A rescue plan is being drawn up in a desperate bid to save Marriott's Castle Harbour hotel from closure.

Marriott chiefs have threatened to pull out if they continue to lose money.

They say more than $40 million has been lost since the hotel opened in 1986.

A key part of the rescue plan is a revamp for the nearby golf course, designed to fill empty rooms at the hotel.

Bermuda Properties Ltd, the hotel's landlord, has offered to build a clubhouse on a wooded hill.

Other proposals include redesigning the course, creating a driving range and setting up a golf school.

The hotel's cash problems were revealed yesterday in BPL's annual report to shareholders.

It described the losses suffered by Host, the Marriott real estate firm which leases the property from BPL.

It said that in January, Host advised its landlords it was forecasting cash flow deficits of $2.5 million a year on its Bermuda business.

"It had lost in excess of $41 million since the hotel opened in 1986,'' the report said.

"Host further advised that unless it was able to achieve a break-even cash flow it intended to terminate the lease agreement.'' Other major hotels in Bermuda were suffering similar losses, the report said.

"Host wants to avoid defaulting under the lease agreement, and to this end is involved in a co-operative effort with the other major hotels in Bermuda and with the Bermuda Government in a fiscal plan designed to improve the industry's financial viability.'' Host was negotiating "certain assistance and concessions'' with BPL and with Marriott International, operator of the hotel, the report added.

The report's contents were revealed yesterday at a planning objections tribunal.

BPL general manager Mr. Peter Parker was at the tribunal to counter a National Trust objection to new zoning at the golf course.

He read from his firm's annual report to dispel "doubt as to the exact state of the Marriott hotel''.

He said major changes to the golf course were planned in the hope of getting 10,000 more rounds played every year.

This could be done by speeding up the course.

A driving range was planned, along with an "aggressive'' golf vacation package.

But Ms Toby Butterfield, for the National Trust, argued that a strip of woodland near the clubhouse site should be protected, instead of being designated for tourism development.

The site contained native plants including mature cedars, and acted as a windbreak for other woodland nearby, she said.

Mr. Parker defended the company's environmental record, saying the Castle Harbour property had more "green'' than any other in the Island.

Even with more tourism development allowed, more than 80 percent of the property would be undeveloped.

After the tribunal hearing, Mr. Parker told The Royal Gazette that Mr. John Marriott, son of the group's overall chairman, had been in Bermuda this week.

Mr. Marriott had foreseen a possible "significant benefit'' for the hotel from improvements to the golf course.

Despite being a golfing Island, Bermuda did not yet have a golf school, said Mr. Parker.

A winter golf package at the hotel could work out as cheap as $120 a night per person, he said.

If the clubhouse was approved, he hoped for an opening next spring.

BPL was looking at other ways to give tourists more to do, Mr. Parker said.

Nature walks were popular with hotel guests, but they did not make money.

The company had been working with consultants who had earlier advised on developing Dockyard.

BPL was also considering building luxury self-catering cottages, he said.

These would attract wealthy tourists who did not like staying in hotels.

The company, which is mainly non-Bermudian owned, clashed with the National Trust earlier this year over plans to build condos on Catchment Hill, which overlooks the golf course.