The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s proposed Grand Lucayan deal aims to avoid a repeat of previous failures and create a destination experience, with Memories and the Port Lucaya Marketplace’s owners “part of the conversation”.

Multiple Tribune Business sources, some close to current developments, confirmed the nature of - and potential players involved in - the Grand Lucayan’s ‘rescue strategy’ prior to the Government last night confirming “productive discussions” continue.

This newspaper was told that the Government is focused on curing the underlying structural problems that have undermined the resort and Grand Bahama’s wider tourism/hotel product, both to ensure it can rapidly ‘exit’ its temporary ownership and ensure it “does not face another quagmire in five years”.

Tribune Business’s contacts said the strategy involves creating a destination product along the lines of an Atlantis and Baha Mar, combining hotel, retail, cruise, marina and other associated resort amenities and attractions into one.

To help achieve this, the Government’s potential equity partners include the Port Lucaya Marketplace’s owner, Peter Hunt, and his fellow investors. Sunwing and its Memories hotel brand affiliate, which departed Freeport in February following a dispute with Cheung Kong (CK) Property Holdings, the Grand Lucayan’s owner, over Hurricane Matthew repairs have also been potentially lined up to return.

Tribune Business was told that Sunwing/Memories are also trying to entice Hard Rock into the deal to take over the casino operation, with the Government’s equity stake pegged at either 40 per cent or 60 per cent.

Sources added that CK Property Holdings, one of the two entities into which Hutchison Whampoa has split, will provide financing to assist the deal and repair the resort, as the Minnis administration bids to re-open the Grand Lucayan in time for the winter 2018 season.

“The new partners are Hunt and his fellow investor, and Sunwing and Memories,” one source told Tribune Business on condition of anonymity. “Sunwing and Memories are supposed to bring Hard Rock to the table. Hard Rock would take the Lighthouse Pointe and the casino. They didn’t say anything about Breaker’s Cay.

“Hutchison will lend the Government $60 million.... Hunt is critical because they want Port Lucaya to survive. They’ve got the right ingredients. Let’s see if they can pull it off.”

Another source familiar with the Grand Lucayan situation confirmed: “The Government has been talking to all the parties you’ve mentioned. It has been trying to broker a deal to get the place open before the end of the year.”

The parties’ identities were affirmed by a third source, who added: “Everything you said has been part of the conversation. Those you mentioned are all part of the conversation and moves in terms of delivering a destination experience.”

Kwasi Thompson, minister of state for Grand Bahama, did not comment when the identities of the Grand Lucayan deal participants were put to him last night.

The Government ultimately issued a statement that, at most, revealed that a deal has yet to close. Pledging its “commitment to the revitalisation and restoration of the Grand Bahama economy, particularly the Lucayan Strip”, the Minnis administration merely said: “Towards this end, there have been continuing productive discussions.

“We remain resolute in our determination to do all that is necessary to achieve our stated goal. To this end, the Government will make further announcements shortly.”

One government contact said of the deal’s progress: “I think we’ve come pretty far. It’s coming along nicely at the moment.”

However, the clock is ticking on Dr Hubert Minnis’s pledge, as given in last month’s national address, that repair and renovation work at the Grand Lucayan will begin before month’s end.

He said: “All signs point to the beginning of renovations at the resort within the next month, with the facility ready for business for the winter season.” Many tourist industry observers believe the latter deadline is virtually impossible, with even the March/April period now in some doubt.

Mr Hunt did not return Tribune Business’s calls seeking comment over the past two days. However, the website for his PNH Properties group contains a dedicated ‘Bahamas’ section with architects’ renderings and plans to transform the Lucaya area into a destination experience.

“The goal of PNH Properties is to ‘imagine’ a tourist destination that offers true added value and unique opportunity to every part of the local economy and every hospitality provider,” the website says. “Unlike typical ‘standalone’ resort developments, this comprehensive destination plan will attract greater numbers of visiting travellers and a longer length of stay.”

It continues: “In Port Lucaya, the PNH project is designed to provide guests of the greater Grand Bahama island tourist and residential community with a more diverse range of activities and excursions in one location. By developing a ‘comprehensive resort community development plan’, PNH is working to provide a wider range of high-value experiences and activities, at the same time repositioning Grand Bahama as an experience-driven branded destination.

“Past experience on Grand Bahama has shown that guests lack the variety of experiences that should be a baseline expectation for such a prestigious destination. These experiences are an essential component of the Grand Bahama package - necessary to occupy visitor’s time and provide memorable entertainment throughout their multi-day vacation.

“Combined with the marina harbour and canals, the PNH experience is a vibrant and dynamic array of both daytime and night-time activities, adding true value to a guest’s vacation and creating the appetite for more engaging vacation experiences.”

This matches the Government’s plan, which is to create a destination experience incorporating the Grand Lucayan, rather than leave the hotel and other tourism-related products as separate, standalone entities.

Sources suggested the Minnis administration was determined to avoid a repeat of the Grand Lucayan’s 11-month post-Matthew closure, which has stripped Grand Bahama of 59 per cent its room inventory and caused the loss of an estimated 1,000 jobs.

“The Government has a very strong interest in getting Grand Bahama right,” one contact told Tribune Business. “It’s been a failure for too long. Why has this property failed for so long? I think we’re beginning to get an understanding of that, and what needs to be done to fix that.”

The source said the structural issues holding back Grand Bahama’s tourism and hotel economy were similar to the rest of the Bahamas, namely the cost of energy and labour, and labour productivity.

Access costs to Grand Bahama in terms of airlift were also said to be extremely high, with the source describing the cost of jet/aviation fuel on the island as “ridiculously high”. Tribune Business was recently shown a chart illustrating that the per gallon cost of aviation fuel in Freeport was between 37.8 per cent to 54 per cent higher than rival Caribbean destinations, and 37.5 per cent higher than Nassau.

Tribune Business was told that this is negating Grand Bahama’s comparative advantage of US proximity, and making further-flung Caribbean destinations and resorts cheaper on price - something the Government wants to fix.

“It really makes no sense trying to get something sold and you find yourself in a quagmire five years down the road again,” one source said. “You have to solve the infrastructure problems, and get the right operators and carriers.

“Grand Bahama has lacked a destination. Baha Mar, Atlantis... people buy destinations; they don’t buy hotel rooms. They buy the experience of the destination. If you don’t have the experience, you don’t have the rooms.”

They added that solving these issues was vital to enabling the Government exiting its Grand Lucayan investment quickly, in the manner of the UK and US governments following their auto and banking industry bail-outs of the 2008-2009 recession.

“Everything is being done on the basis of the Great Recession in the US,” they added. “You get in, and you get out. There is no sustainability without profitability. Enabling that to happen is the model being pushed forward.”

It is unclear where Paul and Steve Wynn, and their Wynn group, fit into the Government’s Grand Lucayan plans. The Canadian-based real estate developer was the leading contender to purchase the property under the former Christie administration, but there is understood to have been little movement on the deal in recent weeks.

Tribune Business was told yesterday that Wynn had submitted a revised proposal to the Government several weeks ago, but its offer now appeared to be running second to the Minnis administration’s plans.