Getting to an agreement on Fairmont Southampton
Politics almost always involves trade-offs.
If Bermuda pursued a policy of not touching the natural environment, there would be a cost in terms of falling living standards.
By contrast, if the natural environment was covered in concrete and tarmac, there would be a short-term economic boost, but people’s quality of life would deteriorate, and in the longer term, people would stop coming to Bermuda since it would have lost its natural beauty.
Those are extreme examples, but they encapsulate the challenge posed by the proposed special development order for the Fairmont Southampton.
Many people rightly feel that Bermuda needs the hotel to reopen to enable the tourism industry to recover. The cost in jobs, loss of hotel beds and airlift has been felt through the whole economy.
The owner of the hotel, who closed it in late 2020, would like to open it as well since there are costs to keeping it closed. But it argues that it needs concessions and an additional 261 tourism and residential units to make it viable.
The idea that the hotel needs to build and sell residential units, some of which can be leased back to the hotel by their owners, is not new. Most of the larger hotels in Bermuda now have some kind of ownership component.
This is understandable because running a hotel in Bermuda is expensive, and if hotels are going to charge a competitive rate, they need ways to offset the expense.
But the question with the existing SDO is just how much is needed.
The gains to the economy will be offset by the loss of open space, while the scale and siting of the buildings, according to the owner’s own artist impressions, are out of empathy with Bermuda’s traditional construction and will take away from the island’s natural beauty.
So there needs to be a trade-off. The problem is how to get there.
In 2009, the Fairmont Southampton was granted an SDO, which would have enabled it to build more than 100 additional units.
Now Gencom, the primary owner of the property, wants that extended so it can build 261.
But there has been no real explanation of why that is the number required. It was also not clear until Tuesday night whether the hotel’s reopening was contingent on the SDO being approved.
Chris Maybury, who is one of the investors in the project, made it clear that it was. If the SDO was not approved, Mr Maybury said, the resort would end up as “another derelict hotel on the landscape” — and if the investors did not get their way, they would take their money elsewhere.
These statements may well get many Bermudians’ backs up, since it is natural to dislike the feeling of being subject to bait-and-switch tactics.
In part, that is because Gencom has not generated much trust since it took over the hotel. Many, including Curtis Dickinson, the former finance minister, were offended when Gencom failed to pay redundancy payments to its staff.
The drawn-out negotiations and increasingly generous list of tax concessions have not helped either. According to David Burt, the Premier and Minister of Finance, the original guarantee was for $50 million, but this has crept up to $85 million by all accounts.
It also succeeded in getting an agreement with the Bermuda Industrial Union that is more favourable to the hotel than are traditional union agreements.
The endless broken promises over when renovations would begin and when the hotel would reopen have not helped, either. All add to a feeling of being used, and the latest comments from Mr Maybury will not have helped assuage those feelings.
Mr Maybury did seem to suggest this had not always been the case, but rising interest rates and tightening credit have changed that.
Mr Maybury said on Tuesday night that some of the investors in the project were getting nervous about the response in Bermuda to the SDO.
If that’s true, it is surprising. If no one told Gencom or the investors about the responses to the Southlands hotel development or the Tucker’s Point SDO, and then warned them that the response to this proposal was likely to be as fierce, they have been let down.
If Gencom had shown these plans to anyone with any memory of Bermuda over the past 20 years and asked how they thought they would be received, the answer would have been: “Badly.”
So Gencom was given assurances that were disingenuous, had the wrong advisers or it simply was not listening. It does not really matter which because the reaction has been entirely predictable.
That Gencom has handled this process badly from the start does not change the facts on the ground.
Bermuda needs the Fairmont Southampton to reopen. Gencom owns the property and presumably would like to get a return on its investment, as it should.
So Bermuda has to decide if Gencom is bluffing or not. There’s a simple answer to that. Gencom will have done extensive financial modelling to work out how to make the property viable.
It needs to share those models with community leaders to demonstrate that the 261 units are genuinely needed.
If they are, then Bermuda has a decision to make. If they are not, then there is room for compromise. That’s because the vast majority of opponents of this plan understand there is a need for Fairmont Southampton to build.
The difference is that they do not agree with the scale of the development or its siting on the ridgeline of the property. There’s room for compromise. The question is whether Gencom wants to be a trusted partner or simply wants to dictate terms.
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