by Richard Coulson
First published in The Tribune...
The disputed future of the Grand Lucayan Hotel complex is more than a business debate. It could well mark the opening political shot for control of the FNM. Incumbent Prime Minster Hubert Minnis and predecessor Hubert Ingraham have each visibly tied his flag to a radically different solution for the hotel’s continued viability - and the future of Grand Bahama.
Grand Lucayan Hotel is no ordinary commercial venture—it symbolises Grand Bahama’s success or failure as a tourist destination. Actually three linked hotels (two closed and Lighthouse Point struggling), it provides the back-bone of the island’s guest room supply. Although the Freeport Zone enjoys a successful industrial segment, a dynamic tourist industry remains essential for economic growth, affecting cruise ships, airlift, transportation and real estate.
Prime Minister Minnis has now formally announced his government will “buy” Grand Lucayan.
Both he and Tourism Minister D’Aguilar make no bones about loathing this decision since they agree Government should not be in the hotel business. It was “the best of bad choices”, necessary to avoid closure of Lighthouse Point, which would not only throw 400 hotel workers on the dole but destroy most demand for Port Lucaya, the bustling complex of restaurants, bars, music and retail shops oriented towards both visitors and locals. The one remaining hotel, privately-owned boutique Pelican Bay, operates smoothly, but cannot by itself support a a thriving Port Lucaya.
Mr D’Aguilar fears a repeat of the Royal Oasis catastrophe, when that once premier hotel closed from hurricane damage in 2004 and never reopened, dragging down the related casino and the International Bazaar, the once colourful shopping district, now a ghost town blighting central Freeport.
Government has been dealing with two uncooperative parties. Hutchison Whampoa, dominant over much of Freeport, never showed any enthusiasm for the business of its hotel subsidiary. Instead of upgrades and maintenance, it has focused solely on the negative step of selling Grand Lucayan for a non-negotiable $65m. The only potential buyer was Canada’s Paul Wynn, who after months of expressed interest, walked away from his non-binding Heads of Agreement, preferring to set up on Nassau’s Cable Beach, leaving Dr Minnis as the abandoned bride at the altar.
Dr Minnis’ firm-jawed decision to buy Lucayan has one major flaw: nobody knows how it will be done. He admitted there is no timeline, merely that the public will be told all “upon closure”. Bluntly, that means he has not the foggiest plan what the next steps may be. “Closure” could be months or years down the road.
One scenario might go like this: Government provides enough current cash to keep Lighthouse Point open on a shoe-string basis. It makes a $25m cash down - payment (available from the budget) to Hutchison, who grants a purchase-money mortgage loan for the balance. It then must find a reputable, experienced hotel company prepared to lease or manage the operation — or even buy it outright. On the strength of that name, it borrows the minimum $50m needed to restore the hospitality group to presentable shape for modern tourism. Simultaneously, it negotiates with airlines and travel agencies to assure enough tourism supply for this questionable destination.
Clearly, these steps will demand financial and business expertise of the highest order and cannot be accomplished overnight.
Meanwhile, the Lucaya area will stagnate and Grand Bahama’s many other problems will be on the back burner. It’s not surprising Dr Minnis’ decision has met sharp criticism.
It certainly opened the door for Mr Ingraham to veto the hotel purchase and propose a far more ambitious strategy for growth, one that would revolutionise how Freeport and Grand Bahama are governed.
His manifesto calls for Government to buy out the interests of the St George and Hayward families in the Grand Bahama Port Authority (GBPA) and all their other holdings like DevCo and the Harbour and Airport Companies, acting jointly with a financially capable strategic partner and Bahamian investors.
In effect, the GBPA and the Hawksbill Creek Agreement would vanish. Government and its private partners would establish a new entity “heavily managed and directed by private experts”.
Since the death of business leader Edward St George in 2004, the GBPA has floundered, and Mr Ingraham argues that present management by the two families’ heirs, though well-meaning, is simply incapable of generating the new investments needed for economic resurrection. “Grand Bahama needs a reset,” he summarises.
Much remains to be filled out in Mr Ingraham’s strategy. Government itself certainly does not have the funds to compel a buy-out from the reluctant St George and Hayward families, as Hubert knows. But he seems confident of finding the “financially capable strategic partner” to bankroll the deal. Is he already talking with one? What incentives would it demand? How would it coordinate with Government objectives? Where would the new Bahamian investors fit?
Holding no Government position, as an independent, well-connected lawyer with a cadre of willing advisors, Mr Ingraham is free to explore all possibilities. If he can produce a viable scheme to re-energise Grand Bahama, the present administration will have no choice but to listen.
Enjoying a higher level of personal popularity than the often “verbally disadvantaged” Prime Minister still suffering from his Oban missteps, Papa Ingraham may find himself once again a major political figure.
Mr. Coulson has had a long career in law, investment banking and private banking in New York, London, and Nassau, and now serves as director of several financial concerns and as a corporate financial consultant. He has recently released his autobiography, A Corkscrew Life: Adventures of a Travelling Financier.
