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International business in Bermuda today is where Bermuda tourism was in the early 80s, having peaked and at the beginning of a structural shift in operating model and under attack from hungrier global competitors.

1980 was the peak of tourism numbers.

2008 was the peak of international business.

30 years later Bermudians are wondering where all the tourists went. The PLP is stubbornly refusing to swallow their pride and outdated mindset and implement the kind of fundamental reform and modernization required to make Bermuda tourism relevant again while everyone is the industry is screaming for them to get their heads out of the pink sand.

I worry that in far less than 30 years Bermudians will be asking where all the (re)insurers went, while the PLP stubbornly refuses to swallow their pride and outdated mindset and implement the kind of fundamental reform and modernization required to make International Business relevant again that everyone in the industry is screaming for them to do.

Bermuda companies are now global companies, and in many cases no longer Bermuda companies (but Swiss and Irish). The tax issues are largely settled and companies are comfortable locating virtually any job outside of Bermuda, other than a small handful of mostly underwriting jobs. The old mindset that Bermuda Immigration can dictate who you hire and for how long is gone.

Gone.

XL now has only 2 of their 11 top executives located in Bermuda. This is one of the two flagship Bermuda market companies. ACE did likewise years ago.

[XL CEO Mike McGavick] explained that, as a global company with offices in 27 countries, XL's senior management team was not all based in the same country, and never had been throughout his three years leading the company.

"We've probably been at a peak, in recent history, of senior executives being in Bermuda," Mr McGavick said. "Some of those people have been staged both out of other places and Bermuda.

"Will I be doing more up there? Sure. Are there others who are making changes for their own idiosyncratic reasons? Sure. But we've always been very flexible with where people live. All the time I've been here we've had a distributed senior management team and I expect we'll continue to."


Companies now choose which positions they locate in Bermuda. If Immigration says "No" then they move that position, and the affiliated supporting jobs, to a jurisdiction more welcoming. Term limits are kryptonite to Bermuda's international competitiveness and the long term death of international business in Bermuda.

The Swiss are actively using Immigration policy (ours and theirs) to attack Bermuda by recruiting companies and soliciting highly skilled, high earning positions to their cantons through tax holidays and individually negotiated tax rates.

It isn't cost. Switzerland is as expensive if not more than Bermuda.

It isn't economic stability. Ireland is in far worse financial shape than Bermuda.

It's convenience and attitude.

The PLP, or at least a few in the PLP know this, but will not do the right thing. Political face saving is paramount and will ensure Bermuda's international business industry goes the way of our tourism industry. That is not protecting jobs for Bermudians. It's exporting jobs.

Bermuda Immigration's role has fundamentally shifted. The days of employment protectionism are over and it now needs to act as a critical marketing arm for Bermuda as a financial centre.

Immigration policy should be geared towards retaining our existing intellectual capital, and attracting new international investment and expertise.

Paula Cox's debt means that banking on a global economic recovery to simply get us back to 2007 levels is not enough. We need to grow GDP and revenues to new highs in order to service her $100M Ministry of Debt - or dramatically cut spending (= massive public sector layoffs after a hoped for election win by the PLP).

As Bermuda companies have gone global, so have the jobs. As with tourism in the 80s, other countries are refining and improving the Bermuda model and doing it better.

If Immigration blocks or rejects a company from locating a job in Bermuda, with long term stability, they will simply look elsewhere.

They won't call the press. They won't kick and scream. They'll say "these guys just don't get it and won't get it", pack a few people on a jet and send them to somewhere that is happy to have them.

Just as the PLP reversed their policy limiting yacht stays to 21 days, they need to reverse their policy limiting jobs stays to 6 years. It's the same fundamental problem - taking your customer for granted and indicating that it's all on your terms.

Financial services companies, like tourists, have many options of where to go.

The fundamental challenges with international business today are the same as tourism: international competitiveness, a quality and constantly improving product, and ease of use.

Bermuda cannot afford to have the PLP do to international business what happened to tourism. The time to act is now, not in 30 years.

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An eagle eyed reader spots a telling indicator:

ColbertBermudaShorts_lg.jpg

Umm. Dept of Tourism gives out shorts from a company that wound up 10 years ago (check the label on the shorts)?

Sad irony as the disappearance of Smiths and Triminghams was in part due to the incompetence of the Dept of Tourism and our ever-declining air arrivals.

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With the latest installment of free was never free, and the PLP unwinding yet another of the PLP's election promises which never made sense in the first place, the One Bermuda Alliance Opposition should start broadening the response, and not keep them narrowly focused on each f-up.

