day weekend.

The town will send residents tips on water conservation door-to-door Wednesday, but for now, residential taps remain on.

"We're asking them to severely cut back their usage," Fraser said, "but we're trying to keep all residences online."

Whaylon Arthur, a Tofino resident, told CP that the district should have known this was coming and warned people sooner.

"It's a bit drastic and it's a bit panicky," he said.

But Leif Pedersen, administrator for the District of Tofino, said the water shortage became more severe than was expected.

The municipality implemented Level 4 water regulations last week, meaning residents were prohibited from washing vehicles or watering lawns.

Boil order

For now, Tofino has switched to a back-up water source from Ginnard Creek on nearby Meares Island, for residents' use only -- but that water is under a boil-water advisory.

"We'll be testing it in, I believe, in four spots each day," said the mayor, "and if it comes back in good enough shape then they'll (call) the boil-water warning off."

Pedersen said fire trucks will be bringing in water to top up the Lovekin Reservoir at the south end of the district. He's also looking at ways to truck in more water, including from Ucluelet, about a 30-minute drive from Tofino.

The B.C. government said it's monitoring the situation, and said hospitals, seniors' homes and residences won't run out of water during the shortage.

Coun. Derek Shaw said Tofino has been vulnerable for a long time because the last significant water-supply upgrade took place in 1991 -- and nothing has been done to add capacity since then.

In December 2005, the Community Services Ministry said Tofino was eligible for grant money to upgrade its water system after the district experienced low water levels in the summer of 2004.

A joint federal, provincial and municipal water system improvement project -- estimated to cost about $6 million -- is scheduled for completion in 2007.

With a report by CTV's Todd Battis and files from The Canadian Press