The Marriott Hotel sale

Apr 04, 2023 Features / Columnists, Peeping Tom

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Kaieteur News – Bharrat Jagdeo is being disingenuous about the Marriott Hotel which his government is putting up for sale. He argues that now is the right time for the hotel to be put on the auction block because it is presently showing a profit and will soon face competition from other branded hotels that are now under construction.

Presumably, these branded hotels when completed will provide competition for the Marriott and possibly therefore reduce its profitability. The argument therefore is that now is the right time for the hotel to be sold given the favorable conditions for recovering the significant public investment in this project.

In justifying why, in the first place, his government sought to build a hotel – a venture which in neo-liberal economies is reserved for the private sector – Jagdeo regurgitated the old and discredited rationale that at the time there was a need to catalyze the construction of such hotels. As such, the government took the lead in investing in the hotel.  Jagdeo is being disingenuous. He seems to have conveniently overlooked the fact that initially this was supposed to be a private venture, one that the government was excited to subsidize for the private investors. When the APNU+AFC came into office it launched an audit into the construction and operations of the hotel. That audit confirmed that the original plan was for the hotel to be private venture and not a public-private partnership.

Jagdeo needs to be reminded that the decision to construct the hotel had nothing to do with the reasons he gave. It was supposed to be a privately-owned hotel by a New York based firm. It was only after the original developers experienced difficulties, four years after, that the government decided that they would proceed with the hotel’s construction as a public-private partnership.

From thence onwards, the hotel was mired in controversy. The government put up the bulk of the funding and the remainder was provided via a syndicated loan. The members of the syndicate were never made known and this gave rise to suspicions that members of the local oligarchic class may have been involved in investing as syndicated investors.  The syndicated investors enjoyed special rights. The fear among local observers was that should the hotel go bust that not only would the syndicated investors have to be paid first, leaving taxpayers at a loss, but that the said still unknown investors would be able to gobble up the hotel for a highly discounted price, thus making a financial killing.

On top of this, the hotel had a highly flawed and dubious shareholding model which at one time would have allowed a minority shareholder to exercise majority interest and without having to inject any equity until the completion of the hotel.  The audit of the hotel revealed a significant financial risk of default in the repayment of principal and interest on the syndicated loan should the hotel continue to ratchet up losses due to poor occupancy rates.  It recommended that the government take over the syndicated loan.

The APNU+AFC went ahead and did this. But it must have also had in mind the possibility of the financially-troubled hotel going belly-up. This would have opened the possibility of the syndicated investors walking away with most of the recoverable funds and may have even walked away with the hotel. The APNU+AFC was unable to ascertain the identities of the persons behind the syndicated loan. By taking over the loan, the government assumed 100% government ownership of the hotel. Jagdeo seems to be of the view that financial considerations – the ability of the hotel to service the loan – were not the basis for the government taking over the loan. He should not delude himself into believing that the hotel was in a position to repay the loan installments when due.

The only reason why the hotel is now enjoying a stronger financial performance is because of the discovery of oil. Had oil not been discovered, the hotel may have long been thrown into bankruptcy. But with workers from the oil company along with other investors flocking to the hotel, occupancy has skyrocketed and with it the financial fortunes of the hotel. Jagdeo’s government has thus decided that this is the right time to sell the hotel. But why sell a now profitable and money-making enterprise?

The hotel is privately managed and is of no administrative burden to the state. So why sell it? By Jagdeo’s own admission, a number of branded hotels are under construction. The private sector is now the engine of growth in the country. So there is really no compulsion to sell the hotel to expand the role of the private sector in the economy. The government has not sold the Guyana Oil Company which is making money. It has not sold Lithographic which no one appears to want to buy. It has not sold the Guyana National Shipping Corporation and it certainly is not selling the loss-making Guyana Sugar Corporation.

In 1993, the PPPC government tabled its Privatization Policy Framework Paper. It proposed a number of models of privatization, including joint ventures and public shareholding. So why not sell shares in the hotel to the public? Why not give the workers a share in the hotel? Or are ordinary Guyanese and workers no longer factored into government’s privatization plans? Taxpayers’ money floated this hotel. Should the taxpayers not derive some benefit before the hotel is sold?

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

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• Bharrat Jagdeo, competition, economies, Marriott hotel, Private

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