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Kerzner the Sun King grows his empire

Kerzner the Sun King grows his empire

He builds fables into the very fabric of his hotels

The Bahamas Investor Magazine
January 4, 2008
January 4, 2008
Simon Cobb

Sol Kerzner is a man with an affinity for myths. Known in his native South Africa as “the Sun King,” his no-nonsense way of dealing with rivals is the stuff of legend. His lifestyle and his business deals have inspired countless apocryphal tales. And he builds fables into the very fabric of his most spectacular hotels.

Sun City, his first foray into creating a destination resort in the South African homeland of Bophuthatswana, in 1979, conjured up a man-made lake and a 148,000-acre wildlife park on a scrubby bit of veldt. The Lost City, which followed at the same site, went further. Conceived as the rediscovered ruins of an ancient civilization that had been buried by a volcano, it incorporated an artificial rainforest, roaring waterfalls, and a golf course with crocodiles in the water hazards. Atlantis, which Kerzner began building on Paradise Island in 1994, features the world’s largest artificial marine habitat and an “archaeological dig” uncovering what the fabulous sunken civilization might look like, if it ever existed, and if it were ever found.

Kerzner no longer owns Sun City or The Lost City, but every one of these resorts could have been built as a monument to his ambition. So it comes as a surprise to hear him say, in the slow, careful rumble of a man confident that he will not be interrupted, “I don’t think of my legacy, you know. I run a business, and I run a company.”

He is probably more down to earth than the stories about him, and the fantastic buildings he constructs, would indicate. It’s easy to forget that he graduated in 1958 as an accountant from the University of Witwatersrand in South Africa, and that the first hotel he ever built, the five-star Beverly Hills just north of Durban, was financed by clients and colleagues from the accountancy practice where he made junior partner by the age of 25 (one of the many legends that accumulates around Kerzner has it that he persuaded them to invest using pictures cut out from a Florida holiday brochure).

When it’s pointed out to him that he doesn’t appear to think like a typical accountant, Kerzner gives a brief laugh: “Well, a certain amount of that training is good; it keeps your feet on the ground a bit. But I don’t think I would have enjoyed just being in the profession. I knew that that wasn’t what I was going to do, but I felt it would be good training whatever I decided to do.” He found his direction in life when his Lithuanian-born parents acquired “a very small hotel in Durban, so after I graduated, that sort of got me focused.” Unsentimental about much of his past, he has no idea what became of the hotel that got him started in the business. However, he says, he still loves South Africa, still considers himself a South African, and still spends every Christmas and New Year with his family at their home in Cape Town.

A sense of place
Kerzner was born in 1935 in Doornfontein, a rundown district of Johannesburg in South Africa. Because of his short stature and foreign-sounding name, he was bullied at school, which led him to take up boxing and eventually become welterweight champion of his university. While Sun City and Atlantis might suggest that their creator grew up devouring novels by Jules Verne or H Rider Haggard, or spent his adolescent Saturdays watching the kind of matinee adventure films that inspired Raiders of the Lost Ark, Kerzner is quick to dismiss the idea of such a frivolous childhood: “Well, I enjoy movies, but I wouldn’t say I went overboard about them.”

Instead, he says, the themes for his resorts “come a little bit from the environment. So being here in The Bahamas I thought the whole theme was fish and ultimately getting back to Atlantis made sense. And back in Africa when I did Sun City and The Lost City, that whole thing was really more about the jungle and the animals. So I think that a little bit of it comes from where you are, the location, the tradition of the country.”

He first came to The Bahamas in the late 1960s “when they started developing Paradise Island, and I came here because I was interested always to go and see new hotel developments. I was only here for two days, and then only returned in the 90s.” That was when he acquired more than 600 acres of prime land and a number of not-so-prime properties from Merv Griffin for only $125 million. Griffin had been involved in a struggle with Donald Trump for control of Paradise Island, which left him with no funds to modernize or refurbish the resort once he acquired it.

However, far from following the ownership battle with predatory intent, Kerzner says he had no idea Paradise Island was even up for sale until an investment bank approached him with a proposal to buy. Although the Sun King is no sun worshipper himself, admitting only grudgingly that, “I don’t mind the sun,” he remembers responding, “Well, if the beach and the ocean are still as I remember, I’d be interested. The location was close to the markets in the US, but principally I loved the whole environment. I think it’s just spectacular.”

Size and substance
The natural advantages of Paradise Island were a far cry from Kerzner’s first venture into making a destination resort. Only 29 years old when he built the five-star Beverly Hills, within five years he had built up the Southern Sun chain of 31 hotels and was looking for a fresh challenge. “I had a good confidence level and belief in what I felt would be attractive and successful,” he says. In 1977, the South African government controversially declared the region of Bophuthatswana an “independent homeland” (no other countries recognized it as an independent state) which meant the stringent anti-gambling laws that existed in South Africa at the time would no longer apply there.

