By NEIL HARTNELL
Tribune Business Editor
Consultants have been hired to review the Grand Lucayan deal’s merits amid growing doubts that it now delivers the promised benefits to the Bahamian people, Tribune Business can reveal.
Multiple sources close to developments, speaking on condition of anonymity, confirmed that the go-ahead had been given to hire one of the so-called ‘Big Four’ accounting firms, thought to be KPMG, to assess whether the Government should proceed with the terms as they presently stand with Holistica, the ITM Group/Royal Caribbean joint venture.
This newspaper was told that while still interested in proceeding with the acquisition of Freeport’s former anchor resort property, ITM/Royal Caribbean had used the COVID-19 pandemic’s devastating impact on the global cruise line industry to water down the focus on the hotel.
The number new hotel rooms to be constructed is said to have been drastically slashed, with the redevelopment timeline pushed further and further back, as the Grand Lucayan becomes increasingly secondary to the cruise component and Freeport Harbour.
This contradicts the Government’s main goal, which was to ensure the resort’s transformation has equal billing with the harbour’s redevelopment as a water-based adventure theme park, given that it would provide the greater amount of job opportunities, entrepreneurial spin-offs and economic benefits for the Bahamian people.
Michael Scott, chairman of Lucayan Renewal Holdings, the Government-sponsored special purpose vehicle (SPV) that owns the hotel, declined to comment when contacted yesterday by Tribune Business although he did not refute the appointment of the consultants or their objective.
Neither Simon Townend, KPMG’s principal, nor Dionisio D’Aguilar, minister of tourism and aviation, and Senator Kwasi Thompson, minister of state for Grand Bahama, the latter two being the lead ministers negotiating for the Government, could be reached despite messages and texts being sent in addition to phone calls.
However, Tribune Business contacts said prospects for the ITM Group/Royal Caribbean deal going ahead were currently far less rosy than made out by Senator Thompson in his recent national address unless something alters radically within the next few weeks. The issue is thought likely to be discussed at an upcoming Lucayan Renewal Holdings Board meeting this week.
“A consulting firm has been hired to do a review,” one source, speaking on condition of anonymity, said. “I’m not excited. They [ITM/Royal Caribbean] keep wanting more and more, and there hasn’t been any real action by the Government.
“It comes right back to Hutchison not having signed off on the harbour. Royal Caribbean cannot be excited about the hotel because they do not have the harbour. They are pushing the fellow into the corner because he doesn’t have anything to fight with.
“They still want it but not in a decent timeframe. The Government should have put the pressure on Hutchison to sign-off. They’re missing the boat. The hotel deal cannot happen without the harbour. It makes no sense for Royal Caribbean. Let’s face facts: Royal Caribbean wanted the hotel as an adjunct to the harbour deal.”
Mr D’Aguilar, who had said the final ITM/Royal Caribbean deal will likely look different to the one struck pre-COVID-19, recently confirmed that the joint venture partners want to seal “the entire transaction at once” to protect their commercial interests and not hand an advantage to either Freeport Harbour Company or the Government.
Securing the hotel without the harbour, and the proposed additional cruise berths and water-based adventure theme park, would hand the advantage to Freeport Harbour Company and its 50 percent shareholder and manager, Hutchison Whampoa.
Knowing that ITM/Royal Caribbean will now be desperate to tie down terms for the harbour to complement the Grand Lucayan, Hutchison could seek to alter the deal to its commercial advantage and extract extra concessions from the joint venture. Thus ITM/Royal Caribbean’s interest in sealing both aspects of its $300m project simultaneously.
Another well-placed contact, also confirming the Government’s hiring of consultants to review the deal, said: “By and large there’s a feeling this Royal Caribbean deal won’t go through. The cruise lines are not going to be sailing any time soon, they’re struggling and it’s costing them millions to maintain these vessels.
“The hotel has to open soon. Port Lucaya is haemorrhaging, just emptying; the whole area. Then we will have no shopping left, and Port Lucaya will be like the International Bazaar. That’s where we’re heading. It’s another Princess (Royal Oasis) and Bazaar situation.”
They added: “The Government has to face reality and come clean with the people: Some deals don’t work. The question is when, and if ITM/Royal Caribbean are satisfied with the airport. It’s if, if, if, and they have paid no non-refundable deposits. Every time there’s an extension they should pay something to the Government, but it seems happy to let them string it along as long as they want.”
Multiple contacts said some within the Government and Lucayan Renewal Holdings Board were mulling whether to approach other parties who bid on the resort to see if they remain interested as an alternative to ITM/Royal Caribbean.
However, one contact close to developments argued that doing so “makes no sense”. They argued: “How the hell can you find another buyer for a hotel in a town with no airport, no hospital? These people are all dreaming.
“Freeport tourism was dead before COVID-19 came. That’s why we need a group like Royal Caribbean to provide the visitor numbers. We need a group with clout and numbers. The cruise lines will have the numbers; they don’t have them now.
“There are no alternatives. Which group is going to come and reinvent tourism in a dead tourism spot like Freeport? It has to be a group with potential. Freeport was a dead tourism town before Dorian not to mention COVID-19. Anyone who does their due diligence on Freeport sure as hell is not coming. I’m not proud of it but that’s the way it is.”
Mr Thompson in his national address voiced optimism that the Grand Lucayan will be “fully turned over” to the ITM Group/Royal Caribbean joint venture before year-end 2020.
He added that the duo’s partnership, known as Holistica, remains “committed” to the hotel’s transformation and that of Freeport Harbour but the project’s start will be delayed due to COVID-19.
“We are currently reviewing their post COVID-19 development plans and hope to fully turn over the hotel property before the end of the year,” he said, although few specifics or new details were provided.