Kerzner Fears “Bloodbath”
Kerzner International would have to “reassess things” if there is any development on Cable Beach that goes after the high-end tourism market, according to Butch Kerzner, the company’s CEO.
Mr. Kerzner, who was a special guest on the radio Love 97 programme “Jones and Company” Sunday, said while Kerzner welcomes healthy competition, any improvements on Cable Beach should be geared at the mid-market.
“Cable Beach has been able to go very strongly after the mid-market when they reinvested in their product and I think that if they continue to reinvest in their product and continue to create a product that can go after the mid-market segment, that’s great for us,” he said. “That’s great for the destination.”
But Mr. Kerzner said it would be “lunacy” if Cable Beach and Paradise Island went head to head.
He added that the Bahamian landscape has been “littered with failures” from resorts seeking to go after the same market. He pointed out that the high-end market in the United States – the main source of tourists to the Bahamas – is less than three percent.
Mr. Kerzner said there was a “fiasco” in the late 1980’s when the owners of the Crystal Palace tried to compete with Paradise Island.
“There was a bloodbath for both of them,” he said, “and we bought the property out of bankruptcy because of that…My sense is that the history is so clear it doesn’t make sense in such a small market where you get [fewer] than one million people per year coming through the market to have a product that goes head to head.”
Mr. Kerzner also said, “I think the sensible approach to tourism generally is that you segment the market…We’ve obviously got the over $300 room rates market and that’s a very small market…It would seem unlikely to me that what is going to be encouraged is to have a destination go after the exact same market.”
His comments come as many people await an announcement regarding future development on Cable Beach that was promised months ago by Prime Minister Perry Christie.
In fact, Mr. Christie has said that he expects to announce a $1 billion investment project for Cable Beach, in addition to plans to revitalize the strip. The government expects that this would complement the recent announcement regarding the $1 billion expansion of the Atlantis resort on Paradise Island.
Mr. Kerzner on Sunday made it clear that his company is not against competition.
“I don’t think we would be cautious about somebody saying they are going to come in and compete…One thing we’re not afraid of is a little bit of competition. It keeps people on their toes and I think that’s all very good,” he said.
But Mr. Kerzner added, “It would really depend on if you’re going to try and develop another ‘me too’ product, then we’d say ‘that doesn’t seem [to be] a very sensible approach’. And at that point, we’d think about that. I just don’t think we’re going to be there.”
Minister of Tourism Obie Wilchcombe, who spoke with the Journal Sunday, said the Bahamas itself is a high-end market. The Minister added that Cable Beach hotels and other properties throughout the country are being encouraged to go high-end.
But he pointed out that there is diversity in the high-end market.
“Kerzner International has created that [high-end market] to a large degree,” Minister Wilchcombe said. “The truth is, at the moment, Exuma is attracting high-end business. The Four Seasons with its clientele, that’s high-end…In Grand Bahama, there is developing there a high-end product.”
He added that the Bahamas wants to maintain high average room rates and high arrivals.
“We cannot in our country, because of our limited number of rooms, have anything other than high-end business,” said the Minister, who pointed out that the Bahamas only has about 15,000 hotel rooms.
He said he does not expect to see Cable Beach competing head-on with Paradise Island.
“I think what we’re going to see are properties that fit into the same category so far as the standards of excellence, beauty and uniqueness,” Minister Wilchcombe said. “Based on what I’ve seen, I don’t think we’re going to have a hotel that’s going to compete against Atlantis. I think we would wish to have in the Bahamas uniquely different properties all of which are attracting different types of visitors.”