“An accumulated deficit from annual operating losses of $34 million” has been posted, a confidential report submitted to the government reveals.
The report, sent to the government on September 30 by a company connected to the Canadian pension fund that has acted as the Hilton’s main financial backer, said the fund was now seeking either a buyer or joint venture partner for the Hilton and the South Ocean Golf and Beach Resort, which are both owned by the same company RHK Capital.
“It is perhaps of concern to the government of the Bahamas that the British Colonial Hilton, arguably the second or third best hotel in New Providence, has been unable to generate any return on investment since its inception,” the confidential report said.
“If this hotel’s performance is a proxy for that of virtually the entire hotel industry in the Bahamas (excluding Atlantis) then it might be concluded that the recent pleas of many hotel executives in Nassau for the creation of a national tourism strategy may not be unwarranted.”
Struggling to maintain optimum room occupancy levels and room rates the report said the Hilton had failed to meet the industry’s own economic rule of thumb, which indicates that at a 70 per cent occupancy level, and without the support of extraordinary revenues, a hotel has to capture an average daily room rate of $1 per $1000 of invested capital in order to earn a reasonable return on investment. This equation translates into a required average daily room rate of $361 for the Hilton.
In an interview with The Tribune, Michael Hooper, the Hilton’s general manager said the figures quoted in the report were wrong, adding that from an operating point of view the hotel had produced a profit during every year of operation.
He added, “The Hilton has made an operating profit for the last three years and will make an operating profit this year, but that operating profit for the Hilton does not necessarily translate into any kind of return for the owner.”
Mr. Hooper said there was absolutely no truth to the claim that the property’s average daily room rate had to be 4361 if the facility was to realise a profit, but would not comment on the level of return for investors with room rates at an approximate $130.
Mr. Hooper said 2003 had been very challenging for the Hilton with profit levels and revenue down from the previous year.
Source: Yolanda Deleveaux, The Tribune
