The January 2017 groundbreaking at Peters Hope for the Black Sands Resort and Villas. Joseph Romano of PACE, left, and MP for Central Leeward, Sir Louis Straker turns the sod on Jan. 19, 2017 while Prime Minister Dr. Ralph Gonsalves, right, and other officials look on. (iWN photo)

By C ben-David

After announcing early last year in the Budget Address as well as in Parliament that he intended to construct a 250-room hotel using public monies, the Honourable Prime Minister of St. Vincent and the Grenadines (SVG), Ralph E. Gonsalves, and Invest SVG’s executive director, Annette Mark, have just provided additional project information.

Not surprisingly, the location will be Mt. Wynne on the central leeward coast, not far from the Black Sands Resort and Villas complex whose site preparation began in earnest earlier this year.

Building a hotel or related tourism facility is always a risky undertaking. If Black Sands Resorts and Villas fails, no uncommon occurrence in the cut-throat Caribbean tourism industry, the costs would have to be borne by Pace Developments Inc., a relatively small Canadian builder of residential units one of whose divisions will also manage the complex. If the new government hotel fails or, as is more likely, only piles up annual losses like many other government-owned entities around the world, we taxpayers will have to absorb the deficits.

With no comprehensive feasibility study accompanying the explicit rationale that the hotel would prosper because we now have an international airport, plans for constructing the facility are disturbing. In the hospitality industry, demand normally drives supply. Given that our premier mainland hotels on or near the narrow strip of grey-white beaches at the Indian Bay/Villa area have an annual occupancy rate of 30-40 per cent, the need for additional accommodation is not to be seen.

According to government spokespersons, the construction of the new state-owned hotel would be financed by a US$50 million (EC$134 million) “soft loan” from our most faithful patron, the Republic of Taiwan. A “soft loan” is a form of credit with no interest or a below-market interest rate plus other concessions such as a long repayment period and interest deferral. Such advances are given by governments or multinational development banks to poor countries unable to borrow at the market rate and therefore viewed as a form of aid or, in the case of Taiwan, a way to buy loyalty.

We also know from the bitter experience of Argyle International Airport (AIA) and other government projects that a US$50 million government project can easily balloon to US$100 million.

Soft or not, the initial loan and the others sure to follow, would add to our sky-high debt level. Will we even be told how much net revenue the hotel will have to earn, after deducting the pricey management fees, to meet its interest and other liabilities? Not likely. Such figures are not revealed anywhere in the Caribbean.

In an interview with Searchlight newspaper on June 13, 2018, Mark also divulged that several major international hotel brands have expressed interest in managing the property. At a press conference the next day, the Prime Minister disclosed that two of the major international hotel brands that had come here to look at the site were the Hilton and Marriot hotel chains, rightly noting that these conglomerates are now rarely involved in hotel or resort construction but instead manage and/or lend their logo to facilities built by other entities.

Though many Vincentians, especially Unity Labour Party supporters and those few remaining socialist troglodytes who believe that the public ownership of the means of production is the best way to run the economy of country, will certain cheer this project, there is good reason to be fearful — very fearful — that it will ever proceed.

Although hotels and other hospitality venues around the world are sometimes built and exclusively owned by governments, these are generally confined to hard-line socialist regimes (such as the former Soviet Union, present-day Cuba, and Jamaica during the Michael Manley era) where their economic performance has been less than lacklustre. Conversely, their presence in mature capitalist economies is a sure sign that they are unprofitable from a free-enterprise perspective. Yes, many hotel chains, including the elite Four Seasons Hotels and Resorts, do not build any of the properties they manage, but the financiers, builders, owners, lessors, and franchisees are invariably private sector entities.

The days of public hotel construction, ownership, and management are nearly over as both building and administration have been transferred to the far more efficient, transparent, and profitable free market sector. As for possession, even Cuba, which until recently owned 100 per cent of the nation’s hotels, has shifted most management and up to 49 per cent of tenure to once reviled international capitalists.

When Jamaica was compelled to experiment with democratic socialism during Michael Manley’s first two terms in office (1972-1980), the nationalisation of the country’s hotels proved to be an economic disaster. When an Edward Seaga government that divested itself of the albatross his predecessor had created soundly defeated him, the hotel and tourism industries began to thrive again.

But even the few examples of public hotel ownership outside Cuba referred to by Ralph Gonsalves prove that governments have no business building hotels.

Barbados has been trying to sell its iconic Hilton-managed and branded resort for years and the Hilton-run hotel in Trinidad, built and owned by the government, was allowed to deteriorate for two decades before being slowly renovated beginning in 2005, a process that is still incomplete.

All publicly-owned and privately-managed Caribbean hotels also suffer from accountability and transparency issues with governments refusing to reveal the contents of their contractual arrangements or even whether the hotels are profitable or not.

No wonder then that Prime Minister of Antigua and Barbuda, Gaston Browne’s call last year that Caribbean hotels should be nationalised was termed a “folly.”

As one British investment house spokesman said:

“State-owned hotels in the Caribbean has never been successful at any time. The business of government is not running businesses. Antigua is heavily indebted and should use its resources prudently in areas like education, healthcare and maintaining law and order — not using well needed capital to buy hotels.
“If the government gets into the hotel business, investors in all sectors will run off and with no FDI
[Foreign Direct Investment], Caribbean countries would be a financial disaster. It just doesn’t make sense. The Prime Minister of Antigua needs to rethink his position on this.”
So does Ralph Gonsalves, whose regime has conceived, financed, built, and managed the AIA boondoggle while negligently vetting outside investors in our tourism industry, as in the case of Buccament Bay Resort (which shows no signs of re-opening anytime soon) and, as time may tell, Pace Developments Inc.

