|More Thoughts on Hilton Tobago
Published Thursday 8th May, 2008
The owners of the
Tobago Hilton property, Vanguard Hotels Ltd, put out full-page
advertisement in the newspapers over the last few days, under the rubric
“A bright new future for Hilton Tobago.”
advertisement leaves us with more questions than answers since we are
not told the new name of the resort after the Hilton departure on May
15. More importantly, eTeck is starting a massive repair programme,
while the hotel remains open and in transition to a new management.
Surely this cannot be the best arrangement for the future of this
was silent on critical aspects such as the price to be paid to the
non-state shareholders (twice reported in another newspaper to be in the
region of $200 million) and the redress being sought against the
designer and/or contractor. We will certainly have to keep this one
alive in the public eye as bacchanal flourishes elsewhere.
There is a
precedent issue which needs a fuller exploration from tourism experts,
if we are to be serious about avoiding a repetition of this failure.
In the last 20
years in the Caribbean region, there has been an almost complete
rebuilding of the large-scale, high-quality hotels in all the countries.
The dominant model
seems to be the all-inclusive one and those resorts can be found in
Barbados, St Lucia, St Vincent, Cuba, Dominican Republic, Grenada and so
T&T have an
educated population, with outstanding natural and cultural offerings, in
addition to no shortage of capital.
Yet our only
serious foray into that arena has met with signal failure. The sobering
question is: why did Tobago Hilton fail?
It would be a
challenging and worthwhile exercise to have the Arthur Lok Jack Graduate
School of Business conduct an in-depth study of the many issues arising
here. To name just a few:
Feasibility studies: what was the quality of the feasibility studies
done for this project?
point: Dr Rowley’s public statement alluded to early difficulties in
this project. At what stage was it clear that Hilton Tobago was falling
short of its targets? Why was it falling short that early in its life?
Repairs: what are the lessons to be learned from the serious state of
disrepair of the property? What can we do to improve the accountability
of designers and contractors in these situations? Can we develop a
working repairs and maintenance model for our country?
Share prices: what is the correct approach to determine the true value
of the privately-held shares in this failed project? When one considers
that Vanguard has three shareholders, only one of which—the State, which
owns 47 per cent—is paying for the $45 million in urgent repairs. This
is virtually a cash-call situation which usually has the effect of
diluting the shareholding of the non-contributors.
As a closing
point, after just about finishing the first piece on the Hilton Tobago,
I asked an informed and passionate Tobagonian—who is active in the
tourist industry—for views on the situation.
I am obliged to
paraphrase here but the strong opinion was given that this huge
government investment was announced as a fait accompli when the monies
allocated could have formed part of a more open and transparent process
to improve Tobago’s tourism instead of being found post-haste to assist
these incautious, big-time investors.
could involve up to $250 million of taxpayers’ money and it demands our
Closer look at
It is sobering, to
say the least, to see our Prime Minister on the defense and to read the
Udecott advertisements which are its response to allegations.
still, the discussion is, at this point, quite light and has yet to deal
with the meat of the matter. Our Prime Minister has often stated that
Udecott is an effective state-owned company for the physical development
of the country.
Udecott is often
portrayed as a model state agency which has the confidence of the
Government as can be seen by the quantity and prestige of the projects
under its control.
Of course, the
recent discussions arising from Dr Rowley’s post-dismissal claims have
prompted questioning on the role of Udecott.
Some time ago we
promised to dedicate some time to the Udecott experience and it is now
Next week we
begin, but it is important to place a marker here:
retirement of its CEO, Wayne Agard, in late 2005, Udecott has been run
by an executive chairman in the person of Calder Hart. Please note that
this executive chairman system is anomalous and none of our successful
companies (private or public) use it.
In 1991, following
a series of financial disasters, the Cadbury Committee was appointed by
the London Stock Exchange and other regulatory and professional bodies.
The committee was mandated to report on “Financial Aspects of Corporate
Governance” and completed its work at the end of 1992.
One of the key
recommendations of the Cadbury Committee was on the proper role of the
chairman in avoiding the financial collapses of the past.
recommendations of the Cadbury Report have been widely adopted and it is
instructive for us to quote from its findings—
chairman’s role in securing good corporate governance is crucial.
Chairmen should be able to stand sufficiently back from the day-to-day
running of the business to ensure that their boards are in full control
of the company’s affairs and alert to their obligations to their
the importance and particular nature of the chairman’s role, it should
in principle be separate from that of the chief executive. If the two
roles are combined in one person, it represents a considerable
concentration of power. We recommend, therefore, that there should be a
clearly accepted division of responsibilities at the head of a company,
which will ensure a balance of power and authority, such that no one
individual has unfettered powers of decision.”
Our most active
state enterprise is under the control of an executive chairman, who also
chairs the nation’s largest pension fund. That hardly represents best
practice, whatever our Prime Minister might like us to believe.
At the most
fundamental level there is something amiss in the structure of Udecott.
But we continue next week.
Afra Raymond is a
director of Raymond & Pierre Limited. Feedback can be directed to email@example.com.