How much longer is the economic folly of GEMS going to continue?
Recently the Barbados Advocate carried an article in which the Auditor General stated that Hotels and Resorts Ltd owed Government, (the taxpayer), $48 million in unpaid interest.
He also reported that the then Government had agreed a loan of $145.3 million.
Hotels and Resorts Ltd, currently comprises of just three hotels, Blue Horizon, the Savannah and Time Out at the Gap, with a total of 241 rooms. This does not include the 30 rooms that have remained derelict since Blue Horizon was acquired.
Also must be mentioned is the sale of Silver Rock Hotel and Eastry House and exactly where the proceeds of these properties have gone.
But let’s stick with the remaining operating properties.
According to the Barbados Statistical Service, our registered accommodation providers (Hotels, Guest Houses and Apartments) achieved an annual average occupancy of nearly 51 per cent in the last recorded year available. If we therefore take this an indicator for the GEMS properties, that means they reach around 44,862 in total, occupied room nights per year.
To service the $48 million interest alone, that means each occupied room would have to charge an additional BDS$1,070 per occupied room per night.
Even at full published rack rates, I somehow doubt that overall they are achieving at average room rate of US$150 per night. Take into account, all the tour operator discounting and years of predatory pricing, and that figure could be closer to US$80.
Add the latest loan just revealed, but made in July 2002 of BDS$145.3 million and you are compounding the debt by over $10 million per annum in interest alone.
So in addition to the $1,070 per occupied room night already needed to repay the interest (not capital) debt, another $223 for each and every night a room is occupied is required as the interest due and payable climbs by over $10 million per annum.
How much longer is this madness going to continue?
17th June 2008