At 5:00 pm on Wednesday 22nd May 2019, the ‘Resort Development in Tobago: Power, Politics and People’ seminar was held at Tobago Hospitality & Tourism Institute Campus, Blenheim, Mt. St. George, Tobago. The speakers were –
- Dr Acolla Cameron (Chair) – Head of the Dept of Management Studies, UWI,
- Mr Louis Lewis – CEO of the Tobago Tourism Agency,
- Mrs Diane Hadad – Chair, Tobago Division of the T&T Chamber of Commerce,
- Dr Leslie-Ann Jordan-Miller – Senior Lecturer, UWI,
- and myself.
Today’s seminar emerged from a December 2018 invitation extended to me by UWI colleagues to participate in a seminar on the proposals for Tobago Sandals. The announced withdrawal of Sandals from that project lead to a widened scope for this seminar and I am pleased to work with those UWI colleagues on this important issue.
This article outlines the case I propose advancing as my notes on resort development.
The Tourism sector is of significance in our Region with large tourism plant playing a major role in our micro-states.
These resorts occupy prime lands, often waterfront, and consume substantial public resources – water, infrastructure and other tax/financial concessions, environmental capital.
The conventional terms of the discourse on Resort Development gives prominence to employment, capital spend, room numbers, local content in terms of supplies and labour, origin of visitors and so on. The actual commercial rationale for these projects is seldom, if ever, discussed. Many governments hold as secret the terms of those arrangements under the grounds of commercial confidentiality.
The ‘Underlying Commercial Arrangements‘ are in fact decisive in the establishment and operation of these large-scale resorts. Regionally, the dominant model by which these resorts are created is based on the capital investment of hoteliers (site acquisition, design, finance, fitting & furniture) being incentivised via tax/duty/work permit concessions made by the host governments.
In T&T two regimes exist in fundamental tension –
- firstly, the Tourism Development Act of 2000 which created seven-year tax holidays for investors in tourism facilities and
- secondly, the three largest hotels in the country are State-owned – Hilton Trinidad, Magdalena Grand (formerly Tobago Hilton) and Hyatt Regency.
The first regime has had little, if any, impact in terms of new private capital deployed in this sector, while the second is the subject of this submission.
The T&T model is one in which the State has invested all the capital as Public Money and those facilities are operated by the hotelier under a Management Agreement. These State-owned hotels are large-scale Public Private Partnerships (PPPs). The terms of those Management Agreements are available only in the case of the Hilton Trinidad and no proper performance details are available for any of the three hotels.
UWI colleagues tell me that little, if any, research or attention has been devoted to those ‘Underlying Commercial Arrangements‘. As a result, we have little idea as to the basis for, far less the returns on, those huge investments of our Public Money.
So the problem is that the decisive arrangements are literally unknown as we plunge ahead into more of these PPPs.
As part of my research program, accomplished with the help of Disclosure Today, I wrote to the Ministry of Finance PS, Maurice Suite, to ask for copies of any Audits or Management Reviews of those three State-owned hotels. PS Suite replied promptly that no Audits or Management Reviews had ever been done on those PPPs. It seems to me that we do not know and what is worse, do not even want to know.
Yet that same PS Suite is then promoted to the OPM, where he now heads the Public Service, and that very office emits all kinds of claims about these arrangements for these State-owned hotels. The PM and Minister Young both seek repeatedly to assure the public not to be concerned over the Tobago Sandals proposals since those are the same good arrangements we already have in place. Did PS Suite advise the PM and the Cabinet on this high-profile matter?
Just take Tobago Hilton as an example. That resort was established in 2000, with its construction funded by a ten-year $16.75M USD bond. There were significant private sector shareholders – Hilton International; Guardian Life and Angostura – yet that resort was in a distressed sale eight years later. We also know from Dr Keith Rowley – who was Minister of Trade & Industry at that time – that the private sector partners had not fulfilled their responsibilities insofar as contributing to the ongoing maintenance of the hotel itself. Those lapses had made it necessary for the State to undertake urgent repairs. Yet we also know, from testimony to the JSC on 6th April 2016, that those private shareholders were repaid $138M, while the State has paid for repairs to the tune of $168M.
After careful enquiry, I can find no proper study of the failure of this PPP at Tobago Hilton. We have not learned from those errors, so the real challenge for us in this discussion is to devise a research program to enquire urgently into these PPPs, especially as we seem to have a growing appetite for that approach to large-scale development. We also need a solid commitment to making the results available for wider learning – no more secret Reports, please!
We would not have experienced the Tobago Sandals debacle if this fact-based basis for decision-making was our norm, that is the sobering truth. There is a lot more to say on all this, but I am closing by welcoming the Tobago Tourism Agency’s recent important research into the Tobago room stock, that approach is to be encouraged.
These are a few considerations on the prospects for resort development in Tobago.