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The Three Remaining GEMS Hotels Valued At $74 Million!

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Submitted by Adrian Loveridge

According to an article carried in the Midweek Nation Wednesday 24th February, 2010 ‘the book value of the (GEMS) properties was only $74 million’.

How is this figure arrived at?
Reading from their own website, Savannah has 98 rooms, Time Out at the Gap, 76 and Blue Horizon 70. So a total of 244 rooms or a stated ‘book value’ of $303,278 per room with ‘accumulated debt of $229 million’. Put that in context to our little hotel of 22 rooms and it would value us at around $6.672 million.

One big difference of course, we have no outstanding debt and have been profitable for a consistent number of years. Both Time Out at the Gap and Blue Horizon need extensive refurbishment, if they are going to live-up to their stated ‘3star’ rating.

No private sector in their right mind would take on the massive debt burden over the equity value, so where does Government go from here?

While the taxpayer is beginning to get some idea of the folly of this entire ‘ill-conceived project’, including the predatory pricing which has contributed to the closure of over 30 private sector hotels, there are still questions to be answered.

Where did the proceeds of the sale of Eastry House and Silver Rock Hotel go?

Prior to the closure of Silver Rock, the refurbishment and building of another 40 rooms, that property’s lowest published rate was US$118. $40 million later and it re-opened as a GEMS property with room rates as low as US$80 per night. Clearly intended to systematically undermine all the other private sector hotels in the area!

Perhaps most the most appalling revelation of this whole saga is the statement by Minister Estwick, that Hotels and Resorts Limited ‘could not carry out any audited financials because of the patchy nature of its accounting’.

What a terrible indictment of the GEMS Chairman, Board of Directors and management at that time and their absolute dereliction of duty to perform due diligence. I can understand the current Government’s reluctance to put yet more money ($3 million) into this seemingly bottomless pit, but when will this end, and at what cost to the private sector that in many cases are hanging on by its coat tails?

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15 responses to “The Three Remaining GEMS Hotels Valued At $74 Million!”

  1. David Avatar
    David

    Do we keep the property or divest is the question. Minister Estwick seems to be the one pushing for divestment and wage freeze. From the inside he obvious is seeing something which is compelling him to suggest urgency.

  2. Hants Avatar
    Hants

    The minister is right.

    The Tourist industry will continue to suffer for a few more years until there is a true boom in the world economy.

    Just read what is happening to the North American and European economies.

    Gems is a suck well for cash.

  3. Enuff Avatar
    Enuff

    @ Hants

    Gems may very well be a suck well for cash, but to sell now may not be the smartest option.

    Firstly they will never get $74 million not with that debt, at a time when it is clear that the government is cash-strapped and further that the tourism industry is in a state of decline.

    Secondly, to sell now will surely lead to job losses which would only exacerbate the unemployment situation.

    Is it better to spend $6m (according to Minister Estwick) to keep people employed and secure a better sale price in the future, or expend $18m per year on constituency councils?

  4. David Avatar
    David

    Isn’t is a giddy feeling to be having this debate Enuff?

    Without a plan these things will happen.

  5. Hants Avatar
    Hants

    @Enuff

    The problem with Gems is not just jobs but the cost of maintenance of the physical plant.

    A Hotel has to be maintained and must always look pristine.

    This is a very difficult problem for the Government.

  6. Christopher Halsall Avatar
    Christopher Halsall

    @Hants: “This is a very difficult problem for the Government.

    A separate question:

    Just why did Government ever own a hotel (let alone several)?

    Do we not believe in free enterprise?

  7. David Avatar
    David

    @Chris

    Did you miss the original debate on GEMS aka JAWS. The argument put forward by Clyde Mascoll at the time was compelling.

    BU’s position remains that the GEMS project was a bailout of a few boutique hotels which were owned by some prominent people. To put it mildly the JAWS project was illconcieved and optimistic; the business model was never viable.

  8. Christopher Halsall Avatar
    Christopher Halsall

    @David: “BU’s position remains that the GEMS project was a bailout of a few boutique hotels which were owned by some prominent people.

