|The Bahamas Investor Magazine
January 4, 2008
January 4, 2008
Since its election victory in May 2007, the Ingraham government has made no secret of its intention to put serious time, effort and money into the redevelopment of the Grand Bahamian economy. With ministers Zhivargo Laing and Neko Grant both representing constituents on that island, there is every sign that the administration will pay much more than lip service to the island’s needs. During its first time at the helm, the Ingraham-led administration oversaw the infusion of more than $800 million into the local economy, and within months of the new government taking control a second time around, there were some positive signs that Grand Bahama’s economy might once again be moving ahead.
Dublin-based Harcourt Developments was finalizing its agreement with the government to reopen and revitalize the Royal Oasis Resort & Casino located in the heart of the city of Freeport. The Royal Oasis closed in 2004, with the loss of more than 1,200 jobs, but Harcourt announced plans to “restore the resort to its former glory.” The main reopening is provisionally scheduled for January 2009, although timeshare units and the Ruby Golf Course may be ready sometime in 2008. Preliminary reports suggest that Harcourt will double the size of the old casino, which will be managed by the Foxwoods Development Company, owned by the Pequot Indian tribe of Mashantucket, Connecticut. Foxwoods is believed to be using the Royal Oasis as its introduction to Grand Bahama before moving ahead with its own Beka Development Company project on the eastern end of the island. The intended new development will eventually be part resort and casino and part high-end residential.
Graham Torode, president and CEO of the Grand Bahama Development Company, the largest landowner and developer on the island, says that there are also a number of projects under way that are bound by a confidentiality agreement, including a “major resort and residential core” at Barbary Beach, popularly thought to be backed by the Morgan Stanley group, which should begin construction this year if all goes according to plan. “What we need from a tourism point of view,” says Torode, “is a critical mass—enough hotel rooms to drive an airlift programme and ensure that we can also support a full set of service industries on the island.” Although he stresses that there is no “magic or science” behind his estimate, “just a personal feel,” Torode says he believes that in order to achieve that “critical mass,” Grand Bahama needs another 2,000 to 3,000 hotel rooms above what it has at the present time. “It’s a medium-term programme,” he says. “It’s not going to be something that happens overnight. It could be a five-, seven- or ten-year programme, depending on how successful we are. But it will happen.”
Passenger numbers to rise
As part of the drive to attract more tourists, government is making moves toward creating a new cruise ship port and terminal on the island. Officials at the Ministry of Tourism estimate that the new port would require investment of $75 to $100 million, but would generate returns of $100 million annually. The timescale for the project is ambitious, but the hope is that the new facility could be receiving visitors by mid-2009. Cruise tourism could be expected to rise from the current level of under 400,000 visitors per year to more than 2 million per year within two to three years’ time.
And in mid-July, Spirit Airlines announced that it was beginning daily flights between Fort Lauderdale and Grand Bahama, as well as offering connecting service to the island from its domestic network. Minister of Tourism Neko Grant applauded the airline’s move. “Grand Bahama island is home to some of the world’s best beaches, and boasts ideal conditions for boating, fishing, diving and a host of authentically Bahamian experiences. This boost in airlift to Grand Bahama will certainly play a key role in stimulating the island’s stopover market. We are pleased to establish this new relationship with Spirit Airlines and the potential for additional non-stop service to Grand Bahama from other Spirit-originating markets is certainly noteworthy. We look forward to a lasting impact on our tourism industry,” he said.
The industrial economy of Grand Bahama is dominated by its container port. One of the advantages of being an international trans-shipment hub is having relative immunity from many local difficulties. During the three years in which Grand Bahama has been recovering from the effects of two powerful hurricanes and dealing with the uncertainties arising from the death of Grand Bahama Port Authority chairman Edward St George, Freeport Container Port Ltd has serenely and unstoppably continued to grow and thrive.
The container port’s operating income increased by 30 per cent in 2006, while its throughout increased by 31 per cent to 1.463 million TEUs (twenty-foot equivalent units). During 2007, more than 1.6 million TEUs went through the port, and plans were being finalized for the next phase in its expansion, which will cost a projected $175 to $250 million, add 500 metres of berthing capacity and six new gantry cranes, and increase throughput to 2.2 million TEUs a year.
“The business the container port attracts is not influenced in any way by the economy of The Bahamas in general, or Freeport and Grand Bahama in particular,” says Chris Gray, the company’s chief executive, “whereas Freeport Container Port Limited does have an impact on the economy of Grand Bahama.” The container port employs more than 950 people, states Gray, as well as using the services of many local contractors and suppliers. “And there’s what I call the human consumption, which is what our staff actually digests in terms of gasoline, cars, restaurants, food, etc, which creates other jobs in the community.” Before taking up his current position, Gray was in charge of the port at Felixstowe in Great Britain. “A study showed that every job in the port created six other jobs outside,” he says. “That’s not the case here, but I would suggest that we’re at least one for one and possibly two for one.”
The container port is 100 per cent owned by the Hong Kong-based, multi-billion-dollar Hutchison Whampoa Group, which began investing in Grand Bahama in 1994. “Our group’s invested a billion dollars on the island in total, so we’re here, and we’re committed long term,” says Gray. Hutchison Whampoa also owns, in partnership with Port Group Limited, the profit-generating arm of the Grand Bahama Port Authority, a 50 per cent stake in the harbour and airport. Gray describes the harbour as “quite an active little business” with roughly 140 cruise ships calling each year and 20,000 containers going through. “That’s where most of the domestic traffic comes from, because we import everything that we consume on this island.”
However, it is the airport, says Gray, with its 11,000-ft-long runway capable of handling the largest planes that is, “in terms of passenger traffic, the main artery to the island—and we have invested $50 million there since April 2002. The airport has got a lot of land—2,500 acres—on which it’s possible for us to develop air cargo or airport maintenance, which is something we’ve got planned for the future.” The synergy between these three “gateways”—the airport, the harbour and the container port—make up the rationale behind the Sea Air Business Centre (SABC), a 786-acre duty-free zone that Gray describes as “the next big story here.”
In 2005, Associated Grocers of Florida signed an $8-million agreement to use 20 acres as a warehousing and distribution base. On June 4, 2007, Associated Grocers’ subsidiary, International Distributors Grand Bahama (IDGB), signed an agreement; with the giant state-owned Chinese investment company, CITIC, to distribute products ranging from fresh vegetables to white goods. Associated Grocers already distributes to 42 different countries out of Pompano Beach, FL, says IDGB president Roy Deffler, “and we’ll distribute to the same 42 and further, with a wider variety of products.” Goods shipped into the IDGB premises in Freeport will be sent as far afield as Lebanon or Dubai, and IDGB has already supplemented its original 86,542-sq-ft warehouse with another of 200,000 sq ft, and has plans for a third.
Deffler estimates that “no less than $50 million worth” of business will pass through IDGB in the first year, but adds that there is more to the agreement with CITIC than merely distribution. “We will be adding value here in Freeport, bringing in raw materials for processing and components for assembly.” As far as Gray is concerned, there could be no better advertisement for the SABC. “With that deal done, we’ll be able to show them as a model to other potential users.” Before being signed up to the SABC, says Gray, “the people at Associated Grocers didn’t even know we were here. This is one of the weaknesses we have. Say Bahamas and everybody thinks of Nassau, Paradise Island, Atlantis… . This is a great place to do business, but we’ve got to spread the word a little bit.”