By Marlon Madden
Small hotel operators in Barbados have been unable to meet their debt obligation to the now struggling Small Hotel Investment Fund (SHIF), which was established to provide financing for the optimization of their properties.
Mahmood Patel, Chairman of the Intimate Hotels of Barbados (IHB), which represents just over 40 small hotels, disclosed that some members owed some $40 million to the SHIF, which is managed by the Enterprise Growth Fund Ltd. (EGFL).
He made the revelation on Wednesday in his annual report to the IHB’s annual general meeting at the Island Inn Hotel.
Patel suggested that the COVID-19 pandemic had impacted the ability of the small hotel operators to make good on their debt obligation.
“IHB hoteliers are indebted approximately $40 million to the SHIF fund. Unfortunately, the fund has not performed as well, as overall payments have been tardy. When you mine down that information though, and I do not want to go into details, but it is one or two members that might even pay a cent and that has created a case of ‘Peter paying for Paul’,” he said.
“IHB needs to find a way to have a conversation with the state [about] how do we fix this, how do we reinvent the fund or recapitalise the fund because the majority of the members were paying before COVID. That is something I would like to throw out there – how do we sit down and fix this problem for IHB members. We need to recapitalise, we need to reinvent our inventory, our plant. We have to find a constructive and creative way to get out of this hole,” said Patel.
He said the IHB was currently engaging the EGFL in an “economic analysis” relating to the SHIF and once completed there would be a conversation between the IHB, EGFL and the Ministry of Finance to maybe find a “fiscal space” for IHB in the BEST [Barbados Employment and Sustainable Transformation] programme and then to constructively look at the debt challenges.
He said the hope was to come up with a debt restructuring plan for the sector.
“I would like to suggest that maybe we also look for other sources of funding like equity or sovereign funding, but we have to find space to renovate and modernise.”
At the same time, Patel urged small hotel operators to take advantage of the Energy Smart Fund, which is also managed by the EGFL but to provide financial and technical support for renewable energy and energy efficiency projects.
He said it was necessary for the sector to be “repurposed” to become more relevant in the changing tourism market.
He noted that in the previous iteration of the Energy Smart Fund, which is recapitalised by the Inter-American Development Bank and the European Union under the Sustainable Energy Investment Programme, only about five per cent of the IHB group applied for funding to carry out photovoltaic projects.
This fund provides loans, grants and rebates for green projects.
“I would like to implore all members to take up this offer. Interest rates are 3.75 per cent and I know, at least from my experience, energy is the second highest cost for my small hotel,” said Patel.
Minister of Tourism and International Transport Senator Lisa Cummins meanwhile, admitted that the SHIF was in need of a revamp, but urged the tourism industry operators to pay up what they owed.
She said the SHIF had been under review over the last few months and admitted that it was “not the best performing fund” of the EGFL, which manages several funds.
“It was perhaps one of the two worse performing funds in the arsenal of dedicated funds, and largely because of repayments,” said Cummins.
“I think if this moment in time has taught us anything it is that change is required of all of us and even if the Government were to find the fiscal space to capitalise new funds including the SHIF, there has to also be a responsibility to come from everyone to repay the funds that are made available so that we are not only benefiting ourselves, but we are allowing and creating space for others who will come behind in those five and seven years intervals or new entrants into the market to also access those funds,” she said.
“It is simply not acceptable to be able to benefit from funds like SHIF and not repay those funds because you are damaging the sector that we represent. So that is going to be an important responsibility and I am going to call on the leadership of the IHB to ensure that you play a role in policing, along with the Government, the obligations that go along with the rights or access that Government will make available to the sector,” said Cummins.
During his presentation, Patel also reported that the IHB was inching closer to establishing a solar photovoltaic farm and a co-operative.
He also spoke of the need for more marketing and public relations financing while pointing out that the $50,000 received from the Barbados Tourism Marketing Inc. (BTMI) for the period 2016 to 2018 was simply not enough.
“It is very little, and we will be coming to the BTMI hopefully to increase that budget to do very specific actions for our group,” he said.