The real kind of connections they should be helping the voter make is:

If the PLP can't deliver their 2007 election promises why should you believe the next set?

If the PLP can't fix a minor bus and ferry problem, surely no-one can believe that they can fix the economy they broke, the violent crime outbreak they denied, the tourism freefall they branded a turnaround and education that is not really an education?

If the PLP said tourism was turning around why is it at an all time low?

If the PLP said crime was declining why are we averaging one shooting murder a month in 2011?

These aren't isolated issues, they're all interconnected to a fundamentally flawed public policy, an inability to effectively run the most basic apparatus of Government, a glib willingness to campaign on knowingly empty and undeliverable promises, and a public sector infrastructure that is crumbling due to projects being built to achieve the goal of redistributing public sector wealth to a handful of insiders, not the greater public interest.

All that is happening now, transport cuts as tourism season kicks in (our 4% second economic 'pillar'), police cuts as violent crime spirals out of control and debt escalation are all because of those supposed victimless scandals of the BHC, the Berkeley overspend, the cruise ship terminal overspend and the TCD overspend to name a couple.

As the former BPSU head said, the PLP's screw ups were paid for by the UBP's sensible economic policies that carried them for ten years.

The corruption and waste of the past decade weren't victimless and without consequence. They just seemed that way because the UBP's economy was so robust.

The Bermuda Government should be sitting on several hundred million dollars of surpluses which they can use to hire more police officers, put on more buses, spend on the current account and stimulate with capital spending as revenues decline. Instead we're incurring expensive debt which could take more than 10 years to retire - and only if the hard sacrifices are made now to return Bermuda to sensible fiscal policy, which is not happening.

The UBP have tried to connect the dots in their budget replies over the years. But it was intangible because the effects of that mismanagement took years to metastasize. Now things are different. The critique has real examples and should be hammered home.

It's not enough to be right. The Opposition have to be persuasive. You can't drive change unless you win elections.

As the One BA emerges over the coming days (hopefully not weeks), one of the positives is that the Opposition can reboot the critique and start planting the seed in voters' heads of what I think their campaign should be.

Which would be something like:

Bermuda: They broke it. We'll fix it.

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So the authorities can find a couple of joints on the cruise ship in this guy's room, and he ends up paying an extra $3,000 for a holiday in Bermuda, but a band of 30 raving lunatics on the same ship - in fluorescent yellow shirts declaring Judgment Day - somehow elude them to harass the Bermudian public?

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Three data points makes a trend in my book.

I've now now been told (unsolicited) by 3 different sets of clients in the past 6 weeks that "Customs and immigration are extremely pleasant and friendly at the airport now", telling people "thanks for coming to visit" and "we appreciate your business" while processing them. Additionally, apparently the grilling over declaring small corporate gifts (pens, shirts, hats etc) has stopped as well.

The flip side however is that apparently locals are getting the 3rd degree over those antiquated yellow slips of paper and are being asked to produce accompanying original receipts as Government presumably searches for revenue anywhere they can.

I've also had several clients observe that "people are noticeably more friendly on the island now".

So that's a benefit of the pain that is permeating the island. It's taken time, but a serious dose of pain seems to have reminded people that, as the UBP said, business travelers are our customers. That behaviours and attitudes are changing - even anecdotally - is a very pleasant surprise and a sign of Bermuda maturing.

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It's hard to remember any issue which has united such a diverse group of people in Bermuda in opposition as the Tucker's Point SDO. The Uighurs is perhaps the closest I can think of, but even that didn't draw out publicly traditional PLP support in public opposition.

The protest today promises to be big, and it will be tough for the PLP to use their normal 'angry white mob' line against this one.

I'm hoping the Senate kicks this back to the House and all sides can come back to the table and reach some sort of a compromise position. The problem for TPC is that the scale of their economic problems appear to be so large that anything less than this massive proposed development will be insufficient to prevent bankruptcy.

I wouldn't be opposed to construction on the existing brownfield sites on the property, such as the top of Ship's Hill, but many of the areas are too environmentally sensitive, and the area would become too crowded.

There's not a lot of good options on the table, and Bermuda should support Tucker's Point and our existing properties as much as they can, but this request has been so horribly managed by both the developer and the Government and is too big of an ask. The overwhelming public opposition can't be ignored.

