The Tribune

* Hopes rate, visitor spend rise will offset

• Some $300m-$400m upgrades since ‘17

• Seeks savings on $100m Beach Towers

Atlantis is predicting it will take a $14m hit this year from Bahamas Power & Light’s (BPL) hiked fuel charges but remains hopeful this will be minimised by higher visitor spend and room rates.

Vaughn Roberts, the Paradise Island resort’s senior vice-president of government affairs and special projects, told Tribune Business that management is “paying close attention” to energy costs and multiple expense lines given the continued pressures exerted by “local and international inflation.

Describing BPL’s cost increases as “very significant”, with Atlantis also having to “adjust wages to market conditions” and incorporate a minimum wage rise that took effect on New Year’s day, he added that the resort industry had “lobbied as hard as we could” for an alternative to address the state-owned energy monopoly’s fuel charge under-recovery but without success.

“We have estimated the fuel charge impact to us is $14m on an annual basis,” Mr Roberts told this newspaper. “It’s definitely a real cost, but we lobbied as hard as we could as an industry. I guess there was nothing that can be done....

“Obviously we pay close attention to cost increases. The BPL increase is very significant for us. There’s an upcoming National Insurance Board (NIB) [contribution rate] increase. All these things add cost, and we’ve had to adjust wages to market conditions, but on food supplies and operating costs, because we’ve had such strong growth in ADR (average daily room rate) and spend per occupied room, the business has been able to absorb some of these cost increases.”

The $14m hit to Atlantis’ electricity costs give an insight into the fill economic impact of BPL’s fuel charge hikes as they hit their peak increase compared to October 2022 - the last month before they began their phased rise. Between June and August 2023, BPL’s fuel charge is scheduled to be some 163 percent above October 2022 levels, which means it has more than doubled just when summer consumption is at its peak due to increased air conditioning use.

Given that the fuel charge accounts for between 50-60 percent of a customer’s total bill, businesses and consumers had privately predicted to Tribune Business that they were looking at an 80-90 percent increase in total energy costs this summer compared to October 2022. The Government and BPL, though, are hoping that the advance warning - coupled with the fact the peak 163 percent increases lasts for only three months - will enable the economy to ride out the strain.

BPL’s customers are paying above-market prices on the fuel charge portion of their bill to enable the utility to regain upwards of $90m in under-recovered fuel costs, and repay loans/debts owed to both the Government and its fuel supplier, Shell. 

This resulted from BPL holding its fuel charge at 10.5 cents per kilowatt hour (kWh) for a full 12 months between October 2021 and October 2022. To do this, it did not pass its full fuel costs on to consumers, instead running up a debt to Shell. This occurred from the Government choosing to not execute the trades that would have acquired extra cut-price oil for BPL to support both the fuel hedging strategy and the 10.5 kWh price.

Still, from Atlantis’ perspective, the up to 30 percent increase in ADR and visitor spend per occupied room compared to pre-COVID levels have thus far helped to offset the fuel charge hike’s effect on arguably BPL’s largest private sector customer.

Mr Roberts, meanwhile, said Atlantis and its owner, Brookfield Asset Management, have invested $300m-$400m in upgrading the mega resort since 2017. “We’ve had this multi-year renovation programme going on,” he told this newspaper. “We’re in the final stages of the casino renovation, and that’s looking very good.

“We opened a new restaurant at The Cove, Paranza, by Chef Michael White in the last few weeks. We’re going to have an opening party for that on July 15. We did the bar in the casino that used to be Dragon’s; that’s going to open this weekend. We’re stepping through the renovation, which is good. We’ve finished the rooms at the Royal Towers, and are getting good reviews.”

Asked about the scale of Atlantis’ investment in refreshing its product, Mr Roberts replied: “When I last checked it was $300m, but we started in 2017-2018 with the renovations of the Coral Towers’ rooms. It’s hundreds of millions of dollars, and some of it’s deferred maintenance. We have issues with the buildings, replacing elevators that have reached their end of life.... It’s $300m-$400m.”

The Atlantis executive revealed that the resort is also “going through value engineering” in a bid to ensure construction costs for the redevelopment of its Beach Towers property stay within budget following the post-COVID surge in material prices, labour and other related costs.

The 400-room Beach Towers is awaiting redevelopment into Somewhere Else by Grammy Award-winning musician and producer, Pharrell Williams, and his business partner David Grutman, and Mr Roberts said: “We’re still working through it, working through the design and working through the budget.

“The numbers came in a bit higher on the construction side, so we’re going through a value engineering to find savings. That means tweaking the design and so forth. We’re trying to figure out how to make it work within the budget. From where we sit now, it’s probably a 2024 construction start project. We always thought it was a two-year kind of build-out.

“It’s well over $100m. We don’t know where it will end up, but it’s 425 rooms and it’s a complete renovation of the hotel. It’s the oldest hotel, so we have to do a lot of work with it. Elevators, the rood, building systems. All the main building systems have to be replaced.”

Meanwhile, Mr Roberts said Atlantis and other Nassau /Paradise Island properties are eagerly awaiting the start of direct airlift between Nassau and the US west coast in time for the Thanksgiving and Christmas season as this will open a new market for casino patrons and leisure travellers.

“That’s significant. That’s something the destination has been working on for years. It opens up LA and opens up the whole west coast,” he added of the Jet Blue and Alaska Airlines flights. Both will fly direct to Nassau from Los Angeles International Airport (LAX), while the latter will also fly from Seattle to the Bahamian capital.

Mr Roberts said the Seattle route will also make The Bahamas accessible to residents of Vancouver on Canada’s west coast, which lies just across the border. He added that LA, as well as Vancouver, were both strong casino gaming markets for The Bahamas to tap. “We’d like to seem them be successful,” he said of both airlines, “and build in more frequency.”