The Tribune

• Seek out Atlantis-type developer or a Sandals, Gov’t told

• ‘Business model more important than cheque book size’

• GB airport situation ‘million dollar question’ for any deal

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Lucayan must be acquired by a Sir Sol Kerzner equivalent to ensure long-term success, a hotelier said yesterday, arguing: “Business model is more important than cheque book size.”

Magnus Alnebeck, the Pelican Bay’s general manager, told Tribune Business the Government must target a particular type of buyer if it wishes to revive Grand Bahama tourism - seeking out someone with the “vision and force” of the Atlantis developer or a Sandals, or a vertically integrated airlift, tour and hotel operator such as the Memories/Sunwing combination.

Asserting that a “conventional hotel” deal, where a developer acquired the Grand Lucayan and partnered with a resort operator to brand it, was unlikely to succeed based on the property’s history, he said it was vital the Government focus on a buyer’s ability to make it a sustainable, long-term success rather than obsess over securing a $150m purchase price.

Mr Alnebeck said a further “million dollar question” relates to Grand Bahama International Airport, which remains in a post-Dorian condition that Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, recently said he was “embarrassed” by.

The airport remains a vital infrastructure asset in providing tourist access to the Grand Lucayan and the island’s wider tourism product. The Pelican Bay chief said any buyer for the hotel will “have a big say” in what happens to the airport, now owned and controlled by the Government, and will seek “guarantees” from the latter on how it will be redeveloped and the timeline for doing so.

Mr Alnebeck, though, added that a Grand Lucayan purchaser’s ability to attract necessary airlift, and enticing the US to restore pre-clearance facilities, were more important factors to the future success of Grand Bahama’s so-called ‘anchor property’ so long as the airport was returned to a “functional” state.

Mr Cooper last week suggested the Government was seeking a $150m purchase price for the Grand Lucayan. While he did not explain how that figure was calculated, it is equivalent to the amount of taxpayer money - including the $65m purchase price - that the Government has pumped into the property since acquiring it from Hutchison Whampoa’s real estate arm in 2018.

The $150m price tag has attracted much attention, and Mr Alnebeck said it was difficult to determine whether this was a realistic valuation. “The price of a hotel property is normally based on the cash flow it generates, and it has been hardly anything,” he added of the nearby Grand Lucayan property.

“In this case it has to be sold on potential cash flow, and it’s difficult to determine not knowing who is interested, and who the Government is trying to interest, and what they may see. Of course, the more money they collect for the taxpayers of The Bahamas is great, as they own the hotel.

“At the same time, what is more important than the actual sale is the sustainability of future operations. The more money they get, the better it is, but the focus needs to be on the business model as opposed to the size of the cheque book.

“If you look back at the history of the property, it was owned by Hutchison, a Fortune 500 company, and they branded it with Westin and Sheraton, the Starwood brands. That was not feasible and they gave up. Emerald Bay had the Four Seasons. It just didn’t work, and Four Seasons is one of the strongest brands in the world,” the Grand Bahama-based hotelier added.

“Now, with Sandals, suddenly Exuma has the second-best commercial airlift after New Providence, and a very viable and functioning property with a big turnover. My personal feeling, and I’m new sure the new Lucayan Board is doing this, is that they’re looking as much at the business model of a potential owner as they are the price.

“I’m sure the Government of The Bahamas would rather collect the VAT on $500m of turnover for the next 20 years as opposed to a $20m turnover for the next five years until somebody gives up. That, in my view, is more important. I can just imagine how much VAT and economic activity the Government and The Bahamas has lost in the past five years when that hotel was more or less closed.”

Summing up what this means for the Grand Lucayan buyer search, Mr Alnebeck told Tribune Business: “I cannot really see a conventional hotel deal, where someone comes in with a big balance sheet or starts operating, whether it’s a Sheraton or Hilton. That’s not a model that will drive the destination.

“It’s somebody that comes with the vision and force of a Sir Sol Kerzner and Sandals, or someone who comes with a vertically-integrated airlift, tour and hotel operator business, like TUI, Memories and Sunwing.

“The Government should be very wary of someone showing up and saying they will buy it for $150m and brand it with a Ritz-Carlton, for example. I’m not so sure that can work.”

Mr Alnebeck’s argument is that, to truly revive the Grand Lucayan and Grand Bahama’s wider tourism industry, the resort must be transformed into destination-style product that is differentiated from both New Providence and other competitors or, alternatively, the buyer has to be a Sunwing/Memories-type operator better able to control its costs and margins at every level.

Airlift, too, will be key. “That, of course, was the downfall of Hutchison and Starwood,” the Pelican Bay general manager added. “The airlift was just not there, and it was impossible to flex the airlift back and forth. When I first came here 17 years ago, they hosted a convention and it was impossible to get people here because they did not have the airlift.”

The Grand Lucayan and airlift are inextricably linked to what happens at Dorian-devastated Grand Bahama International Airport. “I think that any investor interested in the property will either have a big say in what happens at the airport or have guarantees from the Government as to what happens,” Mr Alnebeck said.

He added, though, that experience elsewhere in The Bahamas and Caribbean showed that Grand Bahama needed an airport that was simply “functional” enough to sustain the necessary airlift as other destinations had performed well without a five-star gateway.

Citing Exuma’s present international airport, which is currently being redeveloped, as one such example, Mr Alnebeck suggested it was more critical for Grand Bahama International Airport to be raised to a standard sufficient to entice the US to restore its pre-clearance facilities and thus open up access to more US cities.

The Pelican Bay general manager was backed by Greg Laroda, Grand Bahama’s Chamber of Commerce president, who agreed that any Grand Lucayan purchaser must come with “the full package” if the resort is to succeed long-term.

“We need it to be sold and work to start immediately to get it back up and running,” he said. “We don’t need to sell it and, six months later, we’re still not anywhere near to seeing any shovels in the ground or a re-opening strategy. We need it to be sold and see some activity start almost immediately. It has to be someone who has a plan to get heads in beds as well.”

Warning the Government that it will have to “convince” potential buyers it has “a very good short-term solution” to the airport woes, Mr Laroda added: “I heard that there was a group of Bahamian investors looking at it. Not to take anything away from Bahamian investors, but we need someone with the full package.

“Someone like Sunwing, someone with big pockets for development like Kerzner did at Atlantis, even though they may do it in phases. It redevelops the hotel, and adds to what tourists can do when they visit the island and keeps them busy. It would be perfect if we could get something like that.”