The only reason this government feels compelled to construct a large hotel at Mt. Wynne is that no legitimate and recognised private entity, local or foreign, would be willing to do so given the lack of white sand beaches or compensating attractions at Mt. Wynne and surrounding areas.

We already have a government-owned folly at Argyle. We don’t need another one at Mt. Wynne.

***

This is the 74th a series of essays on the AIA folly. My other AIA essays are here.

13 COMMENTS

  1. The business of government is indeed not to run businesses. But at this stage of the game, in SVG in particular with all else that has been wrought and what with the robust reality of “lucrative”, life-giving board memberships granted to grateful devotees who literally sit atop entities that resemble businesses steadily milking the State through these entities, what else can government do at this late hour? Is there a pathway back?

  2. The Hotel industry survives in being competitive therefore, it would seem that having a “State-owned hotels would prohibit private investors interest, the fact that they will literally be competing with state-owned SVG Government’s resorts just create greater rick aspects.

    Let’s think seriously on this matter; how many veteran financiers would be willing (after proper sourcing) to risk building a resort on state-owned land to compete with state-owned resorts? Bear in mind that government in principle, has legal rights to all SVG Lands. One way or the other, as C-ben stated “Government resources prudently in areas like education, healthcare and maintaining law and order” >>roads infrastructure and electricity.

    However, it is quite possible that the Government is building this resort in the hope to attract the procurement interest of private investors, including nationals in becoming shareholders. Being shareholders will enhancement national pride and patriotism which in turn will; contribute to improved conservation.

    The finality, is that we cannot give up but aspire yet higher! “Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence”

  3. That sounds like a load of crap, just have the Marriott or Hilton Hotel ” Manage” Buccament Bay. No building need just a new Bridge to the existing Building.

    • Exactly what, “sounds like a lot of crap?”

      There is a court appointed bankruptcy trustee in charge of the very complicated Buccment Bay Resort issue. Nobody can simply give the resort to Marriot or Hilton to manage.

      Besides there are millions of dollars in repairs and renovation that need to be done as part of this process.

  4. I’d really like to see some figures for AIA operations for one year. Are these figures available anywhere and are they reliable figures?

    • You are asking the million dollar question, and yes, how do we know if the figures would be accurate? I would not mind if we had a slight loss on the airport if we undeniably would have higher profits in the tourism industry because of the airport; but that does not seem to be the case. Sadly, C. Ben has been right all along in his airport/tourism reports. I predict that for us to see a turn-around will take more than we are capable of; and we see that our Political Leadership is totally hopeless in all aspects in these regards.

  5. Vincentians are too educated, sounds like everywhere in the world. Lots of talks and no actions.. I know, if the private investors haven’t taken interest in building the resorts The government must act to stimulate the tourism sector.. once things get going we can privatize later! I wish to hear more constructive criticism not flat out road blocks from you always..

    • The government has been enticing private investors to develop Mt. Wynne as a tourist destination since 1998. Pace Developments Inc. is the first and only developer bold (or foolhardy) enough to buy land in a black-sand seaside area of nearly 700 acres that has stood unwanted for 20 long years, a period during which scores of hotels and resorts have been built in every part of the Caribbean and thousands more around the world.

      The government must NOT act to stimulate the tourism sector at a place where there is no tourism sector to stimulate. Face reality: “things will never get going” at a hotel built by the government at Mt. Wynne.

      These are “not flat our road blocks” because there is no way to stop the government from going ahead with this project. Indeed, my comments are a positive patriotic attempt to point out the folly of a project that does not deserve public support.

    • I understand your opinion Adrian. Sadly, C. Ben is right.I am sure even he wishes he were not, otherwise he would not spend the time writing these articles. C. ben does seem negative about most everything. Accepting that he has been accurate all along with tourism, we should see it constructively and not emotionally. Our Prime Minister is an intelligent man but for some reason he is very loose with the people’s money and he makes the worst economic decisions imaginable while we watch the vital infrastructure of the nation crumble, crime going out of control as unemployment gets worse. Many of the people are going to continue voting for thier own poverty, believing that some building materials at election time will make things better. The airport is a tremendous liability and here is our Prime Minister again creating more debt and liabilities for our children of future generations to pay for as taxes will go up even more. Unless C. Ben can continue to educate more of the brainwashed all of this is just going to continue.

  6. David its the new vote winner he is looking for, he cant point to the airport that is already looking like a white elephant, Buccament is no recommendation, the imaging centre at Georgetown still isn’t ready although they say it is, only four patients.

    He can’t start the new city because no one or no investor will get caught up in that crackpot idea.

    So its the easy rout to capture the minds of the ignorant. Its a hotel that like all his 3 year projects will take 10 years have a 100% overrun in costs, but will not matter in the short term if it gets him re-elected.

    By the way I hear that Buccament will be a local family of hoteliers, none of the big boys. That is why he is frightened to say who it is.

  7. If the private sector don’t come its because its not a good idea to build such a project there. For the government to borrow US$50 million to self build is a folly, like the airport is a folly.

  8. One thing for sure, general support lacking. Calling on Vincentians to support trash, no way. The scriptures says one ought to stay clear of negative people. Boring individuals, one theme. Advocacy on behalf of Ben, long journey guys.

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