Tourism minister insists Grand Lucayan sale is not a bad deal

Although the principals intend to spend less and take a longer time to begin development, Minister of Tourism Dionisio D’Aguilar said he wouldn’t describe the new conditions of the Grand Lucayan sale as “bad” as has been described by Lucayan Renewal Holdings Ltd. Chairman Michael Scott.

Last week, Scott described the sale of the Grand Lucayan to Royal Caribbean International (RCI) and ITM Group as “a bad deal”, as the board of Lucayan Renewal Holdings Ltd. – the government’s special purpose vehicle to handle the sale of the Grand Lucayan resort – pushes toward a February 2021 reopening.

But D’Aguilar said yesterday that given the climate of the cruise and tourism industries, he’s encouraged that RCI and ITM Group are even still interested.

“Is the deal the same as it was in March? No it isn’t because of COVID-19, so the rate of expenditure isn’t as significant as originally planned. The speed at which the project is going to progress is not at the same speed. It’s just the reality of COVID-19 and its impact on every facet of the tourism industry worldwide. It’s the reality and while Chairman Scott might feel it’s a bad deal, it’s not. My view is yes, it’s not as perfect as it was in March or not as good as it was in March, but what I like about it is they are still interested and they still want to proceed,” he told Guardian Business.

“If I was a cynic, I would say that they would say, you know all bets are off, we’re not interested, we’re standing back and moving away from this transaction until we get our core business up and running. That is what I would have expected. But the fact that they are still very interested means that they are looking beyond the pandemic, they see a vaccine coming, they see a return to service and they see destinations in The Bahamas as attractive.”

After purchasing the Grand Lucayan for $65 million from Cheung Kong Property Holdings Limited – the real estate arm of CK Hutchison Holdings – in August 2018, the government in March this year signed a heads of agreement for (HOA) for the sale of the property and the development of a cruise port.

However, on March 15 the COVID-19 pandemic made its way to Bahamian shores, delaying the closing of the sale and the certainty of the project.

“With great enthusiasm and enormous optimism we signed the deal in early March with Royal Caribbean International and ITM Group. On the face of it, it looked great. Here were two well-funded companies, they were very successful, the cruise industry was booming, we had a partner that was well-funded that could deliver on a promise and follow through on their plans. So we were like great, this is great. And you know, two weeks later COVID-19 struck. And of course, COVID-19 has most impacted the cruise business. Their businesses have come screeching to a dead stop and now obviously with their core business being out of commission, they’ve had to step back and re-evaluate all of their plans,” D’Aguilar said.

“So the rate of expenditure has decreased and the speed of expenditure has decreased, but I think everybody has to recognize that within this COVID-19 pandemic, the reality is anything involved in the tourism industry is impacted. Hotels around the world, many of them, are shuttered. If they are open they are running at very reduced occupancies. Airlines are suffering from lack of traffic, they’re down – some would say – almost 70 percent. Cruise of course is to a dead stop, excursions are virtually eliminated. So this is the new reality.”

D’Aguilar shied away from giving a firm date on when the government expects the sale to be finalized, only saying that from the government’s perspective things are “ready to go”.

“Royal Caribbean wants to develop an attraction at the Grand Lucayan, but they also want to couple that with the construction of a new cruise port, so they’re dealing with two parties. One is the government of The Bahamas as it relates to the hotel and one is Hutchison Whampoa as it relates to the port. So, we are ready to go, or almost ready to go. Obviously there’s some fine print details to cross off, but that other transaction has to be moving at the same speed and culminate at the same time as ours does to make it attractive to them. They want to sign both at the same time,” he said.

“I remain encouraged by their interest and desire to push forward to make it, notwithstanding what is happening to their core business.”

The project was expected to commence in early 2021. D’Aguilar said whenever the project is complete, The Bahamas stands to benefit.

“RCI is going to want to go on short cruises now, maybe not as long. People are going to be very weary of a seven- or 10-day cruise because in those types of environments, unfortunate events may occur as it relates to COVID-19. Royal Caribbean and ITM have identified The Bahamas as a very attractive market for them, COVID-19 notwithstanding,” he said.

“But when they resume service – and I always say the three busiest cruise ports in the world are Miami, Fort Lauderdale and Cape Canaveral – if your market at least for the next one, two years wants short cruises, then what is more ideal than The Bahamas? So I’m encouraged that they pick up the phone every two weeks, we talk, we negotiate, we move the deal forward, notwithstanding the fact that we are in the worst possible situation as it relates to tourism that any of us have ever experienced in our lifetime.”

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