Business News from The Nassau Guardian
A selection of Business stories from The Nassau Guardian including:
- PM: Emerald Bay closure challenges Exuma
- Downs: Four Seasons departure may be a good thing
- Receiver: Emerald Bay debt compounded by $5m this year
- Sources: RIU shuttering for three months
- An Expedia-ted flight
PM: Emerald Bay closure challenges Exuma
By KEVA LIGHTBOURNE ~ Guardian Senior Reporter ~ kdl@nasguard.com:
The closure of the Emerald Bay Resort and Hotel presents a “tremendous challenge” for the economy of Exuma, Prime Minister Hubert Ingraham said in the House of Assembly yesterday in a Communication on the closure of the luxury property.
The communication comes as Emerald Bay prepares to close its doors on May 26, which will result in the loss of approximately 500 jobs, adding to the hundreds of already unemployed hotel workers who have lost their jobs due to the global economic downturn’s impact on tourism.
EBR Holdings Limited, the developers of Emerald Bay, placed the resort in receivership in June 2007, when the loans secured by all the assets of the development fell into default. But, Prime Minister Ingraham said that the government has been in close contact with Mitsui — a Japanese insurance conglomerate that acts as the receiver for the development — over the past 14 months and will continue to work with them to find a new investor group to acquire and reopen the hotel, golf course and marina, and to complete the full development planned for the Emerald Bay site.
“The receivers have advised that they are already commencing consultations with various parties that had previously signaled an interest in the development. That notwithstanding, a time frame for the conclusion of a sale and the re-opening of the hotel, golf course and marina cannot be given today,” he reported.
“Chances are not very good that the Four Seasons brand will be retained at the hotel because Four Seasons has been unwilling, up to now, to give back any of the concessions it has in the current contract and some have said that that has contributed towards the unwillingness or inability or reluctance of some would-be purchasers to conclude an arrangement and be stuck with a 20-plus year deal that was expensive or costly,” Ingraham explained.
In seven days, on May 26, the resort’s staff will be dismissed over the following 30-day period, with a skeleton staff being retained through the transition period to new ownership.
Over 500 individuals were employed at the resort including 83 managers and 442 line staff. Twenty-six expatriates were among the employees.
“Four Seasons has undertaken to ensure that all employees will receive severance payments and all other benefits owed. The government has received similar assurances with regard to monies owed to other creditors of the project including government utility corporations such as BEC,” Prime Minister Ingraham said.
“Arrangements are being put in place to extend a variety of counseling services to disengaged workers from the Emerald Bay hotel. Specialists from the Ministry of Health, the Department of Social Services and the National Insurance Board will be available in Exuma prior to the closure of the hotel, to provide necessary guidance and support to all those seeking assistance including information on the criteria for registration for unemployment benefits.”
The closure of the Emerald Bay Resort and Hotel will have a ripple effect on the economy of Exuma, as a number of other establishments relied on the business from both the hotel guests and employees.
The government has also been advised that during the temporary closure, critical amenities at the development, such as the water plant operations, will continue unaffected.
In a statement released yesterday afternoon, Progressive Liberal Party chairman Glenys Hanna-Martin described Ingraham’s communication to Parliament as “most disappointing as it provided no insight into the state of affairs”.
“In fact, everything contained in that Communication was public knowledge through various newspaper reports and word on the street over the last several days,” said Hanna-Martin.
“The prime minister could provide no hope as to when the resort will ever open again. What he did say, however, was that his government has been in close communication with the resort’s receivers over the period of receivership namely over the last 14 months. The question then arises, which the Bahamian people would like answered, when did the government become aware that hundreds of Bahamians would be left jobless and why were the people affected not advised earlier so as to prepare themselves as best they could?”
She said the Opposition should have been briefed on such a significant matter.
Downs: Four Seasons departure may be a good thing
By VERNON CLEMENT JONES ~ Guardian Business Editor ~ vernon@nasguard.com:
Receiver for Exuma’s Emerald Bay Resort is arguing attempts to attract a sale might well be strengthened by the departure of the Four Seasons management company, now preparing to shutter the operation by month’s end.
“It’s certainly not anything we planned,” Russell Downs of PricewaterhouseCoopers told Guardian Business Wednesday, “but the departure of the Four Seasons opens up the potential for a buyer with an existing relationship with another hotel management company.
“We continue to have a lot of interest (in the property) and are now going back to those interested parties.”
The assessment is arguably the only positive spin on yesterday’s news Mitsui of Japan, the secured creditor for the property, will close the resort by the end of the month. It is citing mounting debt, some $5m this year alone, as well as a weak revenue stream given lackluster occupancy levels at the hotel.
The move will send another 400 to 500 Bahamians onto the unemployment line, although Downs suggests as many as a 100 will remain engaged in caretaking roles.