There were no roads or infrastructure on the undistinguished patch of bush in Bophuthatswana where Kerzner chose to build Sun City. He knew, however, that the opportunity to gamble and to break down the racial barriers erected by the apartheid system in a luxury resort only a two-hour drive from Johannesburg would bring the crowds flooding in. In retrospect, he said many years later, he would have built it bigger. “Scale is terribly important because you have to give the reality of what you want to achieve.”

It was a lesson he would bear in mind when planning Atlantis, with its 20 million gallons worth of salt- and freshwater lagoons containing some 50,000 sea creatures, its life-size replica of a Mayan temple, 63-acre water adventure park, dolphin experience and, so far, 2,900 rooms.

Atlantis has been Kerzner’s flagship resort for more than a decade, and still contributes, he estimates, “80 per cent of the group’s revenue.” And now he is turning it into a global brand, beginning with the $1.5-billion, 2,000-room Atlantis, The Palm, under construction since December 2005 on a man-made island in Dubai. He can envisage further Atlantises tailor made for Europe and the Far East. Meanwhile, he considers the Atlantis here in The Bahamas to be still very much a work in progress. “One of the things that attracted me about the Paradise Island transaction was the fact that we acquired over 600 acres of the 800 acres on the island, so we still have a lot of land, a lot of scope for development, and we are right in the throes of further expansion.”

So far Kerzner has invested more than $2 billion on Paradise Island. “I think our experience overall, with the government and the people, has been really good,” he says. “It gives me the confidence to keep investing in the country, and probably gives other folks the confidence to invest here. We employ 8,000 people here, and anywhere in the world, even in a big country, that would be a lot.” Kerzner International is, in fact, the second- largest employer in The Bahamas, behind only the government, but its contribution to the region extends beyond merely providing jobs.

In 2005, the company set up Kerzner Marine Foundation, a non-profit organization to protect marine environments, whose first major grant was to help establish a preservation area off the island of Andros. “I know that we also help improve playgrounds and facilities for children,” says Kerzner. “My son Butch—for quite a few years he ran with it. Since his accident I’ve obviously been more involved.” One of Butch Kerzner’s dreams was realized posthumously in September 2007, when a $600,000 swimming pool donated by Kerzner International was opened at St Anne’s High School in Nassau.

The only one of Kerzner’s five children to follow him into the tourism industry, Butch Kerzner died at age 42 in a helicopter crash in the Dominican Republic in October 2006, while surveying potential sites for development. A Stanford MBA graduate who spent six years on Wall Street before joining his father’s company, he was the sober, corporate-friendly face of Kerzner International. A skilful negotiator, Butch arranged the purchase of Paradise Island, the listing of the group on the New York Stock Exchange in 1996, and the $3.8-billion private equity buyout—one of the biggest public-to-private buyouts on record, backed by the Dubai government and investment firms including Goldman Sachs and Colony Capital—that increased the Kerzners’ stake from 11 to 25 per cent in 2006.

Anatomy of an empire
To Butch goes much of the credit for the complexity and range of Kerzner International’s operations. As well as both versions of Atlantis, there is the elite One&Only chain of international hotels, which includes the Ocean Club on Paradise Island. Butch also negotiated the deal with the Mohegan Indian Nation in Connecticut that, in 1996, saw the opening of Mohegan Sun, one of the highest-grossing casinos in the United States. After the British government proposed liberalizing its gambling laws and granting a licence for a super-casino, Kerzner International bought a strategic gaming licence and property in the unglamorous city of Northampton, as well as some $16 million of loan notes in London Clubs International.

However, when Gordon Brown took over from Tony Blair as British Prime Minister, the government’s enthusiasm for a super-casino cooled, and Kerzner says that “right now we don’t have any interests as such in the UK.” Another market that he has had difficulties in penetrating may soon open up to him, though, as a deal was announced last year that will see Kerzner International build a Las Vegas resort hotel in partnership with MGM Mirage. The US casino giant will provide approximately 40 acres of land, valued at $20 million per acre, while Kerzner and his backers will develop and operate the new venue.

As the ultimate host, Kerzner has naturally befriended an impressive tally of entertainers and celebrities. His parties regularly boast guests such as Liza Minnelli, Janet Jackson and U2’s Bono. He has been told that his penchant for high living and hard work will take a toll on his health. His fourth wife, Heather, admitted to the Daily Mail newspaper in March 2007 that when people remarked she should make him slow down, her response was: “I am not his nurse. I am his partner, and I love him for who he is.” She added that, “If he were 20 years younger, I couldn’t keep up with him.”

Kerzner himself dismisses any suggestion that he should take life easier, pointing out that he travels more now than he ever did, and that adrenaline is what keeps him going. “I’ve always enjoyed being in this industry,” he says. “And I think it’s very exciting. I enjoy developing new projects and I enjoy every aspect of the business. I’ve always thought I was very fortunate to decide to work in this particular industry. And I’ve always said that the thing that drives me is not the money—although there are obviously advantages to living like this—but the excitement of the business.”

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