With the support of my colleagues from Disclosure Today, I have been conducting research into the underlying commercial arrangements for the State-owned hotels in T&T. Those are the decisive details which drive projects of this nature and from which the substantial public benefits ought to flow.
The unhelpful responses from the various agencies with whom we engaged via the Freedom of Information Act only served to underline the degree to which the actual conduct of these large-scale public-private partnerships runs totally counter to the oft-repeated official statements about openness and having nothing to hide. The Ministry of Finance was the only public authority to give a prompt and clear response.
This proposed large-scale investment would require significant sums of public money to be committed to the project. That commitment would be via direct investment or lease rentals, tax/duty concessions and expensive externalities such as improvements in the water, sewerage and electricity services as well as the expansion of the facilities at the ANR Robinson Airport
The main point here is that public money is raised via involuntary payments called taxation, which means that there must be certain rules for its proper use. The key one is that those funds must be managed and accounted for to a higher standard than private funds. Therefore, we need to consider the role of the public-private partnership (PPP) against that background.
Just try to imagine, for instance, the Massy Group CEO taking a proposal for a large-scale hotel to his Board for approval without any details of how the three hotels in which investments had previously been made had performed.
If you think that is improbable, just try to imagine the Board approving that fourth large-scale investment without insisting on being provided with the details of the previous investments.
According to the Minister of Finance, the Tobago Sandals project is being facilitated by this government. Is this large-scale investment by the State being advanced in accordance with private sector standards? Or is this yet another PPP in which the private sector takes a big capital cost off the public balance sheet and is repaid with risk-free returns?
There are other questions to be asked if we as taxpayers are to avoid that kind of totally undesirable—but not uncommon—outcome.
What are the actual terms being proposed for the Tobago Sandals project? And, most importantly, will these details be disclosed to the public before decisions are made?
A related question is this: Have any concessions—in addition to the series of tax and duty concessions which the Tourism Development Act already offers to developers and operators of hotels—been agreed for Tobago Sandals in respect of taxes, duties and/or employment of foreigners? Have the externalities been estimated in terms of costs and timing?
We also have to ask what has been the performance of the existing State-owned hotels. Given the varying management arrangements used for those hotels, what are the lessons learned in terms of crafting a new agreement? Has there been any feasibility test or any cost/benefit analysis of the proposed hotel?
And finally, there are the environmental issues to be considered. Given that the proposed site is an environmentally fragile one, has any environmental impact assessment been carried out for this project?
The red flags signalling potential improper conduct are very much in-your-face. Firstly, there is the decision to pursue the project with Sandals on the ‘Sole Select’ basis. Of course, it has to be acknowledged that this approach is not in breach of our laws but equally important is the fact that it can—and does!—produce uncompetitive results.
Secondly, the State appears to be entering into these negotiations without even the basic information as to the performance of its own hotel investments. That kind of lop-sided, blind-side negotiation arrangement is very common in situations which have ultimately been found to involve corruption.
That is why we need to continue insisting on disclosure, before decisions are made, of the details of this huge project,
Let me add two sidebars. The first we can call “Public Money.” In “Everything but the Truth,”—an article dealing with public money which was published on 10 June, 2014—I wrote the following:
“The leading learning from which we have drawn serious lessons is Lord Sharman’s 2001 Report to the British Parliament “Holding to Account,” which was a thorough examination of the definition, role and need for control of public money.
“We expanded on Sharman’s definition of public money so as to capture the full range of possibilities but we have accepted his key finding as to the requirement that public money is to be managed to a higher standard of accountability and transparency than private money […]. The contemporary, best-practice position in respect of the management of and accountability of public money being that the private sector rules are the bare minimum.”
Let’s call sidebar number two “Learning the Lessons.” One of the remarkable aspects of how these State-owned hotels are managed is the degree to which silos have been created. It seems clear that the management agreements and performance figures are closely guarded secrets, as shown by the response to our requests under the Freedom of Information Act.
Here are two striking pieces of information which should give pause: The state enterprise which has responsibility for both the Trinidad Hilton & Conference Centre and the Magdalena Grand is ETeck; its line ministry is Trade & Industry. The state enterprise which has responsibility for the Hyatt Regency is UDECOTT; its line ministry is NOT Trade & Industry but Housing & Urban Development!
Also of interest is that the THA has itself purchased several hotels over the last three years. Those details, though interesting, are beyond the scope of this article.
So I will say first that I am reliably informed that the management agreements and performance figures for these hotels are protected behind confidentiality clauses with such strict provisions that it is very challenging for entities within the state sector to get access to the information, far less the public.
My second point is that we seem to have no inclination to learn from our mistakes, so it is all too likely that the Tobago Sandals project will come under the management of yet another state agency.
If that happens, it will result in a further dispersal of our limited management experience in negotiating with these international hotel groups.
Editor’s Note: Afra Raymond is a Chartered Surveyor, Managing Director of Raymond & Pierre Limited and Immediate past-president of the Joint Consultative Council for the Construction Industry (JCC). This discussion is hosted at afraraymond.net.
