Invest tens of millions in Airbnbs, not Fairmont Southampton
“Without reflection, we go blindly on our way, creating more unintended consequences, and failing to achieve anything useful”. — Margaret J. Wheatley
One of the most important national and political decisions that David Burt will make — or has already made — pertains to the future of the Fairmont Southampton Resort. Conflicting statements and unfolding events demonstrate why I am not able to accurately state this. There have been so many mixed messages that the only thing that we are forced to conclude is that something untoward is going on.
We have been assured by the new Minister of Tourism, who was on the job for one week, that “the value of any relief granted will be far outweighed by the economic benefits to the people of Bermuda”. However, the value of that relief will remain a mystery until at least tomorrow, when MPs are scheduled to debate it.
We are also unsure if there is a guarantee for the project and how much that guarantee will be. The former finance minister says there was no guarantee agreed while the present finance minister says that there is a guarantee of $50 million agreed by the former finance minister. It is no wonder that this issue caused Curtis Dickinson to quit his portfolio on the eve of the Budget debate.
The Fairmont Southampton Hotel Act 2022 to be debated tomorrow is to provide life support to the hotel but it has raised many unanswered questions. It will see Bermudians subsidising the hotel for up to 15 years, potentially amounting to hundreds of millions of dollars.
Progressive Labour Party politics continuously put us in a disastrous cycle of committing ourselves to poor decisions based on past decisions. We have too many bricks-and-mortar structures that should not have been built or renovated. It should be an expectation that smart people learn from past mistakes.
Nations make progress when they learn from the past. It is ridiculous to take the position that this is what we usually do, you did it so I can do it too, or that I have done it before so I can do it again.
Bermuda, have we not been down this road before? We saw Club Med and Sonesta close when tourism was strong. We have seen Ariel Sands and Elbow Beach close as well. More recently, Morgan’s Point failed to get off the ground.
It is to be hoped the Speaker of the House will use his powers to halt debate on this Bill for a reasonable period to allow MPs the opportunity to digest the financial implications of the Bill to Bermuda and Bermudians. It is amazing that a premier and party that ran their election platform on a premise of transparency are about to commit Bermudians to hundreds of millions of dollars under a veil of secrecy and darkness.
It is economically dangerous to be married to the view that some businesses are too big to fail or some deals are too good to pass up. Our political leadership needs to get past short-term political gain and face reality. We cannot afford to throw good money after bad any longer.
Wasted money on various projects has now become crippling debt for Bermuda. The cold hard truth is this: if a business requires welfare to save it, it is usually because it is not a profitable business. A business requiring a government guarantee, or taxpayer insurance, is a telling indicator.
The Fairmont Southampton was the jewel in the crown of Bermuda’s tourism product and served the country well. However, its present predicament speaks to its viability. They were not able to pay $11 million for redundancy for their employees. They are now requiring Bermuda to provide hundreds of millions in concessions to begin operations. By all appearances, this is a recipe for disaster.
The present Fairmont Southampton situation is telling us that our tourism reform needs to consider whether having mega hotels in our jurisdiction is the way forward. If it is, then mega-hotel investors should make this decision on market indicators free from a reliance upon the taxpayer for 15 years to make the project a success.
In the meantime, before the pandemic, the Bermuda Airbnb market was gaining success; so much so that the Government began to extract a tax from this industry. Clearly, the pandemic has set it back, but the PLP may be overlooking significant opportunities because we are so used to looking at the familiar.
It is foreseeable that demand will increase for Airbnbs with the resumption of more air travel and the discarding of the travel authorisation form, which is killing the tourism industry. There are many homeowners who would benefit from the growth of this industry. Growing the Airbnb industry along with existing hotels could provide the accommodation required to complement growth in the industry.
Should the Government back and support the Airbnb market at a fraction of the cost it would take to support a mega-hotel development, Bermuda stands to gain far more — directly and indirectly.
Consider the Government in partnership with the banks making special Airbnb accommodation loans available to homeowners or providing home-improvement concessions to the industry sparking a massive island-wide home-improvement drive. This would have multiple benefits.
The construction boost would put many construction contractors and subcontractors back to work. The net effect would be a broad-based construction boom across the island. Many homes would be improved along with the aesthetics of the island, which is important to the tourism industry.
This would also provide the needed boost to the battered real estate market. Bermudians would become direct stakeholders in the tourism industry like never before. This in turn would improve our friendliness to tourist, which is an essential component of the sector.
Properly managed and regulated with appropriate oversight, it would be a win-win for everyone. The spin-off businesses to the Airbnb industry would help to employ even more people in desperate need of work.
It is perplexing why the PLP, which claims to be about economic empowerment of the people, has not seized the opportunity.
Gencom, its investors and politicians addicted to mega projects and photo-ops will be the loser. While Bermuda must welcome and be attractive to foreign investors and inward investment, we simply cannot continue to accommodate them at our expense and to our detriment. Our political leaders are about to commit Bermuda and Bermudians to hundreds of millions of dollars over the next 15 years under a blanket of secrecy. Is this in our best interest as a nation?
Sound investment that stands on its own and flourishes is much better than subsidising questionable ventures that are likely to fail, with the investors making off like bandits and the Bermudian taxpayer left holding the bag.
This is clearly one of those issues that requires sound leadership because one way or the other, it is going to affect us in the future.
• Vic Ball was a One Bermuda Alliance senator from November 2014 to July 2017, and more recently a candidate in the 2020 General Election in Smith's West (Constituency 9)