At the end of January 2018, the Ministry of Trade & Industry and its implementing agency, Evolving Technologies & Enterprise Development Company (ETECK), announced the completion of a $7.6M project for the renewal of the Trinidad Hilton Pool. According to the official statements, that project was completed on time and within budget, as part of the State’s long-term obligations at that 418-room hotel. Despite those assurances, there was a series of condemnations which need to examined.
Trinidad Hilton Management Agreement
Three of its interesting details –
- Hilton pays ETECK a rental of 76% of the ‘Annual Gross Operating Profit’ which is defined in the lease;
- ETECK is responsible for doing replacements, renewals, extensions or improvements to the Trinidad Hilton at its expense. That means that ETECK was acting within the lease terms in paying for those pool improvements;
- Hilton is required to prepare detailed accounts of the hotel’s operations and submit those to ETECK.
Please note that Trinidad Hilton is undergoing a hugely expensive improvement program since 2008 (see Sidebar).
I am not making an issue of the decision to do these improvements or making allegations of cost or time over-runs. There may be issues in those aspects of the project but I am not engaging those.
My issue has been and remains, that despite all the smooth press releases and so on, we are unaware of the underlying commercial arrangements by which these hotels exist. The three largest hotels in our country are State-owned – Trinidad Hilton; Magdalena Grand (formerly known as Tobago Hilton) and Hyatt Regency. Those hotels are operated by foreign entities under management agreements with the State agencies which hold the ownership interest. They can therefore be classed as Public Private Partnerships (PPPs). Since PPPs are currently being promoted as a development approach, those arrangements certainly ought to be closely examined, looking beyond the Hilton pool.
In 2016 I developed a research program into the State-owned hotels in our country and have been pursuing that with the help of my colleagues at Disclosure Today. We have been trying to get copies of the Management Agreements and details of the performance of those hotels.
Our questions have been avoided with a type of brazenness which would be funny, if nearly $2.0 Billion in Public Money were not involved.
But Trinidad Hilton is unusual in that we actually can access the Management Agreement between Hilton International and ETECK, since it is a registered lease with the Registrar General’s Department – DE 200601713101. That unusual aspect itself discloses a series of deeper issues within this fractured and important part of the State’s portfolio –
- The Agreements – If ETECK registered the Trinidad Hilton Agreement why was there the need to suppress the agreement for the 198-room Magdalena Grand? The Trinidad Hilton agreement contains no confidentiality clause, so why then have we agreed to those at the other hotels? How does that secrecy serve the Public Interest?
- Performance – even though the Trinidad Hilton Management Agreement is available, the same secrecy on its performance applies as at the other State-owned hotels. If there is no confidentiality clause, what is the secret about that hotel’s performance?
The Joint Select Committee
In 2016, the Parliament’s JSC examined the operations of ETECK with particular reference to its accounts and finances. Its Report was published in September 2016 and makes intriguing reading, given the stakes here. According to the President of eTeck, Robert Salandy, in his testimony to the Joint Select Committee on 6th April 2016, the project costs have escalated from an original estimate of $484M to a current figure of $634M. A total of $508M had been spent and it was reported that “…Salandy could not give a time-frame in which the renovations at the Hilton hotel would be completed…”. I was particularly struck by Salandy’s claims that he was unaware of whether any feasibility test or cash flow analysis was engaged before starting the $600M+ long-term project. When pressed, he relied on the Cabinet’s approval as justification. This all places the State’s investment in this type of opaque PPP into question.
ETECK’s position is complicated. On the one hand, they are withholding the Magdalena agreement on grounds that to disclose those details would violate and threaten the commercial interests of the operator. On the other hand, they are unable to explain why the disclosure of the management agreement in the case of Trinidad Hilton was not similarly damaging. The Trinidad Hilton agreement contains no confidentiality clause, yet ETECK continues to suppress its performance details on similar grounds. Of course, all of this sits awkwardly alongside the Minister’s claims as to Return on Investment for the Public Money spent and so on. I tell you.
The Information Age is global and it is growing, except when it comes to the secret, public projects in the Republic of Trinidad & Tobago. It may seem bizarre to juxtapose ‘secret‘ and ‘public‘ like that, but Ole Mas is our National Culture.
As part of our research we wrote to the Ministry of Finance & The Economy and received a prompt reply that there has never been a Financial Audit or Management Review of those hotel PPPs. That Ministry is pushing PPP as a development approach at this time in our country.
One thing we know for sure is that those foreign hotel operators would not have persisted if those arrangements were not profitable. As we now know, Hilton International was able to exit the Tobago project when the arrangement became unfavourable and still be paid $138M for its shares in Vanguard Holdings, which owned that property. So the real question here is just what returns do we, the public, get from these huge and expensive projects. The silence, obfuscation and sheer spin all fed my scepticism on the Tobago Sandals proposals. If the State is unwilling or unable to disclose the agreements and performance of those hotels, it seems that there is an inability to make the case for yet another one. Hence the Ole Mas continues.