Warning: Undefined variable $userid in /www/wired868_759/public/wp-content/plugins/user-photo/user-photo.php on line 114
You are getting this right Afra. Keep going! The “Hotel Management Agreements” are more or less standard in the industry, but with significant negotiated differences. Get one from anywhere in the world. Differences would be in % of revenue (usually 2%) and the % of profit BEFORE Interest and Tax (25% to 30%) and the % of revenue for mandatory refurbishment and upgrading. Replacements and maintenance are normal operating costs. There are other matters that benefit both sides e.g. exit clauses, how many free hotel room nights.
I hope #USMNT Twitter fingers strong tonight toooooooo
I will be explaining more at ‘Bussin Files’ at the Big Black Box on Wednesday 11th October at 6.30pm
Wendell Manwarren Dominique Inniss Stanton Kewley
Thanks, Lasana Liburd…we jamming still!
I’m trying my hardest to understand the problem with Sandals inno. We have Hilton owned and maintained by the government under a franchise agreement. Hyatt owned and managed by the government under a franchise agreement. Magdalena owned by the government that was previously under a franchise agreement with Hilton. How everybody acting all new all of a sudden is confusing me!
What you don’t know can hurt you eh Nicole. You can’t assume that every deal is the same. And that is assume those other hotel deals are doing so well for us.
The Hyatt was described by the last government was a “cash cow”. They did a scheduled 5 mil USD upgrade earlier this year that was totally funded by their own revenue. Magdelena is always booked. Hilton is still standing after all these years. I’d say things are working out pretty well.
Well I don’t know anything to contradict that. But what we don’t know about Sandals can hurt us. Same for negotiations with China.
Unless you know of politicians that you would trust blindly… ???
I know that we 3 deals with international hotel partners that have nothing untoward in them.. so judging by history I’m pretty comfortable with this deal…plus I doh really take on UNC propaganda
The upgrade at Hilton has been going on for years, is it complete? And remember when there was a pay dispute not so long ago?
Hilton’s issues are not financial it’s incompetent management by ETECK.
Oh ok! And will ETECK be given the responsibility for Scandals? Things are just perfect.
Well considering Hyatt is managed by UDECOTT with zero issues….nope
Nicole UNC propaganda? I have no idea what the UNC saying. But I’m a grown man and I can process info. I don’t worship politicians and believe they are better evolved than I am and shouldn’t be bothered with questions.
We have different understandings of what politicians are there to do I think.
Facebook and Apple are billion dollar companies that don’t have zero issues.
Hyatt has zero issues?!
That in itself is probably an indictment on the lack of information coming from those hotels.
Sigh. I never pegged you as 1 to take things that literal Lasana. Tres surprised
Nicole it doesn’t have to be literal to be honest. But I’m guessing you don’t know much about their challenges right? But they must have some. So what are they?
It isn’t that we deserve a weekly update. But the information should be available if and when we want it.
Sigh..the only thing without issue is this life is Jesus Christ. All franchises operate on the same model..ask George Nicholas how quickly a designation will drop you if you do not maintain their standards or pay franchise fees. Hyatt Trinidad has neither been cited by the franchise holder nor failed to pay franchise fees. They’re in a profitable position. If a bell boy gets disciplined and is unhappy or a guest water is not hot enough is information I’m truly not interested in. Once they’re not a burden on the treasury my interest is lost.
Nicole then I’d like to know how much money we are earning and how it is used.
There are always questions to be asked once there is state interest and investment.
That’s the purpose of the Freedom of Information act. Maybe you can use it. ?
Nicole Ulerie if you read the story you would see that the freedom of information act was thwarted. That’s the entire basis of the story.
Afra Raymond can we get an update on the 50 room hotel at NAPA? Since these hotels are so profitable then I assume that the Napa hotel’s management arrangement is also yielding profits. We probably missed the announcement of those profits or the name of the company managing this profitable entity. Almost daily, I observe chinese nationals exiting a building directly opposite the Port of Spain General Hospital and walk over to NAPA. I assume that property where they are residing is government property. I assume that this is also another profitable hotel and these foreigners are not enjoying free electricity and water as was discovered at another post construction site in Couva recently..
To get an idea of how sandals operate then look at Antigua and Barbuda.
It’s being reported this morning that the THA is not involved in talks re: Scandals?
So I take it the financials for these hotels are still not public. And why is hyatt under udecott…… I thought they were about development and eteck dealt with managing. Someone put me on the straight and narrow part if I have missed the bus on this..
So, should a PPP variant in which no cash outlay by the state be considered?
This is exactly howt our group wants to approach the development of a 400 Berth marina resort in Tobago.
The assets which the State controls are the seabed and to some extent, the multitude of approvals.
Yet, our DRAFT MOU has languished in the THA for three years.
Because we are Nationals? Perhaps??
In T&T, it’s not enough to say that you’re nationals, EPM; you have to prove it by putting your money where your mouth is-in the PNM!