seeds of future disaster by failing to properly maintain their properties.

That was the warning yesterday from two of the Island's most senior economic experts --accountant Mr. David Lines and former Premier the Hon. Sir David Gibbons, chairman of the Bank of Butterfield.

The two men were giving evidence at the long-running Essential Industries Disputes Settlement Board talks on a new contract for hotel workers.

Mr. Lines, senior partner at Cooper and Lines, unveiled new figures on the financial state of eight of Bermuda's top hotels.

Despite grilling by Bermuda Industrial Union president Mr. Ottiwell Simmons MP, he said he was unable to say whether individual hotels were making a profit or a loss.

Losses had slowed down for the group as a whole, but this was almost entirely due to less cash paid out by Sonesta Beach in finance charges following its change in ownership.

"The position from one year on another has actually deteriorated, because you have got less sales than you had in the prior year.

"The hotels have made up for that lack of revenue in a number of ways,'' he said.

There had been a reduction in salaries, wages and overtime, which could have come partially from hotels closed for renovations or during the winter.

And hotels had also reduced maintenance, which might be to the detriment of the properties in the long term.

Pointing to a 60 percent cut in the cash spent on replacing furniture and other fixed assets, he added: "Long term, the properties are not being maintained as they were in the past.

"The money is just not being spent, and that's driven by a lack of revenue.'' The hotels were spending about $4 million less on wages, salaries and overtime for workers and managers, but these payroll costs had stayed fairly stable in relation to revenues.

Sir David, asked to give his opinion of the hotel industry, returned to the theme.

The "continuing deterioration'' of the industry was to be expected given the fall-off in tourism, he said.

But the hotels could find themselves in a worse situation by failing to maintain quality. In the tourism business, appearance was very important, and worn-out carpets, chipped tiles and faded drapes were noticed by customers.

"The funds that should have been expended in maintaining the quality of the plant have in fact been spent on running expenses, including salaries and wages.'' If re-investment did not take place at a hotel then closure was "almost inevitable''.

"Club Med is standing empty as a tribute to the failure to maintain and invest in standards.'' Between 1988 and 1992 re-investment was "unacceptably low'', he said. "I think wage and salary increases must be based on real growth. There has been no real growth in this industry in approximately three years.

"Based on that criterion, subject to union agreements which have to be honoured, there was no financial basis on which wage increases could have been justified.'' Retailers had understood this and had chosen to keep jobs rather than increase wages.

Sir David called on management and workers to use the opportunity of recession to get together and work out improvements to the businesses.

The result of any economies and efficiencies might then be shared out between hotels and employees, he said. This had been done at the bank.

High growth could be achieved by Bermuda once again, he said. But that would require a degree of cooperation between management and labour, and it was his perception that cooperation had been lacking in recent years.

"It has been a question of negotiating over a pie that over the last year or two has shrunk.'' Instead of "squabbling'', workers and management should follow the Japanese, who involved shop floor workers in suggesting improvements. The union could take a lead on this, he suggested.

"There seems to have been bickering and almost fiddling while there's a bit of Rome burning.

"It's a luxury we can't afford. We should not be bickering over a share of a shrinking national product.'' Sir David said he was not taking sides in the talks. "It's six of one and half a dozen of the other.'' BACK AT THE TABLE -- Bermuda Industrial Union president Mr. Ottiwell Simmons MP (left) and former Premier the Hon. Sir David Gibbons walk into yesterday's meeting of the Essential Industries Dispute Settlement Board.