Bazarian: $1.5m per key to build a Bermuda luxury hotel
Developer Carl Bazarian says it would cost some $1.5 million per key to build a five-star resort in Bermuda.
Therefore, the financial models would ultimately have to work before any developer breaks ground on a new resort here.
The $1.5 million a key price compares to about the same in other upscale Caribbean-Atlantic destinations such the Turks & Caicos, and around $900,000 a key in places like the Dominican Republic and Mexico.
Local and international hotel developers we spoke to said the commercial viability of a new resort in Bermuda was difficult, because you would need condo rental and/or real estate sales to justify building a luxury hotel in order to reduce the project costs and loan capital required.
Therefore, high construction and operating costs in Bermuda must be addressed if the Island is to attract new investment, they said, especially given the tough capital market for newbuild resorts and a downturn in fractional and other vacation real estate sales.
New Tourism Minister Shawn Crockwell said last week he planned to meet yesterday with Tourism officials and they would be giving him a briefing on all the developments, especially Park Hyatt.
But the sad reality is that with the collapse of the Coral Beach Club Four Seasons plan, the postponement of the Grand Atlantic hotel, and several other planned developments falling by the wayside, there are only three proposed resorts at best and not one is confident enough of their financing to give a date for groundbreaking and completion.
One of the developers behind a proposed $1.8 billion Morgans Point resort, Nelson Hunt, claimed in The Royal Gazette in December that they had had investors, but had needed approval for a casino to proceed. Mr Hunt said there would be no major hotel development in Bermuda without gaming attached.
Meanwhile, the developers behind the planned St Regis Par-La-Ville hotel and residences claim they have financing, but appear to be nowhere near breaking ground and face legal issues including a Chinese brokerage suing them, and their company taking out a writ against another investment company.
And as we have reported, the PLP Government terminated the lease with Carl Bazarian for his planned Hyatt resort in St Georges, which was originally slated to open last year (see story on front page).
Thus, realistically, it will be — at the very least — two years before Bermuda sees a new resort.
In the meantime, the Tourism Board in whatever form it takes will have to look at marketing to increase arrivals, especially in the off season when tourist numbers and occupancies plummet. And it will have to look at ways to help a number of the hotels that we have to be viable, or more could go up for sale or into receivership.
A local hotel developer we spoke to said the new OBA Government needed to consider offering significant, far-reaching concessions to developers in order for financial models for a new resort to work here, including such things as:
— Duty free on all materials;
— Non-Bermudian workers to supplement Bermudian workforce for project duration;
— Concessions on food and beverage operations;
— No payroll tax for a period like two years;
— No hospitality taxes,
— Fast planning times for approvals;
— Latitude in doing hotel investment with a real estate component to make it viable;
— Electricity discounts until operating successfully.
The former Club Med property has remained vacant since 1988 when it closed its doors. Since then a long line of investor-developers have put forward plans for the site, some with financing in place, only to have them collapse for various reasons.
Back in 2008 it was announced the Park Hyatt was slated to open in 2012, featuring a 100-room hotel, 111 Park Hyatt Residences, and approximately 30 branded Hyatt fractional ownership units. The project has since been revised to include a hotel, golf course and amenities only in a first phase.