IN AN ARTICLE carried in the MIDWEEK NATION of February 24, 2010, the declared value of the then three remaining Gems hotels was stated at $74 million, plus an accumulated debt of $229 million. With a total of 244 rooms that values each room at $303 278 when averaging it across the Hotels and Resorts Ltd properties.
Recently, it was announced that a prominent private sector player had acquired Time Out for $7.5 million. With 76 rooms, this equates to well under $100 000 per room, less than a third of the valuation stated seven years ago or almost $16 million below book price.
Hotels and Resorts Ltd currently only operate one remaining hotel, Blue Horizon, and the financial state of that property is unknown as no audited accounts have been made available to the taxpayers. So we are left to guess what other negative trading liabilities there could be.
The new owner has had a long and seemingly successful history of managing and operating hotels and other tourism services for decades, again apparently without all the concessions granted to a highly restricted chosen few.
I have no doubt that after considerable upgrading the newest St Lawrence Gap acquisition will be no exception.
Our insurers recently quoted a replacement or new building cost for a hotel of between $1 500 up to $2 000 per square foot, so perhaps this is a more realistic way of attempting to value open and functional properties.
This latest sale also takes us, the people who financed the Government of the day’s disastrous foray into hotel ownership and operation, almost to closure.
We can again only speculate what these hundreds of millions of dollars squandered on Gems could have done, if they had been invested in creative and cost-effective marketing of the destination instead, in terms of increased arrival numbers and job creation across the entire sector.
What is also often forgotten is the systematic predatory pricing policy practised by Gems over years of operation to the detriment of the mostly small hotel private sector players. It took considerable time to restore viable room rates and anything close to profitability, which essentially is needed to maintain and upgrade properties on a regular basis.
From our own experience, we saw Silver Rock Hotel close with a minimum room rate of US$120 per night, after tens of millions of taxpayer monies were ploughed into the property and a considerable number of rooms added. It re-opened at rates as low as US$80.
When it eventually returned to the private sector, property transfer tax for the new owners was waived by Government, again giving a fiscal advantage not available to most other hoteliers.
While this tragic and costly affair in the history of our tourism sector cannot now be rectified, perhaps it will remain as the worst example of Government “playing” with our main foreign currency earner, and remind every politician that sometimes it is better to let market forces prevail.
Email: re-discover@caribsurf.com
