China: Courting the Americas

China makes inroads in the Bahamas with Baha Mar mega-resort

 

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China: Courting the Americas. This is one in an occasional series on Chinese economic activity in Latin America and the Caribbean.


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mwhitefield@MiamiHerald.com

Cement mixers from China and construction equipment rumble next to a premier strip of white sandy beach as thousands of Chinese workers labor to complete a $3.5 billion resort project at famed Cable Beach.

Bahamian officials hope that the Baha Mar project — four new hotels, 200,000 square feet of convention space, an 18-hole Jack Nicklaus Signature Golf Course and a casino with a 50-foot glass water wall and a Vegas-style show lake — will transform Bahamian tourism, putting it on the map as a world-class gaming destination.

Baha Mar developers plan to have the mega-resort open by mid-December, just in time for the winter tourism season.

Baha Mar has amassed some of the world’s most famous hospitality brands to operate its hotels. The centerpiece, the 1,000-room Baha Mar Casino & Hotel, will be managed by Global Gaming Asset Management, which has developed gambling resorts from Las Vegas to Manila.

There also will be a 750-room Grand Hyatt, a 300-room Mondrian Hotel and a 200-room Rosewood Hotel. The Spanish hotel operator Meliá recently took over operations of the Sheraton Nassau Beach Resort at Cable Beach and is running it as a Meliá hotel. When renovation of the 694-room property is completed, it too will become part of the Baha Mar brand, operating as the all-inclusive Meliá at Baha Mar.

But Baha Mar is also noteworthy because of the extensive Chinese involvement in the high-profile project. Not only is the Export-Import Bank of China providing the bulk of the financing, China State Construction Engineering Corp. is the general contractor.

Chinese backing

It’s all part of China’s growing economic and business reach in the developing world. Chinese investment in South America, for example, tops $89 billion, according to the American Enterprise Institute and the Heritage Foundation. And in 2011, China pledged $1 billion in loans for development in the Caribbean — not including Baha Mar.

Even before ground was broken for the new Baha Mar hotels, the Cable Beach area underwent extensive renovations.

Congested West Bay Street, which ran right through the middle of the project, was rerouted and a new half-moon-shaped boulevard called Baha Mar was carved out to serve the resort. Three banks and a fire and police station that were in the footprint of the resort were relocated to new facilities.

Even the Prime Minister’s office, which sat at what is now the entrance to Baha Mar, was sent packing and is now ensconced in a nearby leased building.

“It’s called transformation,” says Robert Sands, a senior vice president for Baha Mar Ltd. Developer Sarkis Izmirlian, chairman and chief executive of Baha Mar, “didn’t just want hotels on the beach; he wanted a destination,” he said.

“A lot of focus will be on the gaming aspect,” Sands said.

But the upscale resort, the largest tourism project under development in the Western Hemisphere, is something of a gamble.

It depends on filling the resort’s 2,200 new rooms and the nearly 700 refurbished rooms at the Meliá — and attracting visitors from markets where the Bahamas hasn’t traditionally been strong.

One of them is Asia — and to capitalize on the Asian high-rollers it hopes to attract to its new casino, air links from Asia, the U.S. mainland and around the world will need to be expanded.

Baha Mar has already opened an Asian business development office in Hong Kong’s central business district. But the Bahamian tourism industry is U.S.-centric: In 2010, for example, nearly 80 percent of visitors to the Bahamas came from the United States.

While the lion’s share of visitors will still come from North America, Sands said, Baha Mar hopes to increase the Asian percentage while also reaching out to upscale Europeans, Latin Americans and Asians living in North America.

Tourism Minister Obediah Wilchcombe said he plans a trip to China in March to drum up interest. The Bahamas, he said, also is courting visitors from Brazil and Russia and hopes to be able to announce additional airlift from some of the new markets by June or July.

With an eye toward welcoming many more visitors, the Bahamas recently completed a $400 million renovation and expansion of Lynden Pindling International Airport. But the summer season was slow: From January to October 2013, the number of overnight visitors fell to 1.14 million — 5.3 percent off the pace of the previous year.

More than a decade ago, Prime Minister Perry Christie began looking for a developer to revive Cable Beach, once known as the Bahamian Riviera, and talks began with Izmirlian.

The project survived a change in government and then another that returned Christie to power in 2012. But it was almost derailed after financing dried up during the global recession.

