NASSAU, BAHAMAS – Minister of Tourism Dionisio D’Aguilar yesterday said the revenue and employment opportunities to be gained from the sale of the Grand Lucayan resort far outweighs the “couple million dollars” in operating losses incurred.
The government signed a Heads of Agreement (HOA) for the sale of the property to Royal Caribbean and ITM theGroup earlier this week.
It had originally purchased the resort as an investment from former owners Hutchison Whampoa in September 2018 at an overall cost totaling $65 million.
In an interview in the foyer of Parliament, D’Aguilar insisted the government has sold the property for roughly what it was purchased for.
“The agreement will say that we are selling it for $50 million, but we also have the insurance proceeds that we’re going to receive from the insurance company based on the damages incurred during Hurricane Dorian,” he explained.
“So we reflected that somewhat in the price, but we expect to get that money directly from the insurance company and it will balance out at $65 million. “
The tourism minister noted that there were some operating losses for the 18 months the government managed the hotel, but he insisted that they felt it was more important to keep the hotel opened.
“When the document is revealed, you will also notice that we have had to give some concessions, but in every heads of agreement you have to give concessions,” he said.
D’Aguilar noted that the concessions are not extraordinary and not something the Bahamian people should be worried about.
“We think this is a great deal,” he said.
“When people look at what are the immediate costs…you have to think of the years of revenues and employment opportunities and entrepreneurial opportunities that that’s going to create for Grand Bahamians.
“…It far outweighs the couple million dollars that you are going to be spending every year in operating losses and you would have incurred while we held it for the 18 months and the concession they would be given.”
When the government acquired the Grand Lucayan property, the purchase price did not include inventories in the resort, and it also did not include other supplies of all kinds whether used or unused, opened or unopened such as china, glass, silver and linens.
Hutchinson Lucaya Limited (HLL) and Bahama Reef Limited (the vendors) was expected to receive credit for the total value of the inventory.
The government was also responsible for any stamp duty associated with the sale of the property, including stamp duty payable on the conveyance and the mortgage, and any other taxes, as well as all recording fees.
In addition to these costs, the government also conducted a costly voluntary separation exercise for line staff and managers at the resort last year.
The VSEP for line staff employees at the property included severance, gratuity and back pay for 164 workers totaling nearly $3.2 million
The government also agreed to a $4.4 million VSEP payout for 72 managers at the resort.
Both D’Aguilar and Minister of Finance Peter Turnquest said after the VSEP exercise, operating costs at the hotel was expected to decrease significantly.
However, last month, Turnquest told a local daily that operating costs were still at $1 million monthly.
D’Aguilar could not indicate yesterday how much was lost in operational costs over the 18-month tenure.
He however signaled that as the ownership of the property changes, all of the staff at the hotel will be severed.
“As we transition from our ownership to the new ownership, we will have to sever all the staff, pay them out all their monies owned to them and the new employer will then decide who they are going to reemploy,” he said.
Asked when the HOA is expected to be tabled, D’Aguilar said Prime Minister Dr Hubert Minnis will determine when it will be laid.