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Baha Mar fueled by Chinese investment
May 13 2011

China investment spurs a US$2.6-billion resort complex in the Bahamas.

Highlights
  • The project is being financed by a US$2.4-billion loan from China’s Export-Import Bank.
  • Baha Mar comprises four, individually branded hotels.
  • The Caribbean has seen a swath of new development in recent years.

NASSAU, The Bahamas—A long-term loan of Chinese money and the notion of induced demand by way of United States-based hotel brands are expected to bring success to the oversized Baha Mar resort under construction on Nassau’s Cable Beach.

Baha Mar is the first tourism project outside China for the state-owned Export-Import Bank of China and general contractor China State Construction and Engineering Corporation, Baha Mar Limited, president Don Robinson told The Associated Press.

The project broke ground on 21 February and is being financed by a US$2.4-billion loan from the Export-Import Bank. The term is 20 years. China State Construction and Engineering, China’s largest contractor, is investing another US$150 million in the project, bringing its total value to US$2.6 billion, according to Robert L. Sands, senior vice president of government and external affairs for Baha Mar. The total number of employees, many of them Chinese, will be 12,000 during the “life of the project,” Sands said by email. The completion date is 2014.

While the government of Bahamas is not investing in the project, Baha Mar “enjoys certain concessions under the Bahamas Hotels Encouragement Act,” Sands said. These allow for duty-free imports of most building materials, and most hotels on the Bahamas island chain, which stretches to near southeast Cuba, take advantage of them.

Besides the massive Chinese presence in the project, what’s also new is the introduction of several US-based brands, said Parris Jordan, managing director, HVS Caribbean. Baha Mar will feature an existing 700-room Sheraton, a current Wyndham reduced from 850 to 550 rooms with the closing of a tower, and three new hotels—a 700-room Hyatt, a 300-room Morgans and a 200-room Rosewood. Yet to be chosen: the name and operator of a 1,000-room casino-hotel also set for the 1,000-acre project.

Rosewood Hotels & Resorts, Morgans Hotels Group and Hyatt Hotels Corporation are new to the Bahamas. Along with them come loyalty programs and distribution systems that will persuade people who have patronized those brands elsewhere to try their Bahamas versions, Jordan said. Each brand has its own competitive set, not only in Bahamas but also throughout the Caribbean, he added.

The new brands replace a bevy of Starwood Hotels & Resorts Worldwide branded-and-managed flags that were to be part of an iteration of the project also featuring a Caesars Resort Hotel operated by Harrah’s Entertainment. The joint venture between Harrah’s and Baha Mar JV Holding Limited fell through in early 2008 when Apollo Management and Texas Pacific bought Harrah’s three days before it was scheduled to sign an agreement with Baha Mar.

The Caribbean context
Although Caribbean tourism took a dive in the global recession of 2008, other Caribbean countries have been outpacing Bahamas in beefing up their tourism, according to Jordan, who cited the addition of luxury and upper-upscale product in Puerto Rico, Dominican Republic and Mexico’s Riviera Maya. (The Chinese also are pouring US$462 million into reviving Punta Perla, a stalled resort project on the east coast of the Dominican Republic, the Caribbean’s most-visited country).

“The addition of these new hotels will improve the competitive position of the Bahamas within the region,” he said. “The additional marketing of Baha Mar, along with the marketing of the selected hotel operators, will definitely increase the awareness of the Bahamas as a destination." Also figuring in the anticipated uptick: a US$400-million upgrade of the Lynden Pindling International Airport.

Nassau and Paradise Island are well known for Sol Kerzner’s Atlantis, a project of similar size. But Atlantis offers different products, not different brands, within one master-planned community. Baha Mar will offer various brands within a master-planned community.

“Given the multi-brand strategy, which will cater to various market segments and price points, the development including the four hotels (Rosewood, Morgans, Hyatt and the casino hotel) should not be viewed as one large hotel project, but rather as multiple smaller hotels that are meant to cater to a variety of market segments ranging from groups to luxury-oriented (free and independent travelers) and therefore resulting in different competitive sets for each of the proposed hotels,” Jordan said.

Can the Bahamas add 2,250 new rooms to its hotel portfolio of 15,212? Jordan thinks so, citing pre-recession occupancy levels of 70 percent and growing. The recession dampened that dramatically, but economists predict that by 2014, “the economic recovery will have gained tremendous momentum. If the Bahamas does not add quality new product, their competitors would benefit—whereas they won’t.”

Room supply in the Bahamas is up 0.8% on a 12-month moving average through March and demand is up 3.2%, according to data from STR, parent company of HotelNewsNow.com. Occupancy on the island was 72.9% in March, up 6.2% year over year. Average daily rate dropped 5.6% to US$303.43 and revenue per available room remained almost flat, up 0.2% to US$221.23.

• View a presentation on hotels in the Caribbean region during CHTIC from STR VP of Global Sales and Marketing Vail Brown here. (Log-in/free registration required.)

An arena brings travelers to a city that otherwise wouldn’t venture there, he said. “The same could be said about a U.S. brand going into a market where it didn’t have a presence before.”

COMMENTS   Show All
Baddniss
5/13/2011 12:32:00 PM
The traffic near Cable Beach is bad now, with everyone going to Atlantis driving by. Its going to be a disaster once these hotels get built...
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