Royal Caribbean's Freeport project in the Bahamas is still undecided
Right before the entire cruise industry shutdown due to the global health crisis, Royal Caribbean announced plans to purchase the Grand Lucayan resort in Freeport, Bahamas, but that deal is still on the fence.
The Tribune reports Bahamian officials are still trying to decide if they want to go ahead with an amended deal by the cruise line to purchase the property.
In early March 2020, a ITM Group/Royal Caribbean joint venture announced plans to purchase the Grand Lucayan resort in Freeport so that it could be transformed into a new destination area that would cater to cruise ship guests.
Since then, the original deal between Royal Caribbean and the Bahamas was changed because of the radically different financial situation the cruise line is under.
“It is not the same deal it was before,” State Minister for Finance Kwasi Thompson said. “It is a post-COVID deal and the terms are not as favourable as it was before.”
Royal Caribbean and the ITM Group have proposed a revised deal/plan to purchase the Grand Lucayan Resort and redevelopment of Freeport Harbour.
As a result, the Bahamas is required to do a full assessment of the plans. Once that is complete, the next step would be to discuss the proposal further with Royal Caribbean and ITM.
"We are confident that this is the right direction for us to go into and continue to do our best to get the right deal for the Bahamian people. It is a situation that is hugely important for us. The hotel development and cruise port development are needed now more than ever before post COVID. We believe it would play an important role in the continuing rebuilding of Grand Bahama,” Mr. Thompson said.
The Grand Lucayan’s board has been contemplating a February 2021 reopening as an option while it awaits the results of the KPMG probe into the merits of the revised ITM Group/Royal Caribbean deal, according to Tribune Business.
Essentially, the revised deal is not as lucrative as the original proposal, and the government is concerned the selling of the property would not be in the best interest of Freeport.
"One of the challenges right now is the hotel is in a state where it is not moving forward, not being developed. Our cruise port is not being developed. And so, we have to look at where you are now and ensuring that whatever it is you do, it is better than where you are now. And that is one of the things we have been focused on."
"That really is why it has taken the amount of time it has taken because we want to ensure that whatever decision is made it is in the best interest of the people of Grand Bahama, and that it provides as much economic activity as much as possible. And it is one of those things we have to continually press and continue to be focused on."
The other issue facing the Bahamas is if they decide to forgo the deal with Royal Caribbean, where would it leave them.
The Bahamas purchased the property from Hutchison Whampoa’s real estate arm in 2018 in 2018 for $65 million, and have already spent over $100 million (including the purchase price) into the property thus far.
There are fears that simply re-opening the resort, in the absence of airlift, a marketing plan and operator, will simply inflict more losses.
The Bahamas thought the Royal Caribbean/ITM joint venture was the perfect solution to salvage the resort and boost Freeport's tourism and economy. However, with the cruise industry suffering greatly, the terms of the deal had to be altered to be less lucrative for the Bahamas.
Tribune reports other observers have argued that the Government has little choice but to stay the course with RoyalCaribbean/ITM as the pool of alternative buyers willing to offer a reasonable price and terms will have shrunk considerably due to COVID-19.