Kerzner International’s chairman and CEO Sol Kerzner issued a press release stating that approval of the controversial Baha Mar development would be a clear breach of the investment agreement signed with Atlantis, currently the largest private employer in the Bahamas.
In a rare public move, Kerzner, whose company once saved the Bahamas’ economy, said Baha Mar is being granted much more than his company ever received.
“Baha Mar proposes employing thousands of foreign Chinese workers, which would represent far more than 30 percent of the total labor force. Approval of this arrangement by government would be a clear breach of an investment agreement with a developer that has become its largest private employer, and an investor who took a risk on The Bahamas when its economy was struggling far more than it is today,” said Sir Sol in a statement issued to the media.
Parliament is in the midst of debating the Baha Mar proposal. Both the FNM and the PLP support the Baha Mar deal.
Mr Kerzner’s statement also said:
“When Kerzner first invested in The Bahamas by acquiring what is now the Coral and Beach Towers out of bankruptcy in May 1994, we made our investment on the basis of agreements with the government that gave us contractual assurances regarding our investment. Although we were confident in our abilities to reestablish the Bahamian tourism industry at that time, we did so in the face of truly dire economic conditions. Accordingly, we insisted upon most favoured nation treatment, which would ensure that no subsequent investor would be given advantages that we never enjoyed.
“Since our first investment, we have always found Government – irrespective of the party in office – to be a faithful partner who has justified our initial and subsequent confidence in the Bahamas as an investor. We have invested more than $2.3 billion over the course of our build-out of the three phases of Atlantis, increasing our room count from approximately 1,100 in 1994 to over 4,000 today.
“We have grown the Bahamian workforce from approximately 1,200 employees when we commenced operations in 1994 to nearly 5,000 full-time employees today, not to mention the indirect employment that our investment has generated in the community. Furthermore, we have spent millions on training programmes to develop and improve the skills and professionalism of our work force, which has allowed Atlantis to be rated among the top resorts in the world.”
Mr Kerzner also noted that, with his company’s single largest investment of approximately $1 billion for phase three, Atlantis signed another Heads of Agreement with the PLP government in 2003. Among the many requirements that the government imposed was a strict rule that at least 70 per cent of the total construction labour force would be Bahamian.
Atlantis officials insist that Baha Mar’s proposal of some 8,150 Chinese labourers constitutes a complete reversal of this previous standard.
In an interview with the Tribune newspaper, Kerzner International’s managing director George Markantonis said the company intends to address the breach of contract in their Heads of Agreement with the government.
He did not reveal how this matter will be “addressed” with the government, but noted that the original Heads of Agreement constituted a solemn promise by the Bahamas government that laid out the rules for Kerzner and subsequent investors.
“You can’t put in one thing in an agreement and then do another thing. And really it is as simple as that,” Mr Markantonis reportedly told the Tribune.
Agreeing with statements made months ago by marketing experts at BahamasB2B, Mr Markantonis said he was concerned that there could be cannibalism in the marketplace with a new 3,000 room development on Cable Beach.
In the early stages of the Baha Mar proposal, BahamasB2B founder and marketing expert Duke Wells publicly warned that the Bahamas could not handle such an increase in hotel rooms in the same market as Atlantis, all at the same time.
Mr Markantonis agreed, telling the Tribune that, at the very least, a project with the size and scope of Baha Mar needed to be phased in over many years, as Kerzner International did with Atlantis.
Both Mr Wells and Mr Markantonis agreed that the Bahamas tourism infrastructure needed to catch up with additional demand. Airlift would have to be increased, and that will not happen overnight just because 3,000 new hotel rooms are built.
Mr Wells noted that the hotels on Cable Beach can’t keep their rooms filled now, how would they ever fill an additional 3,000 rooms.
Mr Markantonis compared statistics from the Promotion Boards for the month of November 2010 to December 2009, revealing that overall airline data reflected that departures are down 26 per cent and seats are down 19 per cent from just last year, which was already determined to be a terrible year.
“Now is it plausible that someone can just go and add another 3,000 luxury rooms… and find the customers where?” Mr Markantonis asked.
Prime Minister Hubert Ingraham said on Sunday, in a nationally televised address, that the Baha Mar deal would be approved by the end of the month. It is unclear if Kerzner’s intervention will have any effect on that pronouncement.
Meanwhile, Baha Mar was not happy with Mr Kerzner’s public comments.
“We are not going to comment on Mr. Kerzner’s public relations statement. The Baha Mar project has been well vetted with the public, the government and its investors. We are happy the Baha Mar resolution is being debated in Parliament today,” said the company in response to Kerzner.
The Bahamas government is sliding down a slippery slope. It is possible that a resolution to the problem may include additional concessions for Kerzner International, which would take a direct hit on the government’s ability to capitalize off of additional construction on Paradise Island.
It would appear that Bahamian government officials have never heard of “one in the hand is worth two in the bush.” Either that, or they are blinded by desperation and greed, which will backfire on them and the nation.
