By E.J. Rolle
Now that the deal is done, what’s next?
Make no mistake about it, the Minnis administration wanted to make the Heads of Agreement (HOA) signing with Holistica Destination, a joint venture with Royal Caribbean and the ITM Group, for the purchase of the Grand Lucayan Resort a big deal and invited everyone they could think of to the event, including the entire Cabinet to Freeport.
The event, which took place on the Great Lawn of the Resort, called for business dress attire, with a reception to follow in the lobby of the Grand Lucayan Resort. Some called it an historic day for Grand Bahama, as principles from the various entities involved smiled for the cameras as they inked a deal that is hoped to help revitalize the struggling economy of Grand Bahama.
Yes, there is cause to celebrate: Grand Bahama’s economy has been in a downward spiral since 2004, and it has been plummeting ever since. When the Grand Lucayan closed its doors, it only helped to make a bad situation worse.
After much promises and talk about selling the resort and having it renovated and reopened, Grand Bahamians had become weary and skeptical of any talks about the reopening of the Grand Lucayan. The proposed sale for the resort had been bandied about like a political football for years, leaving Grand Bahamians guessing if they had been hoodwinked.
It had been a long time coming, and even as doubt had crept in over the past few months, most Grand Bahama residents breathed a sigh of relief on Monday, March 2, 2020, when the government of The Bahamas and Holistica Destinations made the sale official.
It is a glimmer of hope that there could possibly be light at the end of a long tunnel of despair.
“After many false dawns, there is an exciting new horizon for our second-most populous island and economic center,” said Prime Minister, Dr. Hubert Minnis. “Grand Bahama is at the beginning of a new day.
“Like many of you, I have seen Grand Bahama’s ups and downs, its struggles and its needs. With this major investment and other investments, we are restoring the confidence of Grand Bahamians.”
While we’re celebrating, let us do so with a clear head and with an objective point of view. Yes, the deal has been signed, but what happens next? There is a twisted idea that within a few months the Resort should be opened and the days of prosperity will begin once again for the Magic City.
But here are a few things to consider.
Firstly, although a HOA has been signed, there are 90 days in between to close the purchase deal. During that time, a more comprehensive assessment of the property will be carried out to decide where renovation work will be most needed right away.
“Approximately $300 million dollars will be invested into the hotel property to refurbish, renovate and reconstruct 500 rooms in the first phase and another 500 rooms, along with 500 villas in phase two,” according to Robert Shamosh, CEO of Holistica Destinations.
“The plan is to also include a casino, a water park, restaurants and retail center and a 40,000 square foot convention center.”
According to officials from Royal Caribbean, it will take some five or six months before any work begins on the property. Even before that starts, all of the employees at the resort will be terminated and given their severance pay, in order to have the new owners start with a clean slate.
So, five or six months from now, eager Grand Bahamians will have to endure passing the Grand Lucayan and see nothing happening. And then there will be another year or more before the first phase is completed and ready to be opened. Giving consideration to unforeseeable delays due to weather conditions, material delays, etc., it could be two years before the former Grand Lucayan is reopened.
Two years, no doubt, seems like a long time, but if the hotel has been sitting dormant for close to three years, another two years, with activity going on shouldn’t be a problem. Besides, during that time of lying dormant, the government pumped $14.6 million into the resort (2018-2019 fiscal year) and $16.1 million (2019-2020 fiscal year), with another $32.4 million described as “an initial equity contribution.”
And those numbers do not take into account the amount the government has spent subsidizing the Grand Lucayan’s operations, which some speculate to be close to $100 million.
Also take into consideration that a two-year wait after the purchase also means proprietors of businesses in the Port Lucaya Marketplace will have to try and hold on for another two years, as waning business perpetually threatens to close their respective businesses.
Then there is the issue with the Grand Bahama International Airport.
One thing is for certain, without a functioning and busy international airport, this project will not work. If the Grand Bahama International Airport is not up and running by the time the renovations and reconstruction at the Grand Lucayan is completed, it will pose a serious problem for the resort.
Airlift will be critical to the survival and ultimate success of the Grand Lucayan. However, it was noteworthy that during the HOA signing, not much about the airport came from Minister of Tourism and Aviation, Dionisio D’Aguliar.
The last word to come from the Minister in regards to the airport was simply that they are still in negotiations with Hutchison and the Grand Bahama Port Authority on the eventual purchase of the airport and that they were awaiting word from Hutchison about the deal.
At the present, the airport is in a deplorable state following the devastation by Hurricane Dorian. Hutchison Whampoa, one of the major shareholders in the GB Airport, has already expressed their feeling about their role in the future of the GB airport – they want nothing to do with it.
That means the government of The Bahamas will once again have to step in and clean up behind Hutchison and take over responsibility of the Grand Bahama International Airport. Just as they had to step in and clean up Hutchison’s mess with the hotel.
Michael Bayley, President and CEO of Royal Caribbean Cruise Lines says that there is no current plan to fund in any part, the redevelopment of the airport, but said that his company is very open to finding solutions to help the business to grow.
“Our team is working on the solutions to the (GB) Airport and our hope and expectation is that the airport will undergo a significant revitalization, with investment to be part of this overall solution,” said Bailey.
Another issue to consider in the Holistica takeover of the Grand Lucayan is the complement of foreign and Bahamian workers during the construction phase, as well as during ongoing operations, once the resort is opened.
The government is promising some 3,000 construction jobs at the Grand Lucayan, with a 70/30 ratio with foreign and Bahamian workers – 70 percent should be Bahamian and 30 percent foreign, but there has already been discussions by executives from the ITM group of “the need to bring in people to assist with the construction.”
But the Pointe Hotel in Nassau is proof that the government cannot, or chooses not to, keep up with the required Bahamian/foreign workers ratio on a job site of this magnitude.
With a promise of increasing visitor arrivals to Grand Bahama going from 600,000 a year to a possible 2.5 million a year, the economic possibilities seem mind-boggling. But as it stands, no one knows the specifics of the HOA deal.
We don’t know the tax concessions that are involved in this deal. Neither do we know how much Bahamian involvement will be allowed and at what level and how Bahamian businesses going to benefit from this project.
However, in light of the lingering questions, there is still need to rejoice and Grand Bahamians have a right to be hopeful. To have a major company like Royal Caribbean and the ITM Group willing to invest so much into Grand Bahama, it says a lot of the future of this island.
It is certainly something to be thankful about.
While we don’t know specifically what is in the HOA, and while we are unsure of how much Bahamians generally will benefit from this new venture, all we can do is sit back and wait to see as the information unfolds and as the project gets underway.
This hotel sale is like a typical Bahamian sale where we buy a 2016, front-end damaged car in the U.S. for $3,000. Tow it and ship it to Nassau, pay Customs duty and VAT, buy and ship all the parts to Nassau. Spend in total $12,000 on the car, realize it was a bad purchase, unable to totally fix it, he places an ad it in the newspapers for sale of $13,000, hoping someone would bite. Two months pass by and no sale, you drop the price to $12,000 to try and break even. Another four months pass by and someone offers you $8,000 and you jump at the opportunity. You feel good because you have $8,000 in your pocket, but the truth is you’ve lost money and will not admit it.