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I was having an email exchange today on my Tucker's Point SDO post, with someone who I respect immensely and really understands tourism in Bermuda. He presented the pro-SDO case, which paints a picture which hasn't really been presented publicly by Tucker's Point or the PLP:

While I understand and agree with a lot of what you say on the T's P SDO, there are other factors also to consider.


1. The impact on Bermuda's reputation in the marketplace if yet another hotel (and there haven't been many) that has invested a ton of money in the Bermuda product goes under.

2. The impact on the potential to attract ANY hospitality investors going fwd to Bermuda as destination...potential which is already at a low...this would sink it..and affect more than just HSBC and the owners of T's P.

3. The impact on jobs if there is another receivership. Don't kid yourself, there is no guarantee that another buyer would pick it up and operate it in the same way..or that this would happen quickly. Example - Four Season in Exuma, Bahamas went under...it is now a Sandals resort that Butch Stewart bought for pennies on the $...nothing like what a FS would have been to that island.

4. The impact on Bermuda's marketing and brand (weak as it may currently be) with the loss (before it started) of a Rosewood hotel - only the 2nd brand in here (Fairmont being the other).

I know that this is all tough to offset against what is being proposed...but it should at least make people stop and think (particularly those who purport to have all the answers as to how to turn Bermuda tourism around - not talking about you, my friend...!!)).

...


But I don't think people here understand what REALLY makes tourism work.

It is VERY complicated..and there is a new model that is still unfolding..the old one is "broke" (pun intended...!!)

...

Trust me, HSBC WILL be taking a haircut..that debt WILL be written down..by
how much who knows, but there is no way they can carry it on their books at
current levels (I'm told it's north of $120 mil).

However, we'll never know because, unlike Butterfield which is local, HSBC
doesn't have to produce a financial statement to that degree of detail.

Re Tuckers Point taking a hit...they have been taking it for YEARS with
losses upon losses. They will NEVER ever be profitable enough to see the
shareholders getting a return. Privately they might acknowledge that, but
publicly it can never be said. They could certainly prove it.
It makes me laugh when people ask for their accounts..if I were them, I'd
hand them out...publish them, let it all hang out...!

There is a lot of merit to these points, and I would admit to finding many of them difficult to dismiss out of hand if Bermuda wants to remain in the tourism business.

This suggests that a Tucker's Point failure would present a systemic risk to Bermuda's tourism product.

What I think is particularly problematic is that the Government and Tucker's Point, perhaps out of political need to not admit the true state of Bermuda's tourism product post Brown's fictitious 'Platinum Period' and pride to not have Tucker's Point's financials laid bare, have really not presented the case well - or at all. They've asked the public to accept this with little information.

If this is indeed the state of tourism in Bermuda (and it is), Bermudians need to know. We all know it's not healthy, but years of political spin have been painting a different picture with the PLP even recently posting on their website about Tourism's turnaround being 'alive and well', when it seems more like a death spiral.

So a little food for thought. I don't think there is an easy answer here, but I would not be able to support the SDO based on the lack of information presented, and if I was Tucker's Point I would present the financials, and if I was Government it's time to be honest on this front for the first time in a decade.

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I'm not sure what kind of numbers the PLP - outside of Cabinet - have in Parliament for this SDO for Tucker's Point. And regardless of how you feel about what essentially amounts to a Government bailout of a private corporation and HSBC's loan department, there is a lot going on here.

Firstly, and usually around election time, the PLP make a lot of noise about land being appropriated from black families by the Bermuda Government to create what is now Tucker's Town. So, with the SDO action they are demonstrating that when it comes to tourism they would have and will do the same, by handing over the same land for foreign ownership. They have now ceded that as an issue (not that they won't keep bringing it up when politically expedient and playing golf there with a clear conscience).

Secondly, if I were the Opposition, which I'm not, I'd be looking to apply some pressure here to force Government's hand (to the extent that they don't have the numbers themselves), and withhold any support for a re-zoning and additional sales of residential units to non-Bermudians until the Government:

  • abandons their discriminatory land license policy which prevents Bermudian families with one not yet Bermudian spouse from owning more than one property and disadvantages them in the real estate market.
  • reinstates the previous policy which allowed Bermudians with qualifying homes to sell those to non-Bermudians, which is what the Tucker's Point Special Development Order is designed to accomplish for a corporation.

Why should Bermudian individuals be treated as second class citizens while corporations, and foreign banks are given preferential treatment to prop up their bad business decisions?

I understand the value of a resort like Tucker's Point succeeding as being critical to Bermuda's tourism industry, but it's at least 50% a real estate sales model, and Government is demonstrating incredible hypocrisy and hostility to its own citizens - and undermining the local real estate sector of the economy - by treating Bermudian families as less important than corporations.

