The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BISX-listed bank has revealed that a major Nassau-based resort’s decision to close for two years has placed more than $5m worth of outstanding loans in potential default.

Commonwealth Bank, in its just-released 2020 full-year audited financial statements, further exposed how no sector of the Bahamian economy has escaped COVID-19’s devastating economic fall-out by revealing the possible impact on its own business from Melia Nassau Beach making all its staff redundant.

“On February 15, 2021, the Melia Nassau Beach Resort announced that effective March 1, 2021,the resort would cease operations and make its staff redundant. The gross carrying amount of the related loans and advances for these customers as at December 31, 2020, was $5.099m,” Commonwealth Bank informed its shareholders.

And it is also bracing for a similar impact as a result of Atlantis’ decision to terminate 700, or just under 10 percent, of its 7,300-strong workforce although it is still calculating the likely impact.

“On May 18, 2021, Atlantis announced its plan to make 700 of the resort’s 7,300 employees redundant. This will affect all levels of employment at the resort. To date, the group has not completed its estimate of the impact on the expected credit loss allowance (ECL) relating to the loan portfolio exposed to the Atlantis redundancies,” Commonwealth Bank added.

“The group has determined that both of the above events represent non-adjusting subsequent events and the necessary increase in the ECL impairment provision will be made in 2021.”

This comes following a year in which Commonwealth Bank’s total comprehensive income was slashed by 52 percent to $15.52m, compared to $32.374m the prior year, due to a 36.9 percent increase in impairment charges to $67.758m compared to the prior year’s $48.038m.

Baha Mar’s owner elected to cut its losses by closing the Melia Nassau Beach property until 2023 for a $100m renovation, resulting in up to 300 hotel job losses.

Graeme Davis, the mega resort’s top executive, told Tribune Business at the time it would simply be unprofitable to keep portions of the resort open during the construction work due to COVID-19’s devastating impact on travel demand and occupancies.

He added that the potential “disruption” from the hotel’s upgrades could “damage the brand and reputation of the property”, which was another factor that Baha Mar and its ultimate parent, Hong Kong-based Chow Tai Fook Enterprises (CTFE), took into account when deciding to close the Melia Nassau Beach for two years until Spring 2023.

Pledging that impacted staff, which he estimated at between 200-300 persons, will receive their full severance pay and benefit entitlement, Mr Davis did not, though, commit to giving existing Melia staff “first preference” when the resort begins to re-hire ahead of its return.

And, while promising that the renovations will create “almost a new resort”, further positioning New Providence as “an upscale luxury destination” for when the pandemic ends, the Baha Mar chief said “no decision has been made” on whether the Melia brand and/or its all-inclusive model will be retained after the property’s transformation.

Explaining the rationale for the two-year closure, which takes effect on March 1, 2021, Mr Davis told this newspaper: “Based on the economic conditions of where we are with the demand, we just don’t see it to be profitable [to re-open] based on the current pandemic crisis, and with the reduction in inventory and the disruption to the guest experience.

“That will also be a factor throughout the renovation work, which can damage the brand as well as the reputation of the property.” The “reduction in inventory” refers to how many of the Melia’s 694 rooms, and 32 suites, will be off-limits at any one time due to the construction-related upgrades.

As for Atlantis, the mega resort said it needed “to make fundamental shifts” given continued uncertainty over the strength and timing of tourism’s post-COVID-19 recovery together with the nature of this rebound.

Predicting that travel and tourism, and the hospitality industry, “will be very different for everyone” when the sector does bounce back, Audrey Oswell, Atlantis’ president and managing director, warned that these changes “will not be temporary or short-lived”.

To ensure the Paradise Island property can cope, Ms Oswell said: “Unfortunately, we have to part ways with team members that we respect and value. Out of 7,300 Atlantis team members, 700 of our colleagues will not be returning..... Many teams across the organisation will be reduced in size.”

“Our business suffered significant losses and, in response, we drastically cut costs that touched nearly every corner of Atlantis. While these actions were necessary, it became clear that we had to go further when faced with two hard truths.

“We don’t know exactly when travel will return to normal business levels [and] when travel does return it will be be very different for everyone. While we expect Atlantis to fully recover - and business volumes continue to increase since re-opening, the significant changes we will undergo are not temporary or short-lived.”