Enter China as the white knight. After some 30 months of negotiations, the Export-Import Bank of China in early 2011 stepped in to provide $2.4 billion in financing for the 1,000-acre project.

China State Construction Engineering Corp., the largest construction company in China, made the introduction and also is investing $150 million in the project. As part of the package, thousands of Chinese workers were brought in.

While Bahamians did the bulk of the Bay Street prep work, now many of the workers installing windows, pouring concrete and building the swimming pools are Chinese. The concrete alone to build Baha Mar equals four Empire State buildings, and the sand used to renourish Cable Beach would fill 34 NFL fields.

So far, 3,000 work permits have been issued to Chinese workers, said Sands.

Around the seaside work site, signs in English and Chinese remind workers that safety comes first — “Safety is gainful, accident is painful.” And an electronic sign at the entrance to the main camp of low-slung, blue-roofed buildings where the Chinese workers live reminded them recently they had 294 work days left until completion of the project. “Strive for 120 days and make huge progress,” it exhorted.

Labor debate

The issue of Chinese labor vs. Bahamian labor has been a sensitive one in this island nation of 372,000 people, where the latest published unemployment rate was 16.2 percent.

Some $600 million worth of contracts have been set aside for bids by Bahamanian companies and 2,600 construction jobs have been created for Bahamians, Sands said.

While the use of Chinese construction workers was something of a fait accompli, Bahamians have now set their sights on getting jobs to operate the resort.

“Anytime you talk about bringing in foreign workers, people will always have something to say about it. Baha Mar will give work to Bahamians, and that is a very good thing,” said Leyland Cash, manager of the Twin Brothers restaurant at Fish Fry, a collection of fish and seafood restaurants about six miles down the road from Baha Mar.

A former bank building has been turned into a recruitment center for future Baha Mar workers. So far, more than 9,000 applications have come in for the 4,000 positions needed at the resort’s opening, Sands said. “That’s the true economic impact of this project,” he said.

China has been involved in other tourism projects around the world, but this is the first such venture in the Western Hemisphere — and it may not be its last. The project, which broke ground in February 2011, is seen as something of a résumè-building experience for the Chinese construction company.

The Chinese received temporary import permits to bring in construction equipment, said Ryan Pinder, the Bahamas Minister of Financial Services and Trade. But it may not return to China. “I doubt this is a one-shot deal for China Construction,’’ Pinder said.

There’s also another Chinese connection at Baha Mar. At the heart of the resort will be a 100,000-square-foot casino with 1,500 slot machines, 150 gaming tables and five VIP gambling rooms that developers hope will appeal to Asian high-rollers. But with an Asian casino building boom in recent years, they have many options closer to home.

To sweeten the prospect for Chinese visitors, the Bahamas and China signed a visa waiver agreement in January that will allow Chinese tourists to travel to the Bahamas and Bahamians to go to China for up to a month without securing a visa.

“That helps a lot,” said Scott Brush, a hospitality industry consultant, “but a lot depends on people’s ability to get there. How well Baha Mar does depends on how well they can market” and whether they can convince Asian travelers “the destination is worth the trip.”

The Bahamian government alone has committed $20 million to marketing Baha Mar in the first year, Wilchcombe said.

When Malaysia’s Genting Resorts World rolled into Miami in 2011 with plans to build the world’s largest casino and resort on Biscayne Bay, it too said it wanted to attract Chinese gamblers. But after encountering static from the Florida Legislature in its attempt to have Vegas-style gambling legalized, Genting has announced scaled-back plans for its site in downtown Miami.

It now says it hopes to get the OK for a partnership with Gulfstream racetrack that would allow it to open a 2,000-slot machine resort and offer off-track betting as it continues to work on getting full-scale gambling.

Sands said whatever Genting ends up doing in Miami — some 185 miles from Nassau — won’t put it in head-to-head competition with Baha Mar’s casino.

“We view all gaming across North America as competition,” said Sands, “but we’re an exotic island destination. You don’t have the same beach and sun experience in a downtown Miami that you have here.”

Across an expanse of turquoise water from Baha Mar sits another potential competitor: Atlantis, a 3,414-room resort on Paradise Island. It is bigger than Baha Mar but was built in three stages rather than in one fell swoop like its Cable Beach counterpart.

With its mammoth artificial beach, water slides that drop from a Mayan-style temple, mile-long water ride that meanders through the resort and tens of thousands of fish and other marine life from around the world, Atlantis set the tone for Bahamian tourism when it opened in 1998.

