For months we have watched as the Almond Beach group
imploded while its principle investors cut their losses and moved to divest
themselves of the St. Lucia properties and the Casuarina Hotel while writing
off millions of dollars in the process. Now the remaining flagship property of
Almond Beach in St. Peter is facing closure at the end of this month as a
result of staggering losses and a hotel plant that is long in the tooth and fit
only for demolition instead of refurbishment.
Practically all of the commentary so far has been focused on
keeping the hotel open and protecting the jobs of hundreds of Barbadians who
work there as well as the loss of foreign exchange earnings that will result.
It seems that all the commentary is designed to raise more capital to keep the
business open and to pressure the government to act as the investor of last
resort.
There has been little direct analysis of what caused the
decline of the Almond Beach Group and the role that the fundamental business model
played as well as the initial physical design of the hotel complex. Finally the
management team is ultimately responsible for the cascading losses and the
degradation of the physical plant.
To invest new capital without such an analysis would be rash
in the extreme. To ask the workers to invest their savings and part of their
income in a bid to keep the facility open is unrealistic beyond belief. Given
the magnitude of the sums involved such suggestions speak to the fantasy land
that some live in. They suspend the laws of economics and ignore the harsh
reality of having to make a profit to stay in business.
The truth is that investors and business owners get into
business to make a profit. Employees benefit from business activities through
the wages that they earn and the benefits provided by the company. In turn the
company pays taxes, reduces bank loans and sets aside a portion of profit
earned to maintain the physical plant or to expand if the business climate is
favourable. A lesser portion of the after tax profit is then paid out as
dividends to the owners of the business.
If things get out of kilter in this complex equation the
business suffers and without corrective action or a change in the business plan,
failure is inevitable.
The hotel business is tremendously complex one and requires
a well disciplined multi-skilled management team to succeed. There is some
evidence to indicate that Almond’s management team lacked the fiscal discipline
and attention to detail necessary to rise above the challenges of today’s
difficult economic environment. A cost overrun on the refurbishment of the
Casuarina property that exceeded the budget by nearly one hundred percent and
ran a year late is a clear indication of the problem.
It is time that we realized that businesses are not welfare
programmes that have an automatic call on the public purse when they fail. In
the natural course of things some companies will succeed and others fail.
Asking government to change that by just throwing tax payer money at the
problem is not a solution but an exercise in folly.
No comments:
Post a Comment