The proposed US$51 million Marriott Hotel in Georgetown is one of the primary anchors of the economic policy stance of the PPP government. The Marriott, the airport terminal demolition and reconstruction (US$160 million), the One Laptop per Family Project (US$15 million), and Amaila hydroelectric plant (US$860 million) are all projects brought forward from the Jagdeo administration. The necessity, economic logic and optimal sequencing of all these projects can be questioned. In this column, I will examine the proposed investment in the Marriott Hotel, which is expected to be part financed by the government (US$13 million).
One of the first things to note is the equity investment by the Guyana government represents a subsidy to the hotel with the use of monies from the people of Guyana. Whether that person is a PPP supporter, PNC supporter, AFC supporter or an independent does not matter since he or she will be responsible for paying taxes to help finance the debt all these projects will take on.
In that case the government of the day ought to be extremely careful that it is implementing the best sequencing of projects. While it is true a Marriott 5-star hotel can be nice for the capital city, the economic benefits are less clear. When the government takes on foreign currency debt, it must make sure it is investing in the tradable sectors that will generate enough foreign exchange for the economy.
Crowding Out of Other Hotel Investments
I want to make it clear that the Development Watch column is not against the Marriott coming to Guyana. If the Marriott wants to invest in Guyana then it ought to be financed by private investors. It is not right for the government to subsidise a foreign hotel that will be directly placed into competition with several existing Guyanese hotels that are in the three to four star range. These existing hotel investors would have financed their projects with owner’s equity and bank financing. Some of the investors performed a patriotic duty by responding to President Jagdeo’s call for hotel investments just before Cricket World Cup.
Some estimates have it that the hotel occupancy rate in Georgetown is just around 50 per cent. The government and NICIL are yet to give us a convincing argument that this hotel will bring in mass tourists to yield the projected 11 per cent return. What is there in Georgetown that will cause thousands of tourists to come?
Has the government maintained the art scene? Has the museum been updated? Is Georgetown the garden city of the Caribbean or the garbage city? Are the building codes maintained so UNESCO may declare Georgetown a world heritage site as is Paramaribo? Is there legacy industry tourism like taking foreigners to old sugar factories?
Are they going to come to the Marriott in Kingston, Georgetown to gamble? Is that the tourism vision of the government? In which hotels overseas Guyanese visitors stay and do they care for 5-star hotels? Or do they prefer to stay with families?
Without these forms of city attractions, it is very likely that existing hotels will face competition from the government-subsidised hotel. This is a classic example of government investment jeopardising or crowding out genuine private investments. Even the government accepts this when it accused the AFC of protecting the interest of Pegasus and Mr Badal.
The PPP politicians made this point in Parliament. Hence, they know they are using the monies of the people – regardless of political leanings – to suppress existing hotels because they view their owners as being unfriendly to the government. This is classic oligarchic behaviour. If several hotels should fail because they cannot compete with the city Marriott then the development role the government envisaged would not be fulfilled. Jobs will be lost and resources wasted in other areas as some are created by the Marriott. Isn’t the task of the government to make sure that the rising tide lifts all boats?
Even more perplexing is that several ‘representatives’ of the private sector have not taken into consideration this downside risk. This could send the wrong signals to future investors, both foreign and local.
On the one hand, future investors will see the government as being willing to use taxpayers’ monies to establish businesses to compete with their self-financed projects. On the other hand, future investors will likely view the existing private sector ‘representatives’ as mainly protecting the oligarchic extractions of those connected to the PPP government.
Catalytic Role of Government
Caribbean governments have financed hotels in the past. When these governments were building hotels they were thinking in terms of the catalytic effects their investments would have on nascent tourism industries.
Also when the Barbadian government invested in hotels they were doing so in an area that is geographically compact. Tourists could move easily from one beach location to hotel. In Guyana tourists entering via the international airport at Timehri must incur time and money to get to the real jungle attractions the country has to offer.
Therefore, I would argue that the Ramotar administration should also be thinking of igniting similar catalytic effects. What would be some examples? What this column proposes may be risky, but that is the nature of the task when government intervenes to set the stage for future developments while not jeopardising the success of existing sectors.
The government needs to think in terms of the opportunity cost – the next best economic activity on which the said money can be used – of tearing down a perfectly okay airport terminal and building a new one for US$160 million. It needs to think about the opportunity cost of investing US$13 million in the Georgetown Marriott and US$160 million in a new terminal at CBJ Timehri. What is the next best investment that could be made with these funds? That is, investments that will grow and nurture a new or nascent production sector, while not impacting negatively on existing businesses; investments moreover that will stimulate the demand for locally grown produce and crafts by engendering new and sustaining the old.
I would suggest that creating a system whereby beach tourists visiting the Caribbean can easily, quickly and directly fly into the Essequibo Coast to get a taste of something different. Here the task should be to combine blue water beach tourism with green jungle tourism in one package. Flying tourists into that area will help to stimulate several Indigenous village economies. If the government is going to be daring then do so to ignite the catalytic effects; but do not bring unnecessary competition to your existing local investors. Why not establish a medium scale airport that can accommodate Boeing 737s and Airbus A320s into Essequibo? This airport can be connected to popular Caribbean tourist destinations while doing the same at home with CBJ Timehri, Ogle and eventually Skeldon. This will certainly require hotels to be built in the area. However, eco-tourists will not fancy modern architecture buildings like the proposed Kingston Marriott. Hotel investors will have to think about blending eco-tourism themes into resorts as they do in Costa Rica.
Once they get hooked on the Indigenous villages, rivers, lakes, wild life and jungles of the Essequibo they might travel to Georgetown once the politicians get their acts together and restore the city to its glory as the garden city. Then the PPP elites can fulfil that long held fantasy to build their five star city hotel. At that point no one would be able to criticise the government for bad timing and poor sequencing.
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