The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government "must under no circumstances" get involved in operating the Grand Lucayan, a top hotelier warned yesterday, adding: "It's not an attractive asset to buy."

Magnus Alnebeck, Pelican Bay's managing director, told Tribune Business that while government ownership was "fine" it needed to find a top-class operator for Freeport's anchor resort "as soon as possible" and not interfere with how the property is run.

Speaking after the Prime Minister confirmed the Government had signed the $65m sales agreement for the Grand Lucayan's purchase, Mr Alnebeck said the previous owner's three-year failure to find a private sector buyer exposed the extent of the uphill task facing the Minnis administration.

Mr Alnebeck, who heads one of Freeport's few remaining resorts, backed the Government's decision to "buy and hold" the Grand Lucayan while immediately moving to seek a purchaser as

"the smartest strategy" available to it in the circumstances.

While the decision not to repair and re-open the Breaker's Cay property will limit multi-million dollar losses to Bahamian taxpayers, Mr Alnebeck added that potential buyers would likely find it easier to negotiate with the Government than current owner, Cheung Kong (CK) Property Holdings, Hutchison Whampoa's real estate arm.

Replacement of an unmotivated seller with an eager one, the Pelican Bay chief suggested, will facilitate a quicker sale to a long-term owner, with the Government's move also eliminating the "uncertainty" surrounding CK Property Holdings' threats to close the Lighthouse Pointe - the only one of the three Grand Lucayan properties still open.

Mr Alnebeck warned, though, that while the Government's $65m purchase "stops the decline" it does not amount to a revival that will spark a sudden turnaround for assets such as the Port Lucaya Marketplace and its retail/restaurant tenants.

He reiterated that the likely Grand Lucayan solution lay in attracting a vertically-integrated owner - a tour operator that came with its own airlift and resort brand. As a result, the Pelican Bay chief said the Sunwing/Memories/Blue Diamond consortium remained "the people to speak to".

"I think the reality check for everybody should be that it's not an attractive asset to buy," Mr Alnebeck told Tribune Business of the Grand Lucayan. "It's been for sale for three years, and there was one serious buyer [Wynn Group]. That one serious buyer wanted so many incentives it did not make sense."

And, highlighting the enormity of what the Government has taken on, he said the Grand Lucayan was developed and owned from inception by a Fortune 50-rated company in the shape of Hutchison Whampoa. It was initially operated by Starwood's Westin and Sheraton resorts, "two of the most successful brands in the hotel industry, and still it failed".

Still, Mr Alnebeck said of the Minnis administration's plan: "I think that's the smartest strategy they can have if they, at the same time, can present an operator that knows what they're doing. It's then easier to find someone to purchase it.....

"It's very important that the Government realises under no circumstances should they be involved in hotel operations. Hotel ownership is fine, but find an operator as soon as they can for Lighthouse Pointe."

Mr Alnebeck said securing an operator, and recognised resort brand, could even lead to that company agreeing a long-term 10-15 year lease of one of the Grand Lucayan properties and financing necessary renovations itself.

That would create a much more positive "scenario" for the Government, plus Grand Bahama and its economy, but the Government has yet to reveal the full details of its Grand Lucayan business plan/exit strategy beyond the "buy, stabilise and sell" mantra.

Dr Hubert Minnis yesterday declined to confirm whether an operator will be sought for the resort, saying this would be determined by the Board of Directors for the Government-owned special purpose vehicle (SPV) that will be created to acquire the Grand Lucayan. That Board will be headed by Hotel Corporation chairman, Michael Scott.

Tribune Business exclusively revealed that the deal had been signed in yesterday's edition, with the purchase set to close on September 11. Dr Minnis yesterday confirmed the closing is set to occur within 30 days, adding that the Government wants to "get in and out as soon as possible".

The only extra details provided yesterday were the Government's intention to re-open the 400-room property formerly operated by Memories, giving the Grand Lucayan additional inventory to attract pent-up group demand alongside the 196-room Lighthouse Pointe. The Prime Minister also said the Government wanted the resort to be acquired by Bahamian, rather than foreign, investors.

Mr Alnebeck, though, warned that rebuilding airlift and attracting leisure travellers would prove difficulty given the Government's plan to be a temporary owner that largely maintains "the status quo".

"I think going out to attract new airlift, where the Government is operating a hotel to maintain the status quo and looking for someone to take over, I don't think any airline will happily fly into a situation like that," he told Tribune Business.

While the Government could order Bahamasair to open routes to certain markets, Mr Alnebeck said this would likely add to the Government's losses on the Grand Lucayan deal. "They have to run the numbers very carefully. You can't put on a flight to Atlanta and think people will come," he added.

"It's the whole thing that has to be put together. I think the Government is probably aware of this. Government has to be prepared to lose a bit of money on this to find a sustainable solution.

"The operator of the majority of that hotel needs to be someone who controls the distribution channels, the airlift, the whole package. The logical partners would be Sunwing/Blue Diamond; that's the people to speak to."

That combination pulled their Memories brand from the Grand Lucayan in January 2017 following a dispute with CK Property Holdings over post-Hurricane Matthew renovations. Many observers felt they could be enticed back with a change of ownership, but Sunwing/Blue Diamond walked away from the resort even before Wynn pulled out.

Reviving the entire Lucayan strip depends on the Government's willingness, and speed, at which it renovates and repairs the former Memories property. While maintaining the "status quo" will stabilise the situation, Mr Alnebeck said it was a long way from reviving assets such as the Port Lucaya Marketplace.

"The important thing is to find a solution that will work in the long-term and has sustainability," he told Tribune Business. "At least it won't be getting any worse, let's put it that way. If the Lighthouse Pointe had closed down as well you would have a totally dead strip.

"The Government had informed Hutchison a year ago that if things fell through with Paul Wynn they would have stepped in. If they had not made that commitment a year ago, Hutchison would have closed it then. It stops the decline, it stops the current downward spiral, keeps the status quo and hopefully will not get any worse."

Mr Alnebeck said how quickly the Government can exit the Grand Lucayan's ownership depends on the number, and quality, of potential buyers and the type of deal it can offer.

"Any investor will prefer to deal with the Government of the Bahamas than deal with Hutchison," he told Tribune Business. "This is why it makes sense to take over ownership. It will be easier for investors to get something going quicker with the Government than with Hutchison."

Mr Alnebeck said the removal of uncertainty surrounding the Lighthouse Pointe's potential closure would also create "stability" that benefited other Grand Bahama resorts and the destination in general.