The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Opposition politicians yesterday expressed concern that Baha Mar’s revised marketing approach had revived “the elephant in the room” over whether it will end up splitting the high-end tourist market with Atlantis.

K P Turnquest, the FNM’s deputy leader, told Tribune Business that the strategy outlined by Baha Mar’s new owner, Chow Tai Fook Enterprises (CTFE), appeared to be targeting a similar - if not the same - customer base as its Paradise Island rival.

He agreed that this would “absolutely” revive concerns, first raised in 2004-2005 when Baha Mar was conceived under original developer, Sarkis Izmirlian, on whether it could successfully collaborate with Atlantis to grow the high-end visitor market as opposed to splitting it.

The FNM deputy leader suggested there was “a very narrow spot” within which both mega destination resorts could both thrive, but said there was no room for error when it came to execution.

Mr Turnquest said it was “going to be difficult not to have the market split”, warning that this would result in a ‘race to the bottom’ on room rates as Atlantis and Baha Mar competed for the same visitors.

This, in turn, could undermine both resorts’ profitability and, ultimately, the employment of their combined 14,000-strong Bahamian workforce - a number projected to be achieved once Baha Mar is at full capacity.

“That’s always been the concern from the initial development of this project,” Mr Turnquest told Tribune Business of Baha Mar and the ‘market split’ concerns.

“While everyone got distracted by the whole Chapter 11 bankruptcy issue, that elephant was still in the room. The fundamentals of the business was our concern in terms of what was going to be the market for this project.

“Initially, they were saying the gaming side of the business was going to drive the market, supported by going after Europe and Asia,” he added of Mr Izmirlian’s plans.

“The question is: Do we have the market size to absorb this product, and do we have the capacity, the airlift capacity, to feed it?

“The fear is we end up with two properties going after the same market, driving down the price and ending up with diminished properties at both.”

Graeme Davis, CTFE (Bahamas) president, told Tribune Business on Tuesday that the Hong Kong-based conglomerate felt that Baha Mar’s original marketing approach had been too “narrow focused” under Mr Izmirlian, through its concentration on a casino-oriented customer base.

He confirmed that CTFE intended to broaden Baha Mar’s appeal to one that was also “family friendly”, distinguishing this from Atlantis’s “family focused” positioning.

“We feel that there is a broader base of business that can be attracted to the property, and that’s in the luxury, upscale market globally. We’re focusing on a more sophisticated experience that’s family friendly, not family focused. That’s a broad niche for us,” Mr Davis had told this newspaper.

Speaking at the Bahamas Business Outlook conference, Mr Davis said that among Baha Mar’s targets would be households earning more than $150,000 in annual income; adults in the 35-54 years old demographic; ‘Baby Boomers’; multi-generational families; millennials; ‘Generation X’ families and groups.

A source close to Mr Izmirlian yesterday said the former Baha Mar developer had been determined to avoid “cannibalising” Atlantis’s business, and had sought to differentiate the Cable Beach-based project from its Paradise Island rival.

“His plan was adult friendly, gaming focused,” the source said, speaking on condition of anonymity. “Everything revolved around the casino. They had the property built in such a fashion so that it would not compete with Atlantis.”

Mr Davis, though, said he had already met his Atlantis counterpart, Howard Karawan, to discuss how the Bahamas’ two largest destination resorts could collaborate on areas of mutual interest, such as marketing initiatives designed to grow the customer base and drive increased traffic to both resorts.

“We certainly don’t want to,” Mr Davis responded, when Tribune Business raised the ‘market split with Atlantis’ issue. “There will be a little bit of crossover [cannibalisation]” at the start.

“We both understand, Howard Karawan and I, that’s in everyone’s best interest to grow the product together, grow the volumes together, to grow into new markets and grow the market together, driving more interest to the Bahamas than in the past. That’s our expectation and our strategy. We’ll collaborate together.”

However, Mr Turnquest told Tribune Business: “I believe there is a spot, a narrow spot, for both properties to co-exist, but that’s going to take a tremendous amount of marketing and promotion to bring additional visitors to the destination and the airlift to do that.

“If we don’t have that commitment and broad expansion, it’s going to be very difficult not to have that market split. It has to be managed very carefully, as we’d hate to see a reduction in yield for either property.”

Mr Turnquest agreed that Mr Davis’s Business Outlook presentation suggested Baha Mar was going after “a very similar market” to Atlantis, which has traditionally focused on families living in Florida and the US north-east coast corridor.

“If they’re looking at the same US eastern seaboard, it’s going to have an inevitable diminishing of the yield for the two properties, which does not bode well for the employment prospects for our people,” he added.

Mr Davis on Tuesday said CTFE would target Brazil and Latin America as a potential source of Baha Mar visitors, as well as Europe, Asia and North America.

He added that discussions with the airlines to provide the additional 400,000 seats per annum to fill Baha Mar’s new 2,300 rooms were ongoing, aided by the Ministry of Tourism and Nassau/Paradise Island Promotion Board.

Concerns as whether Baha Mar would end up ‘splitting’ the high-end market with Atlantis were first raised by the latter’s former owner, Kerzner International, at a Chamber of Commerce luncheon in 2004. Mr Izmirlian’s camp responded by issuing a study purporting to show the two properties would grow, rather than split, the market.

Uncertainties over Baha Mar’s potential impact persisted, and affected Kerzner’s debt restructuring negotiations with its lenders, a sage that ended with Brookfield Asset Management taking possession of Atlantis via a debt-for-equity swap.

Some yesterday attached more sinister motives to Baha Mar’s broader tourism market focus. Branville McCartney, the Democratic National Alliance’s (DNA) leader, told Tribune Business: “Baha Mar seems to be aiming at putting Atlantis out of business.”

He expressed particular concern that a ‘water park’ was among the possible future uses for the 15 acres currently occupied by the former Wyndham/Crystal Palace properties, noting that Atlantis was already based on such a theme.

Mr McCartney took the same position as Mr Turnquest, arguing that one or both mega destination resorts would lose out if they went after the same market, with the ultimate result being worker “lay-offs”.

“I think they will certainly split the market with Atlantis, and that there will be a loss of jobs,” Mr McCartney told Tribune Business.

“There’s no doubt about it. If they go after the same market they’ll be battling over room rates.”

The DNA leader also implied that a CTFE-owned Baha Mar could collaborate with the British Colonial Hilton and The Pointe, both of which are owned by China Construction America (CCA), to collectively lower room rates in a bid to squeeze Atlantis, given the size of their market position.

CTFE, though, is privately-owned by the Cheng family, while CCA is controlled by the Chinese state. There is no evidence to suggest they would collaborate on such a strategy.

However, Dionisio D’Aguilar, a key Izmirlian ally, and former deputy prime minister, Brent Symonette, have both previously made similar suggestions to Mr McCartney’s.

And the Cheng family has close ties to the Beijing power structure, a Forbes magazine article saying they were one of the first Hong Kong business owners to invest in mainland China following the Tiananmen Square massacre.