The GEMS Hotel Scandal Continues Under New Barbados Government

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?

Adrian Loveridge
17th June 2008

20 Comments

Filed under Barbados, Barbados Tourism, Business, Political Corruption, Politics & Corruption, Traveling and Tourism

20 responses to “The GEMS Hotel Scandal Continues Under New Barbados Government

  1. Bajanboy

    So, Gems is basically insolvent!! Think of what $142 million dollars could have done to improve the physical quality of hotels in Barbados, and also to improve service through training.

    The DLP must come clean on GEMS now!!!

  2. reality check

    any normal and responsible corporate organization would have to write these loans down quickly to fair market value based on a net income times a reasonable multiple factor.

    There is no better opportunity for a new government to do it as soon as possible as they can legitimately blame it on the former den of thieves and incompetents ( including bureaucrats ).

    Taking these write downs to reflect economic realities will no doubt bankrupt NIS and have serious ramifications with International lending agencies who are partly responsible for allowing the last regime to flourish unchecked.

    Nevertheless, if the DLP wants to start with a clean slate they must take the medicine now rather than continue the charade that these loans could ever possibly be repaid.

  3. Write the debt off, prosecute anyone who got rich on the back of GEMS and don’t do anything like this again – it’s not government’s business to run a hotel. As importantly, never call projects names like GEMS – it makes writing headlines like “GEMS loses it’s shine”, or “GEMS hotels fail to sparkle” way too easy.

  4. Adrian Loveridge

    Just the interest payable annually on that one loan to GEMS would give each of the remaining 120 small hotels a marketing budget of $83,000 per year.

    Or the one loan of $146.3 million spread among the 120 small hotels providing each $1.22 million to upgrade and re-position.

  5. Ivan Taylor

    This is some serious remarks, is Barbados FREE press ready to deal with this

  6. S

    I find this headline is extremely misleading. Can the new government get a chance to tackle the issues? It is disconcerting that everyone wants results immediately when we all know that the real world does not work that way. To suggest the government is continuing a scandal suggests that in is continuing and expanding the work it inherited. Rubbish!! the decision to divest a business entity is not one that you do over night. You must investigate what is the best course of action for you and that entity. Furthermore if you are a responsible government you must consider those persons employed in the Gem projects. So I respect Mr. Loveridge’s right to his opinion but I must ask how exactly is the government continuing the GEMS scandal? Because he only references what the previous administration has done? I don’t know if he expects with society crying out about the high oil price, high food costs, higher everything that GEMS will be a focal point of discussion right now. If the government decides to focus on GEMS right now they will be lambasted for not focusing on the pressing issues affecting Barbadians. I guess for some you can’t win!

  7. Keltruth Corp.

    Most disturbing. I have many questions.

    Who owns these three hotels?
    Who are the major shareholders in Hotels and Resorts Ltd.?
    How did this company qualify for such a loan?
    Is the Government required to reveal to the public the details of the loan, and to show who benefits?

    And of course, who suffered? Money has to come from somewhere. From which account was this loan money taken?

  8. reality check

    “I don’t know if he expects with society crying out about the high oil price, high food costs, higher everything that GEMS will be a focal point of discussion right now. If the government decides to focus on GEMS right now they will be lambasted for not focusing on the pressing issues affecting Barbadians.”

    GEMS and other related fraudulent projects is the equivalent of financial murder. Lets not hold anyone accountable because we have other problems to deal with.

    This person has to be kidding or is trying to deflect political and legal energies away from the wrongdoers.

    Where is the outrage!!!

  9. Beefcake

    The GEMS issue is nothing new to the government, as they made it an issue while they were in opposition.

    They have the ability to now act on their previous observations.

  10. 522

    silver.rock used to belong to bree but he ded en gone. so hoo got de money? bryte? stella? whuh gwan? sin.john somewhere gotta be rich

  11. Jerome Hinds

    I agree with S that this article is misleading……to state that the new gov’t is perpetuating the GEMS mess !

    Questions :

    Has the DLP gov’t borrowed new loans for GEMS ?

    Has the DLP gov’t given up it’s quest to find out how the GEMS project performed from inception ?

    I will be happy to hear BFP views on these critical questions .

    **********************

    BFP says,

    Hi Jerome,

    1/ Five months after the new government took office, GEMS hotels are still operating and going into the red at $1000 per bed per day.

    2/ Yes, because the government is funding this debacle, there is new money going into the pot every day in the form of interest deferred and assets unrealized.

    3/ What is the security held by our government on this essentially bankrupt fraud? Are there other entities who hold security on the GEMS assets? Are we, the people of Barbados, #1?

    4/ If not now, at what point are we, the people of Barbados, entitled to say that the current government is continuing with the loss? Six months after election? Nine? A year?

    When can we say that the current DLP government has failed to act to stop the bleeding? Give us a date. A real deadline.

    Over to your Jerome…

  12. Tell me Why

    Do you expect solutions from Jerome, he believe in reactive criticism instead of pro-active solutions.

    By the way Jerome, how all of a sudden we are hearing about the IMF. Where is Standards and Poor?

  13. 102.86

    poo any article by Adrian Loveridge i take lika a pinch of salt simply cause he just does not know how to tell the truth

  14. Jerome Hinds

    Over to your Jerome…

    Thanks BFP.

    I am happy to let you know that the DLP gov’t is actively paying close attention to the GEMS hotels mess.

    Why are they still open ?

    The jobs of young Barbadian women and men are at stake !

    Is this the best for the economics of this project and the country on a whole ?

    No No !!!

    But after being in office for only 6 months…..I am certain BFP can understand that solutions are being considered by the DLP gov’t to clear up this issue !

    Adrian Loveridge should be complimented for keeping it on the front burner .

  15. no name

    Last week there was an ad running on the internet for 7 days at Time Out, airfare included for US$299.00 each for two people from Miami.

  16. nearlynormalized

    Have they left any of the left over money in Las Vegas, we need all the $’s you can leave. We are in what one would call a financial phuque up. Have fun, best get back to the grass hut days. (just kidding)

  17. Fool me Once

    Day Thompy got elected he should have fired everyone involved as they destroy records of where all the money went- into the pockets of piggies.

    Barbados has guaranteed those loans so us taxpayers now owe minimum $160million and climbing daily. GEMS far beyond bankrupt and going to take us down with it.

    Show some spine Thompy and shut this down and expose the thieving ones who set this up. The old guard who go it in this mess (Shorey and others) still in charge lining his pockets and you allowing it to happen looks like a cover up.

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