The Tribune

• Mega resort wants ‘relief’ after 48% energy hike

• But business up 10% for Q2 before ‘soft landing’

• Awaits Gov’t ‘direction’ over plans for Melia site

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar yesterday warned that soaring energy bills will “have a significant impact on our profitability” for 2023 by adding an extra $8.5m to its full-year operating costs.

Graeme Davis, the Cable Beach mega resort’s president, told the Bahamas Hotel and Tourism Association’s (BHTA) latest Board of Directors meeting that he was hoping for “relief” during 2023’s second half with payments to Bahamas Power & Light (BPL) up 48 percent for the year-to-date.

“I will say from a utilities standpoint we’re up 48 percent in our utilities costs,” the Baha Mar chief revealed. “Right now, just for this part of the year and forecasting the rest, we’ll be up about $8.5m in utility expenses for the year.

“That’s certainly having a significant impact on us. We’re certainly hoping there’s relief here as we get into the third quarter and fourth quarter on our BPL expenses. That is having a significant impact on our profitability.”

Mr Davis’ disclosures further illustrate the toll that surging BPL bills are exacting on all Bahamas-based businesses and the wider economy as they increasingly erode cash flow and profits amid peak summer demand. BPL consumers have seen their all-in electricity rates increase by 71 percent in just nine months, rising from 24 cents per kilowatt hour (kWh) in October 2022 to 41 cents per kWh now.

Calculations previously released by BPL predicted that electricity rates will peak this summer as the utility moves to reclaim at least $90m in previously “under-recovered” fuel charges. Atlantis, Baha Mar’s mega resort competitor, previously told this newspaper that is estimates the state-owned utility’s soaring fuel charges will cost it an additional $14m this year, again signalling the pain all businesses and households are having to endure through no fault of their own.

Mr Davis was yesterday far from the only senior tourism executive voicing BPL-related concerns. Kerry Fountain, the Bahamas Out Island Promotions Board’s executive director, told the same meeting: “I just want to echo what Graeme Davis said. That is the concern with these blackouts. We’re paying more and getting less.

“Not only is it causing a poor customer experience, but it’s also increasing costs to the hotel operators as every time something like that happens they have to replace equipment. I’m hoping we can get this matter resolved as quickly as possible.”

His and Mr Davis’ hopes for urgent relief when it comes to BPL’s prices, as well as the inconsistency and unreliability of power supply, are likely to be somewhat optimistic. While the utility is forecasting that its fuel charge will drop, the decline is only predicted to be by three cents per kWH during the three months between September and November this year, and even that will depend on spot prices in the volatile global oil markets.

Robert Sands, the BHTA’s president, pledged that the industry body will continue to push for better quality and more affordable power as this is key to not only the visitor experience but the ability of The Bahamas’ largest industry to remain competitive against global and Caribbean rivals on a cost basis.

“We will continue to have a conversation with our partners at BPL as it relates to the provision of consistent, quality, affordable power throughout the archipelago,” Mr Sands said. “I have spoken about this publicly, and we will continue to advocate on the matter as it is vital to our ability to function as a nation and provide our guests with our best version of ourselves.”

Mr Davis and Baha Mar’s owner, Chow Tai Fook Enterprises (CTFE), will be hoping that the robust post-COVID tourism recovery continues to drive business at the mega resort and help offset the financial impact of high BPL bills. Having enjoyed “a very, very strong” 2023 first quarter, where there was “a very large increase” in business volumes due to weak prior year comparatives as a result of COVID’s Omicron variant, Baha Mar’s president says the momentum has endured.

“Of course the second quarter was very robust last year, so we’re looking at about a 10 percent increase for the second quarter [this year] as we just wrap up June’s financials,” Mr Davis told the meeting. “As we go into July, we start to get into the thick of the third quarter. We’re looking to be just as strong, up about 2 percent over last year. Of course, there was some strong demand.

“Going into the fall, it’s going to be a very soft fall with a sprinkling of a little bit of group business. Our properties are certainly maintaining the occupancy levels we have budgeted and forecasted so, barring any storms, we’ll certainly look forward to a good soft landing by the end of the year.”

Confirming that the Melia Nassau Beach resort’s demolition is underway, and targeted for a fall 2023 completion, Mr Davis indicated that Baha Mar’s owner is waiting on “direction” from the Government so that it can determine its future plans for the seven-acre site that will soon be completely raised.

“I will say we are moving forward with our demolition,” he told the BHTA meeting. “That is starting to come down. We’re expecting to have that completed by fall. We’re hopeful that we can work with the Government here on having future plans to announce.

“It really is right now with the Government, and hopefully we’ll have some direction soon that we can announce on future plans. We’re certainly hopeful that we can make a positive impact for the tourism product here in Nassau and certainly for the community.”

Jackson Weech, general operations manager at Atlantis, told the same BHTA meeting that the 2023 first half has “certainly been robust” with revenue and occupancy percentages “pacing in line with projections”. With rates higher than pre-COVID levels, he added that the Paradise Island resort’s group business “continues to show encouraging growth”, while all holidays for 2023 to-date “exhibited exceptionally high occupancy and attendant rates”.

With both the Thanksgiving and Christmas/New Year’s holidays showing “great momentum in terms of build”, Mr Weech also affirmed that Atlantis has “now completed the full renovation of the Royal Towers” with the west tower finished some seven to eight weeks ago.