Wyndham Closure Cut Baha Mar Losses By Half

Baha Mar yesterday said the six-week closure of the Wyndham Nassau Resort and Crystal Palace casino accounted for a "significant portion" of the 50 per cent reduction in its 2009 net losses, compared to the year before.

Explaining the economic rationale for the six-week closure, which Baha Mar will again effect this year during the slowest period of the tourism season, Robert Sands, the developer's senior vice-president of external and governmental affairs, told Tribune Business: "We cut the loss in half [in 2009] from the year before."

When asked about how much the summer closure contributed to this saving, Mr Sands added: "It was a significant portion, or else we would not be doing it this year. It reduces the costs and expenses at traditionally the slowest time of the year, and we're able to put staff on vacation at the same time.

"We believe that we reduced the loss from the year before significantly, and that allowed us to start the year at our current staff levels."

Mr Sands, who is also the Bahamas Hotel Association's (BHA) president, said hotel operating costs throughout the Bahamas had benefited from the reduction in contributions to the hotel pension funds, which fell by 50 per cent - from 6 per cent of employee salaries to 3 per cent - from the first pay week of 2010 onwards. The employer pays 100 per cent of the contribution.

"We're closing for the slowest period of the year, and organising that people be taking their vacation during this period." Mr Sands said many staff, those who had been employed for between 10-15 years, were due to take between four to five weeks' vacation per year - accounting for almost the entire six-week closure period.

The 2010 Wyndham/Crystal Palace closure will take place between August 23-October 5, and Mr Sands added: "September is the slowest month of the year and, God forbid, hurricane season. We'll direct the existing business to the Sheraton, so we will basically be volume controlling the business during this period."

Some 1100-1200 staff will be affected, and Mr Sands said "less than 40 per cent" of these were members of the hotel union bargaining unit, since those impacted included management, casino and non-unionised personnel.

The Baha Mar executive told Tribune Business that the resort owner "did not accomplish all of the goals we wanted to achieve" during last year's closure, although "a significant portion" were achieved "and helped to reduces losses during that period".

Adding that Baha Mar "got very close" to its planned savings target in 2009, Mr Sands said: "We would have preferred to see additional savings, and the way we managed this process this year will help us to achieve that, especially in the area of energy."

Letters were sent out to Wyndham/Crystal Palace employees in early January regarding the potential 2010 closure, and Mr Sands said areas such as the laundry and energy plant would remain open throughout, along with the golf course.

In an exclusive interview with Tribune Business earlier this year, Sarkis Izmirlian, Baha Mar's chairman and chief executive, said the company's two existing Cable Beach resorts were still open only because his family had used their own money to cover "significant multi-million dollar losses", particularly over the last two years.

He added that, together, the combined cost of acquiring the now-Sheraton Nassau and Wyndham Resort & Crystal Palace Casino plus associated land (estimated at near $200 million); the $150 million investment in upgrading those properties; Baha Mar development costs; and covering the existing resorts' losses (probably at least $40-$50 million) since the 2005 acquisition, had made the Izmirlian family the largest private investors in the Bahamas. Tribune Business estimates that investment to be around at least $500 million.

"Those hotels have lost money for the past four years," Mr Izmirlian said of the Sheraton and Wyndham. "In the past two years, they've lost significant amounts of money because of high operating costs in the Bahamas and the recession in the US. The only reason they're still open is because my family has covered those losses - significant losses."

Mr Izmirlian declined to give figures for those losses, or how great a subsidy his family had been forced to inject, but added: "All I can tell you is that the amount of money invested in buying the land, renovating the hotels and covering the losses makes us by far the largest private investor in the history of the Bahamas. Those are big losses."

Source: The Tribune