By NEIL HARTNELL
Tribune Business Editor
The Government's $65m Grand Lucayan purchase is "not a huge risk", the GB Chamber president asserted yesterday, with the alternative a repeat of the "Royal Oasis fiasco".
Mick Holding told Tribune Business that allowing "the status quo" to continue at Freeport's anchor resort represented a much more "serious risk" than committing taxpayer dollars to acquiring the property and keeping its doors open.
He praised the Government's strategy of buy, then effect a quick sale to the best investor, as "the right move" given his belief that it should not be involved in business - either as owner of a hotel or any other sector.
While acknowledging that the Government may take "a hit" by having to sell the Grand Lucayan for less than it paid, Mr Holding said the tax spin-offs from economic activity generated by a successful buyer could more than make up any shortfall long-term.
The Grand Bahama Chamber of Commerce chief added that the purchase would also give the Government "a freer hand" by removing the Grand Lucayan's current owner, Hutchison Whampoa's real estate arm, from the buyer search.
"The Government was in a situation where they didn't have any choice," Mr Holding told Tribune Business. "With the alternative - to do nothing and retain the status quo - we'd have ended up with another International Bazaar and Royal Oasis situation, which was obviously untenable.
"I don't think it's a huge risk personally; I think they've made the right decision. The alternative was nothing, and that's quite a serious risk. We were risking another International Bazaar and Princess Towers (Royal Oasis) fiasco. On that basis the risk is worth taking. I can never see that area recovering again."
The Royal Oasis's then-owners, Driftwood (Freeport), closed the resort in September 2004 in the wake of Hurricane Frances and departed with the storm-related insurance proceeds. A similar fate threatened to befall the Grand Lucayan, with Hutchison Whampoa failing to reinvest its $80-$85m Hurricane Matthew insurance payout into repairing the property.
Dionisio D'Aguilar, minister of tourism, said the Hong Kong-based conglomerate had repeatedly threatened to close the resort following the May 2017 general election. With the insurance payouts due to end last month, Hutchison Whampoa's patience was said to be exhausted, with any closure effectively eliminating Freeport's presence in the mega resort market.
But many observers believe the Government is taking a major gamble by acquiring the Grand Lucayan, with everything hinging on its ability to effect a rapid sale to a buyer with the necessary capital and vision to turn the property - and surrounding area - into a destination that is differentiated, but also able to compete - with Nassau/Paradise Island and rivals in the Caribbean and Florida.
Taxpayer exposure could increase significantly should the Government and its special purpose vehicle (SPV), Lucayan Renewal Holdings, have to hold on to the Grand Lucayan for any length of time given that hotels are capital-intensive, costly businesses, to operate.
But Mr Holding, while conceding that government ownership of hotels was against his philosophy, said the purchase had "thrown some hope" to Grand Lucayan staff, Port Lucaya Marketplace businesses and their employees, and all companies and workers that relied on tourism for their livelihoods.
"I don't believe in government ownership of businesses," the Chamber president added. "That belongs in the private sector, and hotels are very much in that category.
"The fact they bought with a view to selling on is the right move. Once they've completed the deal they have a freer hand to find a buyer, even if they sell it for less than they paid for it. If the place opens sooner rather than later it's an investment worth making."
Mr Holding added that he "couldn't agree more" with suggestions that efforts to find a buyer had been made easier by Hutchison Whampoa's replacement as vendor by the Government.
The Toronto-based Wynn Group, the last potential purchaser to negotiate with the Hong Kong-based conglomerate, described it as "disinterested at best" in the Grand Lucayan's fate. It accused Hutchison Whampoa of being inflexible in its demands for a $65m price - a constraint that will be removed under government ownership.
"By the Government purchasing there are only two parties in the negotiations," Mr Holding said. "Hopefully it will make things easier. I can only make observations, but that certainly is the appearance of what has been happening - an unmotivated vendor replaced by an extremely motivated vendor. Hopefully that brings us a quicker and better sale.
"Nothing can be done without risk, clearly, but everything has its price. Hopefully the Government won't have to sell it for a lot less than they paid for it, but if the price is right they'll find a buyer. It's just how much of a hit they take in the process."
The Chamber president told Tribune Business that any "hit" could be "worth it" long-term if the chosen buyer transforms the Grand Lucayan into a profitable, sustainable resort destination.
"If one thinks of the revenues the Government is losing - hotel tax, tourism tax, not getting VAT from the hotel and other people who have revenues for the Government suffering as well - if they sell it at a loss they will recoup that over time by the increased trade and taxes they will reap from it," Mr Holding explained.
"It's one of those things where, if they didn't do something and it never re-opened, every year that passed would make it much harder to get back into that sector. It would become more and more difficult."
Mr Holding added that purchase price "might be the deciding factor" for potential buyers, and urged that a recognised hotel brand/operator be part of any solution.