– As Privatization Unit determines best way to divest hotel
By: Kiana Wilburg
Public tenders will be rolled out in the next few weeks for the construction of the Entertainment Complex and Casino of the Marriott Hotel.
This is according to Larry London who sits on the board of Atlantic Hotel Inc. (AHI).
AHI is the special purpose company that was established to manage the Chinese built Marriott Hotel.
London said that since the Government is handling the hotel’s debt, moves can now be concentrated on completing the Entertainment Complex.
London said, “The Entertainment Complex is the cash cow. In a few weeks, we will be putting out tenders for someone who will be willing to build and operate the centre in conjunction with us (the AHI Board).”
While there is some US$11M that can be accessed from Republic Bank Trinidad for the completion of the Entertainment Complex, the AHI official said that the board would not be going this route.
Instead, AHI would be looking for someone who can bring their own funds to the table. The AHI official also confirmed that there are already expressions of interest by four persons in this regard.
Once the casino and entertainment complex gets up and running, London said that AHI would then take over the repayment of the Marriott loans which are now being handled by the government.
As for the future of the Hotel, London said categorically that the intention of the Government is to divest the structure. He believes that this is likely in the next four years.
Junior Finance Minister, Jaipaul Sharma also confirmed to Kaieteur News last night that government intends to divest the hotel.
Sharma, who is also a member of the Cabinet sub-committee on the hotel, said that the matter has been transferred to the Privatization Unit for advice. He said it was sent to there to determine the best way to divest the hotel.
The Junior Finance Minister also sought to explain that selling the hotel is not as easy as ABC. He said that the previous government has tied the nation to a most unfavourable and technical Management Agreement with the Marriott International brand.
He said that anyone interested in buying the hotel would have to take it with the Marriott brand. The purchaser would not be able to change the name of the hotel, since Guyana signed on to a contract that would inhibit this for the next 30 years.
Additionally, Sharma explained that even if the Government wants to sell shares, the Marriott International brand can have a say in that process. He said that the brand owners can object to it being sold to owners of competitive hotels such as the Pegasus Hotel.
It has been over two years since the coalition administration has been in office and it is still unable to remove itself from the Hotel.
In the mean time, the Government has taken the decision to repay the loan for the hotel. Government is forking out about $40m a month to meet the loan payments to Republic Bank Trinidad.
The Government was also faced with finding US$4M to do necessary repairs needed on the Chinese built structure.
Several critics have since lashed out at the government, stating that $40m could go a long way in providing services and catering for infrastructural projects which the nation is in need of. These include bridges in some communities, schools in far-flung areas and better health care services in the hinterland regions of Guyana.
One prominent businessman who spoke with Kaieteur News recently indicated that he was disappointed to learn that the Government is servicing the Republic Bank loans for the hotel.
The official said that what he finds damning is the fact that the nation is only now learning of Government’s decision to take on the payment of the loans. The businessman said that the Government should have been open with its people on this matter from the time it chose to take such a course of action.
The entrepreneur also pointed out that when one considers that the hotel is unable to make enough of a profit to cover its maintenance fees and even meet the repayment of its loans, it underscores the fact that it was and still remains a project that is not viable.
The businessman said, “The government made a promise when it was in opposition to get rid of it and so far we have seen no effort at all to get rid of it. Taking over the hotel loans is really a subsidy to the Marriott…”
The entrepreneur said that it would be wise for the Government to cut their losses now and sell the hotel. He insists, too, that the Government should submit financial the statements for this company as soon as possible.
The decision by Central Government to take on the payments needed for the Marriott Hotel has contributed to the increase of the nation’s overall external debt.
This is according to the Ministry of Finance. In its half year report, the Ministry said that the external debt stock increased by 5.0 percent, from US$1,143.5 million at end June 2016 to US$1,200.7 million at end June 2017.
The Finance Ministry said that this was due to a number of reasons. In this regard, it was explained that Guyana’s external debt increased as a result of the decision taken by the Government, in April 2017, to transfer the Atlantic Hotel Inc. (AHI)’s financial obligations to Republic Bank Limited (Trinidad) to the Central Government. This is due to AHI’s inability to meet the repayment. AHI is the owner of the Guyana Marriott Hotel Georgetown.
One of the shareholders in the Hotel is the National Industrial and Commercial Investments Limited (NICI). According to its head, Horace James, the new Board for AHI has been receiving unsolicited requests from persons who are interested in the construction of the Marriott’s Entertainment Complex and the benefits that might bring.
With this in mind, James said that the board is currently working out how they are going to deal with that in terms of advertising and construction of the complex.
James said, “But Marriott International is managing the hotel. There is a contract between AHI and the International brand for that. In terms of the loans, the hotel is not making money to service the loans. In fact, the Government has to pay US$1.2M every six months.”
The official said that while this cost should have been handled by AHI and or NICIL, the latter simply does not have the money. He stressed that “NICIL cannot stand on its own two feet”.
James said, “So the government is helping out both AHI and NICIL. Marriott can become profitable but I don’t think it should really be a government owned institution. That is why I think government is looking and will continue to look for a model to sell the whole thing or some shares in it…”
The hotel was birthed by the previous Government but there were questions about the risks involved and the financing structure which give control to private investors despite Government spending the bulk of the monies.
The 197-room hotel was completed are more than US$50M with real cost for lands and other concessions estimated at more than US$80M, critics of the project say.
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