The Adrian Loveridge Column – GEMs a Lesson in Squandermania
In an article carried by the midweek Nation on 24th February 2010 the declared value of the then three remaining GEMS hotels were stated at BDS$ 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 a complete unknown as no audited accounts have been made available to the taxpayers, so we are all left to guess what other negative trading liabilities there could be.
The new owner of Time Out 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 highly restricted chosen few. I personally 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 disastrous foray into hotel ownership and operation almost to closure. We can again only speculate what these hundreds of millions of squandered Dollars on GEMS could have done, if instead they had been invested in creative and cost-effective marketing of the destination, in terms of increased arrival numbers and job creation across the entire sector.
What is also often forgotten is the systematic predatory pricing policy practiced by Gems over years of operation to the detriment of the mostly small hotel private sector players, who then took considerable time to restore viable room rates and anything close to profitability, essentially needed to maintain and upgrade properties on a regular basis.
From our own experience we saw Silver Rock Hotel closed under the St. John family with a minimum room rate of US$120 per night and 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 eventually it 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 kind of example of Government’s ‘playing’ with our main foreign currency earner and remind every politician that sometimes it is better to let market forces prevail.