DPM: Grand Lucayan could turn profit before resale

DPM: Grand Lucayan could turn profit before resale
Deputy Prime Minister, Peter Turnquest.

NASSAU, BAHAMAS – Before its projected resale in the second quarter of 2019, the Grand Lucayan resort in Freeport, Grand Bahama, could stop operating at a loss and turn a profit under government ownership, according to Deputy Prime Minister Peter Turnquest.

In an interview with Eyewitness News Online, Turnquest said there are several “exciting business opportunities” on the horizon for the property and if realized, the resort’s losses would be significantly mitigated.

The resort operates at a loss of around $1.5 million per month.

The ongoing voluntary separation package (VSEP) is intended to reduce the resort’s operational costs.

That process is expected to be completed this month.

“Even after the VSEP there is a good chance that we’ll still lose money, which is why it is important to transfer this business to a private sector entity in the shortest time period,” Turnquest said.

“But, there [are] some exciting business opportunities that we are hoping to hear from soon that may, in fact, help to significantly mitigate that, and maybe even turn a profit in the interim.

“If that happens then we’ll be back to a positive position that we really want to be in.

“But again, it is a little early to talk about that I suppose, until we get firm word whether what we are working on, will happen.”

Turnquest did not divulge specifics on the work of the government’s special purpose vehicle (SPV).

The SPV, Lucayan Renewal Holdings, was set up to hold the assets and manage the resale.

When asked how the SPV was mitigating the costs at the resort beyond the VSEP process, Turnquest said he could not disclose as “it is very live at the moment, but it is also very encouraging”.

The government remains optimistic about a pre-June sale, though it was originally projected to be sold within three to six months of its purchase in September.

Last month, Michael Scott, the chairman of the SPV, Grand Lucayan Holdings, said there were two dozen written expressions of interest from potential purchasers.

He said it could take until March or April of next year to select a preferred bidder.

The government purchased the resort for $65 million, with $30 million paid up front.

It borrowed the balance from the former owners, which will be a government-guaranteed mortgage paid over three and a half years.

The resort features three brands: Memories, Breaker’s Cay and Lighthouse Pointe.

The all-inclusive property closed its doors following Hurricane Matthew in October 2016.

The Lighthouse Pointe was the only hotel reopened.

As part of the purchase agreement, the government paid Hutchinson Lucaya Limited (HLL) and Bahama Reef Limited $1.5 million as a subsidy for operational losses while keeping the Lighthouse Pointe open during the completion of the purchase.

It would cost the government around $39 million to renovate the resort’s properties – Lighthouse Pointe, Memories and Breaker’s Cay, according to the government.

The government recently revealed it will spend just over $3 million to upgrade the property and maximize the resort’s potential earnings during the high tourist traffic season.

As it relates the VSEP offers, around 150 employees have opted to accept packages — 60 managers and around 90 line-staff employees.

Scott estimated it will cost the government over $3 million.

However, he said last month that the unions requested payouts that exceeded the resort’s offer by $4.6 million. While it remains unclear what the resort’s board and the unions agreed on, Commonwealth Union of Hotel Services and Allied Workers President Michelle Dorsett said the unions accepted an offer that employees will be satisfied with.

Meanwhile, the opposition has asserted the projected timeframe of the resort’s resale is misleading.

In the Senate, Minister of Labour Dion Foulkes said there were “serious contenders”, including entities in the hotel industry and airline sector, which had sent proposals to the government.

The government has said it purchased the resort to protect the economy of Grand Bahama and the national interest of Bahamians.