The Paradise Island resort, which completed a debt restructuring in spring 2012, also has a casino with 90 gaming tables and 750 slot machines and operates a race and sports book.

Analysts say another big question for the Bahamas is whether Baha Mar will complement Atlantis, bringing in more nontraditional tourists, or whether it will cannibalize it and compete for the same visitors.

Which scenario plays out will go a long way in determining how realistic Baha Mar’s economic-impact projections are.

Atlantis rival?

Sands says the two resorts will complement each other: “Baha Mar will focus on the adult market. That’s the differentiator between ourselves and Atlantis. We’re adult-focused, family-friendly. They are family-focused, adult-friendly.”

George Markantonis, president and managing director of Atlantis, Paradise Island, also says the resorts can co-exist: “An addition of a new resort is good news for the country and will attract new visitors to the destination, which will ultimately benefit both resorts.”

When the Baha Mar casino is completed, the gaming license will be transferred from the Crystal Palace Casino at the Wyndham Nassau Resort on Cable Beach.

It was state-of-the-art when it opened in the late 1980s, and high-rollers could even rent a $25,000-a-night suite with a robot to fetch towels. But on a recent afternoon, there were only 11 customers playing the slots in the tired-looking casino or sitting at electronic gaming tables where a virtual dealer pops up on a screen to deal cards.

“The truth is every 10 years you have to increase your inventory and improve your product,” Wilchcombe said. In the 1990s, the big new thing was Atlantis, he said.

In the intervening years as some of its Caribbean neighbors built up their stock of hotel rooms, the Bahamas didn’t. Now, Wilchcombe said, the time is ripe for expansion. “We believe Baha Mar will be setting the pace for the next 10 or 20 years,” he said.

Atlantis and Baha Mar casinos may become competitors, but there won’t be any Bahamians playing at either of them. It’s illegal for Bahamians or Bahamas residents to gamble — although an illegal numbers game flourishes in the islands.

While Atlantis revolves around recreating the myth of the lost city of Atlantis, Baha Mar will strive to highlight the Bahamian experience.

“Every piece of art in these hotels will be Bahamian,” Sands said. An alliance with the National Gallery of the Bahamas and the Dawn Davies Collection means “Baha Mar will have perhaps the largest collection of Bahamian art in the country.”

Baha Mar recently put out a pamphlet touting the resort as an investment that is paying off for all Bahamians. When the project was topped off last February, Christie declared that Baha Mar “is another step toward securing the future of our country.”

Big economic boost?

The developers released a report by Oxford Economics last June that showed the project accounted for 5 percent of the annual gross domestic product in the Bahamas in both 2011 and 2012. The report estimated that once the gambling resort is operational, on average it will account for 12.8 percent of GDP.

“Baha Mar is expected to generate literally billions of dollars in economic benefits,” said Izmirlian. “This creates real opportunities for Bahamians — jobs, training, entrepreneurship and economic mobility.”

For Lucy Poitier, a merchant at the Pompey Village straw market, such benefits can’t come soon enough. The new marketplace of gaily painted wooden buildings and a small bar sits at the entrance to Baha Mar and replaces two straw markets that were on the site.

“Where they’re building is where we were, but the straw market burned down,” said Poitier, 65, who has been selling T-shirts and other souvenir items for 48 years. “Baha Mar is going to be good; it’s good for the economy; we’ll have more employment.”

Right now, she’s miffed about a security alert from the U.S. Embassy in Nassau warning American citizens to be on “heightened alert” when traveling to the Bahamas because of a spike in crime, including the murder of two U.S. citizens in the past eight months.

“There’s crime the world over. It’s safe here,” Poitier said.

And she is looking forward to the December opening of Baha Mar. “Oh yeah, it will be ready. They are working around the clock, you know.”

But with its 30 restaurants, boutiques, bars and nightclubs and two spas, will Baha Mar be a self-contained Las Vegas on the beach and cut into sales of other businesses outside its confines?

Cash, the Twin Brothers manager, doesn’t think so. Patrons will still want the authentic Fish Fry atmosphere, he said, and come for Twin Brothers’ cracked conch, snapper and blended-from-scratch daiquiris.

“We have our own clientele — a very good clientele that is about 20 percent local,” Cash said. “It’s not going to bother us.”

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