The exact terms of the closure appear to be the result of weeks of negotiations between the receivers and Four Seasons representatives, who as late as 2008 had reasserted the company’s commitment to remaining at the helm of day-to-day operations of the resort’s luxury hotel. It’s reiteration of a pledge made days after the secured creditor for Emerald Bay Developments of Boca Raton, Florida, moved to send the resort into receivership for a defaulted loan.
Five other offers — four sales contracts and one letter of intent signed way back in August 2006 — failed to come to fruition, Downs told Guardian Business Wednesday. All offers were subject to some level of government scrutiny. No new, or existing contract/letter of agreement is now on the table, he said, while confirming talks with Michigan-based Amway Global are ongoing. The Michigan company is owner of the Cape Eleuthera resort, a relatively small property without the high-profile hotel branding Four Seasons had brought to the Exuma property.
On Wednesday, the former MP for Exuma, George Smith, suggested the move to shutter the Emerald Bay resort was meant to pave the way for Amway to take ownership of the property free of any existing contract with the Four Season or any other management company.
It remains unclear if Four Season would play a role in the management structure under a new owner.
The head of public relations for the company declined to offer comment Wednesday.
Receiver: Emerald Bay debt compounded by $5m this year
By VERNON CLEMENT JONES ~ Guardian Business Editor ~ vernon@nasguard.com:
Emerald Bay’s closure this month won’t come before the troubled resort heaps another $5m for 2009, alone, onto a mountain of existing debt — what its receiver pegs at well in excess of $120m.
“The move to close was a difficult one,” Russell Downs, the UK-based PricewaterhouseCoopers accountant appointed lead receiver by secured creditor Mitsui Corp., told Guardian Business yesterday. “But we’re doing what we need to do to stem the losses — those of our client — which have been about $5m (net) for this year and about the same scale for 2008.”
He was cautious about offering an exact tally of total debt attached to the property, and now carried by Mitsui. Still, Downs suggests that number has been dwarfed by the $120m the Japanese corporation inherited when it moved to send Emerald Bay Resort into receivership in June 2006. The move came several months after then-owner Emerald Bay Resorts, a Boca Raton, Florida, development company defaulted on a non-recourse loan. Its own attempts to line up a sale had also failed.
It was with his stewardship quickly approaching its third anniversary Downs Wednesday announced the hotel — and what else of the resort remains open — would be shuttered by month’s end. That move will follow earlier closure of both the marina and the casino, neither of which was enough to stop the financial hemorrhaging exacerbated by the recession and the resulting hit to the Four Seasons’ occupancy levels.
The property’s ‘temporary’ closure will result in the redundancy of some 400 of the property’s current 500, said Downs, suggesting those who remain on the job will be focused on keeping up landscaping and utility services — all with an eye to maintaining the resort’s appeal for a prospective buyer. No one is suggesting a new owner will be obliged to hire them back.
Downs says the creditor is now without a contract or letter of intention for the property.
Property manager Four Seasons will in fact continue to service as many as 200 existing and expected guests this month before barring its doors. Its contract with the property will be retired, said Downs, the net result of months of negotiations. He declined to discuss exact terms and what if any accounts receivable issues remain on the table. Remuneration for incidental suppliers of the resort, however, have for the most part been notified, with outstanding accounts to be paid through the hotel management company.
The Four Seasons closure is separate and apart from continuing attempts to close on a sales agreement for the property. Five other offers — four sales contracts and one letter of intent signed way back in August 2006 — failed to come to fruition, Downs told Guardian Business Wednesday. All offers were subject to some level of government scrutiny. No new, or existing contract/letter of agreement is now on the table, he said, while confirming talks with Michigan-based Amway Global are ongoing.
“We’re not under contract with any party nor have we signed a letter of intent with any party,” he said. “We continue to have a lot of interest and are now going back to those interested parties.”
Still, the real possibility of attracting a buyer may ultimately be scuttled by the same factors Downs is blaming for PricewaterhouseCoopers’ failure to close the deal.
“The economy has gone through a huge change in the three years since receivership was initiated,” he said. “That has manifest itself in the performance of the resort.”
Mitsui remains focused on finding a buyer for the entire property as opposed to breaking up the 500 acre resort into pieces and separately selling off its golf course, marina, second-home sites and hotel.
It’s a luxury it may ultimately be deprived of if a buyer suitable to government isn’t found.
In addition to agreeing to purchase the property for what analysts value at $300m, Prime Minister Hubert Ingraham has suggested the successful suitor will have to be committed to finishing off key elements of the upscale resort. The former MP for Exuma pegs that work at nothing short of an additional $75m investment. On Wednesday George Smith also expressed doubt that Amway, owner of the Cape Eleuthera resort, would be prepared to make that commitment.