    Why do you think I asked the question?

  9. Fair Play Avatar
    Fair Play

    I am disappointed every day when BLP supporters push this idea that Owen Arthur would have taken these great decisions to stop Barbados from being in the position it is in today .In my opinion a lot of persons got rich with this gems project and therefore he contributed to the position we are in today.
    What about the sale of Eastry House and Silver Rock? Where did the money go? These are questions the DLP should be investigating and telling the public about. There is so much disillusionment with politicians because people see them as all the same. Who is going to stand up for making persons accountable for public funds?
    It makes no sense waiting until the next election to talk about corruption again because persons would see through that.

  10. Hants Avatar
    Hants

    @ Christopher Halsall,

    The BLP government “invested” in Gems using the taxpayers money.

    Now the DLP has to rescue Gems because of a really bad investment by the BLP.

    Government should only be involved in marketing the Barbados brand in support of Tourism.

  11. David Avatar
    David

    BU had an interesting debate awhile back about whether the tourism numbers were on the up. Today’s news indicate Barbados foreign reserves is dropping at a fast rate because of the poor showing of the tourist product.

    Guess numbers don’t lie!

  12. Royalrumble Avatar
    Royalrumble

    “Increase arrivals from the US and Canada, in spite of the economic crisis, speaks to the success of the initiatives implemented by this island’s tourism sector”. These were the words reported in the Advocate Newspaper for Thursday, February 25, 2010 as having been spoken by Minister of tourism, Richard Sealy during a debate in the House of Assembly only on Tuesday, February 23, 2010.

    Mr. Sealy went on to shower praises on Jet Blue, West Jet and the marketing initiatives of the BTA and his Ministry for the work he said “speaks volumes to the work done by our teams …”. He added “We went from low 50,000s in 2007 to high 50,000s in 2008, we broke 60,000 in 2009 and will break 70,000 in 2010. That is the direction that we are moving in”. Following these words there was a thunderous applause from his colleagues in the House.

    That however ladies and gentlemen was the fiction what are the facts?

    Harold Codrington, Economic Advisor to the Governor of the Central Bank is reported by the Starcom Network News for Thursday, February 25, 2010 to have said, just one day following the Minister’s statement to the house of Assembly, words to the effect that Barbados’ foreign reserves have declined sharply as a direct result of the very poor performance of the tourism industry.

    His statement not only raises very serious questions about the state of the tourism industry and the threat to the thousands of workers it employs but it also raises very deep concerns about the current levels of our foreign reserves and the threat it poses to our fixed exchange rate position.

  13. Royalrumble Avatar
    Royalrumble

    The letter above was sent to me by Mr. Sylvan Greenidge and I having taken the pleasure to share it with the BU family. I find it worthy of publication.

  14. Christopher Halsall Avatar
    Christopher Halsall

    @Royalrumble and @Mr. Sylvan Greenidge

    Are transcripts available?

    If so, from where, exactly?

    Please share same.

  15. Dennis Jones (aka Living in Barbados) Avatar
    Dennis Jones (aka Living in Barbados)

    @David: ‘suggest urgency’ is not what Minister Estwick has done. He’s put options out there and not indicated any time limit (other than suggesting that GEMS needs more money this year if it’s kept on the government’s books). In any event, asset sales take time and could drag on.

    @Hants: concerns at job losses are legitimate, but people seem to only go one step and see job losses. As I mentioned last evening on Tell It Like It Is, there are many ways to dispose of the assets, and some may not involve job losses or jobs and investment can be part of the deal. It’s for negotiation. Options such as worker buy out exist, and if persons who want to protect the current jobs can do so without subsidy from the public purse, great for them. But part of the concern reflects an acceptance that government has been subsidising jobs, but not doing it transparently. If the public want that policy then it should be presented as such as not dressed up as ‘investment’; worse still if it was done with nepotism.

    Investments with negative returns are really consumption.

    Using the public purse for private gains (however you put the lipstick on the pig) is normally called corruption.

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