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Fairmont Southampton owner says redundancy costs were factored in to revamp bill

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Fairmont Southampton employees made redundant gather outside the hotel in October 2020 (File photograph)

Redundancy payments to Fairmont Southampton workers were written into budgeted costs for the hotel’s redevelopment even before the Covid-19 pandemic hit, the head of the company that owns the resort said.

But Karim Alibhai, the founder and head of Gencom, added that the tourism shutdown because of the coronavirus meant that severance packages were needed earlier than expected.

More than 700 people were made redundant from the hotel in October 2020, although it had been largely out of operation for about seven months.

The Government stepped in to fund $11 million in severance packages in November 2020 after Gencom, which is based in Miami and owns the hotel through its subsidiary, Westend Properties, missed a payment deadline.

Mr Alibhai explained: “If anyone looked at our project budgets, even before the pandemic set in, there is a big line in them that says ‘redundancy payments’.

“Now, the way the capital’s going to come in, is when we shut the project down for construction, 90 days thereafter is when the redundancy payments were going to be due.

“We were not going to shut the hotel down until April or May of 2021.

“The pandemic – suddenly the airport shut down, everything shut down, so the hotel had to shut down.

“All of a sudden, it technically triggered the redundancy payments sooner than the date that we needed.”

Mr Alibhai said that Gencom approached union representatives to tell them that more time was needed to get the funds in place.

He added: “Government made the decision at the time ‘hey listen, we’re going to advance it, because these people need their money right now’, which, I believe, they did the right thing.

“We were discussing with Government at the time … what would be the time period to repay them.”

Mr Alibhai said that governments in other countries gave payroll protection loans to help the industry to cover payments to workers.

He added: “All of our hotel projects in the United States did not have to pay those back.

“In Bermuda, we did pay it back, we paid it back in full, so it was a complete mischaracterisation, I think, that people thought that – you know, when you’re undertaking what at that time was going to be a $350 million project … why would you default on an $11 million payment?

“It just doesn’t rhyme or reason with that.”

Mr Alibhai said: “If the union had been disappointed and upset and did not know the truth, we’d never have got the collective bargaining agreement with the favourable terms and conditions that we did get.”

David Burt, the Premier and finance minister, said in his Budget statement that plans for the Fairmont Southampton’s reopening included negotiation of a new collective bargaining agreement with the Bermuda Industrial Union.

Chris Furbert, the president of the BIU, explained later that the agreement was negotiated after the hotel “broke away” from the Hotel Employers of Bermuda, which was set up to handle collective bargaining with the hotel division of the BIU.

He added: “I can’t tell you all that we negotiated. We have not agreed on how many will come back to work …”

But Mr Furbert confirmed: “We are looking at better wages for the workers at the Fairmont Southampton.”

He said that the occupancy threshold where staff layoffs could be triggered was changed from 75 per cent to 85 per cent during the negotiations.

Karim Alibhai, the founder and principal of Gencom (File photograph)

Mr Alibhai highlighted that Mr Furbert was “a huge endorser” of the redevelopment because he was among the people who were familiar with the planned scope of the work on the site.

He added that Mr Furbert appreciated that the project would not be “short-changed” despite increased costs caused by the pandemic.

Mr Alibhai said that he thought “people in Bermuda will be very pleased” when they saw the extent of the renovations and the knock-on effects on the economy.

Curtis Dickinson, in a statement outlining his reasons for his resignation as finance minister, said last month: “The decision to delay fulfilment of the obligation to Fairmont employees made redundant because of the hotel’s closure will remain a point of concern for me on the developers’ willingness to honour their obligations.

“It is a matter of public record that the employees were paid only after the Bermuda Government stepped in to provide direct financial support to the employees and then supported the pursuit of a statutory demand to recoup those funds.

“This should be a cause for concern and result in an increased focus on ensuring that the necessary protections are put in place to protect the Government’s and the people of Bermuda’s interest.”

But Mr Alibhai said: “Let’s put it this way – I think there’s definitely a paper trail that shows that all the discussions and negotiations were about paying back the redundancies, and what the timing was.

“There was nothing that said, ‘hey, we’re not going to pay – eat it’.”

A spokeswoman for Mr Burt said: “Extending tax relief is one of the tools that governments in other notably successful tourism destinations have used to support hotel development and spur increased tourism activity.”

But the Government remained tight-lipped on the levels of financial support expected to be offered.

The spokeswoman said: “The full scope of the Government’s support continues to be in negotiations following the agreement with Gencom of heads of terms.”

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Published April 07, 2022 at 8:25 am (Updated April 07, 2022 at 8:25 am)

Fairmont Southampton owner says redundancy costs were factored in to revamp bill

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