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With the terrible news that Newstead Belmont Hills is in receivership, the much hyped but never arrived Platinum Period is looking more like the Bronze Age.

(Full disclosure, I stole that line from a friend. It was better than the Platypus Period)

It's hard to see how Park Hyatt or Morgan's Point would pull the trigger in this environment, even if they could raise the funds which is highly unlikely.

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Ah, that oh so familiar ritual of announcing that construction is imminent at the old Club Med site.

15 Nov. 2007 - Action, Not Words: PLP Delivers for St. George's

3 April 2008 - Bazarian Intl. to build hotel at Club Med

26 Aug. 2008 - Once the dust settles

17 Dec. 2008 - Work on new hotel to start next year; completed by 2012

6 Aug. 2009 - Bazarian expects to secure $120m in financing from HSBC

21 Oct. 2010 - Breaking News: Ground to be broken on Park Hyatt hotel next year

I hope this happens. I really do. Hyatt appearing to sign on is progress. But it's obvious that today was just a made for TV event for the outgoing Premier's lame self-tribute videos. Time was running out.

"Must show progress by October 30th. Must show process by October 30th." Rinse. Repeat.

I suspect I'm not alone, and I've said it before, but wake me when Island and Correia Construction equipment is idling on site.

Until then the public is being treated as victims of tourism Stockholm Syndrome, our very own non-reality 'reality' show.

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I didn't make it to the PGA Grand Slam this week, but I have been watching it on TNT and the island looks great on TV as always, and the course has held up well to the pros.

The Grand Slam of Golf proved to be one of the rare examples over the past 4 years of the benefits for Bermuda when the outgoing Premier and Bermuda's interests align.

Sadly golf seemed to be about the only case of this.

The key is for Bermuda to use the Grand Slam as a spring board to really leverage this and attract or create a bigger PGA event, a full four rounds with a larger field to generate much more exposure for the island for a key tourism target market.

I'm not sure how you credibly measure the economic value of an event like this relative to Bermuda's tourism spend, but it does demonstrate just how great a venue Bermuda is for these kind of events.

It's a longer term goal, and won't happen overnight, but I don't think the island should be content with this as the sole professional golf event on the island.

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And another company moves to Switzerland. They won't be the last either.

When will Government wake up, or are they going to sit idly by and let international business end up like tourism?

One day Bermudians looked around and said "Where'd all the tourists (and their dollars) go?"

How much longer before we look around and say "Where'd all the (re)insurers (and their dollars, jobs, tenants) go?"

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Hot on the heels of the outgoing Premier and Tourism Minister publicly mooting not renewing the PGA Grand Slam contract, we get a last minute glowing press release that the head of the PGA will suddenly be participating in the Premier's send off this weekend.

Yesterday in the paper the Premier says this:


"We are in talks about next year but we are going to wait and see what happens this year. If we don't get a good deal this year we will have to renegotiate."

And now that they've bought in to the Gala he's effusive about the value of the 'relationship' and doesn't even hide the direct link of this act:

I am pleased that Mr. Steranka has agreed to join us for the Farewell Gala Weekend and believes his support bodes well for the future relationship between the PGA and Bermuda.

I'm almost speechless. The Gala is is a partisan political fund-raising event, not a Bermuda Government event and this kind of influence peddling is exactly what many people feared.

It screams quid pro quo: the PGA make a ten or twenty thousand dollar donation to the PLP/Premier's event and any day now we'll probably find out that one of the Premier's last acts as Tourism Minister will be to renew the Grand Slam for a million plus. Not a bad trade if you're the head of the PGA. (I should add that the press release doesn't say that the PGA CEO is paying to attend).

I really don't know what to say. It looks so bad. it's so blatant. To make it worse, this is more foreign money polluting local politics.

There's so much wrong with this.

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If I were a Bermudian married to a not yet Bermudian - which I'm not - and government was jerking me around with a license costing over $1,000 to own property, while allowing corporations to buy hotel residential units - with tax breaks, I'd be incorporating myself a little company, taking the savings from my tax concession and calling room service from my hotel residence.

Bermudian families get penalised while big business gets special treatment.

Yet another crazy example of compartmentalisation and cognitive dissonance from the party that demonises anyone who dare add branches to the Bermuda family tree and own property in Bermuda. Remember that? The whole we're protecting land from nasty foreign spouses shtick.

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