Ground-breaking tourism legislation could become the eleventh hour saviour of Island hotel properties seeking to reinvent themselves.

A new Act, which is set to become law this year, is understood to have come at a vital time when at least one major renovation project was facing the possibility of being shelved.

Industry sources said the legislation was likely to tip the balance in favour of refurbishments which looked as though they might have been toned down to merely routine maintenance.

Potential investors and existing hotel bosses, both overseas and at home, are watching closely for progress of the Hotels Concession Act 2000.

The Act creates a wide-ranging brief for Government to provide a concession package including exemption from Land Tax, Hotel Occupancy Tax and Payroll Tax and provide duty relief on alcohol and materials for renovations.

It will cost the Government thousands in lost revenue, but will hopefully stimulate recovery of the hospitality industry.

Michael Kaile, vice president and general manager of the Fairmont Hamilton Princess, welcomed the move, which he said came at a critical moment for the industry.

He said the allowances on tax would certainly jump start investment in the industry, at a time when construction costs have soared and made it difficult to see a good rate of return on the investment.

"This is a breakthrough, especially for existing hotels,'' he said. "Most of the hotels compete with colleague hotels for capital, some of those hotels in other places are able to give a much better rate of financial return.

"It is extremely difficult to compete with other hotels because their costs give a higher rate of return. This Act helps make our projects equally competitive.'' The legislation was announced on Friday by Tourism Minister David Allen and it comes after consultation with the hotel sector.

Included in the Act is the possibility of relief on customs duty on building materials, furnishings, fixtures and other hotel equipment.

In addition, hotels may be able to claim total or partial exemption of Land Tax, Hotel Occupancy Tax and Payroll Tax and relief on duty on alcohol for a period not exceeding five years.

Land licence fees and statutory charges on residential units could also be waived under the Act.

Granting of concession packages is subject to their benefit to the tourism industry and Bermudians and may include conditions related to their employment and training.

According to the Act, the Minister of Tourism has sole discretion on whether an order should be made, but is expected to do so in consultation with the Cabinet.

There is no appeals process.

Mike Winfield, president of Cambridge Beaches, said in theory the bill looked a very good piece of legislation, which was designed to encourage investment in the hotel industry.

He said: "The application of the bill will be looked at with interest but it is an excellent first start.'' And of the possible five year breaks on tax, he said: "These are meaningful concessions, these are the maximum, but we don't know how they are going to be applied.

"It should have the affect of encouraging investment from overseas and encouraging investment on existing hotels.'' Bermuda Hotel Association executive director John Harvey commended the Government for taking the initiative but said he needed to study the document fully before commenting further.

Jeff Amaral, whose Palmetto Bay hotel project is already underway, said he would be looking closely at the bill to see what benefits his planned new hotel and residential development could get.

"We will be putting a proposal together once we have reviewed it to see where we can benefit the most,'' he said.

But permitting residential units to be built and leased back to vacationers drew criticism from Save Open Spaces campaigner Stuart Smith.

He said he feared hotels may use the opportunity to build homes and sell them off, rather than concentrating on tourism.

Mike Windfield