On Wednesday, the government reiterated its commitment to helping the Downs and his local counterparts nail down a contract.
Sources: RIU shuttering for three months
By INDERIA SAUNDERS ~ Guardian Business Reporter ~ Inderia@nasguard.com:
The RIU hotel on Paradise Island is following in the footsteps of Baha Mar, with a three-month closure for renovations set to displace hundreds of its workers this fall, Guardian Business can confirm.
The closure will see employees put out of work for up to four months, with only three weeks paid vacation. It’s downtime expected to stretch from the third week in August up until December, said multiple sources Monday. They include at least two employees and government officials.
Minister of Labour Dion Foulkes said yesterday that the Department of Labour was informed on Friday that the resort planned to lay-off workers as it prepares for a $15 million renovation project; however, the department was given no indication of specific numbers. According to Foulkes, the resort employs slightly over 200 workers.
Said a source: “Everybody is talking about it. “Many people don’t really know what’s going on right now. We really didn’t have no official meeting like that.
“A lot of people are angry because [resort executives] are trying to find a loophole so that they don’t have to pay us packages.”
RIU’s General Manager Filbert Vargas told Guardian Business yesterday that a concrete decision has not yet been made on just who will be laid off. He also said there was no specific date as to when the closure would take place.
Vargas said the Paradise Island property was still awaiting details from its head office in Spain.
However, the idea of only three weeks vacation pay has heightened the worry of employees already grappling with workweek cuts, said the source. The question of what if any access they’ll have to the government’s new unemployment assistance fund is also up in the air. It’s something Foulkes and his department will likely move to address this week as RIU employees — un-unionized — seek government clarification and reassurances.
News of the closure comes as Bahamian unemployment reaches into the middle double digits. Presently, analysts place it at more than 15 percent nationwide given the pending closure of Exuma’s Emerald Bay resort by month’s end.
Even more troubling for RIU workers is the question of whether they’ll in fact be hired back after renovations, ostensibly centered on upgrading rooms.
“What they said is that the managers and department heads will select employees who they want to keep, they will give in a list of names,” said an employee Monday. “So there is the possibility that they might not bring back everybody.
“But I also know they will be hiring because they need more workers because they’re expanding.”
That redevelopment has already started, Guardian Business understands, with about five rooms now redesigned. Renovation of the entire property is expected to last for the length of the closure. On Monday, the president of the Bahamas Contractors’ Association (BCA), Stephen Wrinkle expressed surprise at news of that project.
The closure is planned for what’s known as the slowest period of the Bahamian tourism year — a complete 180 from the near 100 percent occupancy levels Guardian Business understands the hotel is now recording. For the first three months of 2009, RIU experienced a 21.6 percent falloff in revenue, according to recent figures compiled by the Ministry of Tourism.
That slow season was also cited for Baha Mar last year when it announced its own plans to close the doors of its Wyndham property and casino for two months beginning in August of this year.
That’s despite any uptick in occupancy expected as a result of the Miss Universe pageant that same month.
RIU, say analysts, is in an even better location to receive any spin-off benefits from the pageant, given its proximity to Atlantis, which will host the event. RIU is in fact contiguous.
According to insiders, RIU officials are already marketing their upcoming new look with hopes to net visitors by this.
“They are already showing travel agents,” said the source, “and letting them know how the new rooms will look.”
An Expedia-ted flight
It’s yet more indication Freeport’s Pelican Bay is flying in the right direction: According to Expedia.com’s newly-published Insiders’ Select List, the small Lucaya property, largely focused on corporate clients, is one of the best hotels in the world, garnering a score of 86.03. It was enough to place it eleventh in the Caribbean and number one in The Bahamas.
The Expedia survey reflects the votes of thousands of consumers using the online travel booking site as well as the opinions of its own ” Hotel Experts” and the room and other rates associated with a property.
Industry insiders have called the formula into question arguing rankings may also reflect the company’s own financial best interests.
Still, as Guardian Business has, itself, noted, Pelican has fared better than most of its Grand Bahama counterparts, many of which have moved to layoff some of their workers.
“No, we are having no problems and presently we have no plans to lay off anyone,” Pelican Bay GM Magnus Alnebeck told Guardian Business in January, referring to his staff of 85 workers. “January has in
fact been very good for us because of the corporate travel. That segment of the market seems to be what is keeping Grand Bahama alive now.”
The assessment comes a day after competitor Our Lucaya confirmed speculation that it would move to cut as much as 18 percent of its workers.
Pelican, on the other hand, expects to sustain or even grow its occupancy levels this year. The performance is in part owing to its refocus on servicing corporate travel, which even despite the downturn has remained relatively stable. The Expedia ranking may bolster the performance of GB’s odd-man-out.
