Production can be our next source of much needed income
Opening the morning newspaper seeing on one hand the Fairmont Southampton Princess saga, paralleled with $70 million of commercial real estate up for sale in Hamilton, was a lot for a pair of eyes to absorb. To think 33 commercial properties are selling for a combined $70 million — when a decade or so ago that sum would have been the cost of perhaps four buildings — reveals not just a deep markdown of value but also that confidence in the economy has diminished.
The world that gave life to Front Street is gone; the roles that branded the infamous title the “Forty Thieves” are now legendary. For a country that depends on import where much of its tax is derived, the idea of building an “on the ground” functioning commerce in the days of Amazon and online shopping in many ways defies gravity. But for the issue of convenience, retail would not exist; it’s that the cost of this convenience is becoming less rewarding and prohibitive.
We have to consider what were the external factors that gave us success over the past 50 years. What of those factors continue to exist and, equally, what external factors no longer exist? We have to fully embrace the reality we in Bermuda made our livelihood off the world; it was not home-grown genius alone.
The new global tax imperative is here and there is no reason Bermuda should not remain as a prime jurisdiction for offshore business. However that is not enough: we must look deeper into global trends and needs to find a niche that brings activity to our economy.
China has become the factory of the planet where 16 per cent of the world’s output is coming. Chinese exports are an even higher percentage. The recent disruption in supply indicates the world needs to diversify production and Bermuda can fit somewhere in the new alignments. We need to invite production to our shores.
In the meantime, while it may be of assistance to some of the local consumers for the Government to intervene in the supply of goods, it does so at the detriment of many retail businesses that were having difficulty covering their bottom line over the past few years.
We crossed the line many years ago by building large hotels and, indeed, they worked for a while, but they are like whales that need deep water and plenty of ocean. They need purchasers with very deep pockets to invest in real estate and a business that has trended downwards for many years, particularly since the advent of the mega cruise ship, which can house more people at a cheaper cost to build.
When we see a struggling the cruise industry, which is otherwise lucrative, then by comparison luxury resort hotels are doing worse. Fairmont Southampton may face a significant markdown on value and a challenge to refinance in today's environment.
The bright side is that bad times create opportunities for others. Bermuda is open to reinvestment and it will invariably happen. We need a new idea as a driver that brings employment. Some of the ideas are there; we just need to bring them into fruition.