Over MVR 24 million (US$1.5 million) is being lost annually by the Maldives Tourism Development Corporation (MTDC) on a stagnant hotel development in Uligamu in Haa Alif Atoll, it has been revealed.
MTDC Managing Director Mohamed Matheen told Minivan News that the corporation had been making losses on the City Hotel development after construction was halted half way into the project in 2010.
Matheen revealed that along with the City Hotel project – which had cost MVR 120 million (US$ 7.8 million) to develop it to its present state – MTDC’s Herethera Resort had also made a MVR 386 million (US$25 million) loss.
The land for City Hotel was leased to MTDC by the government on February 27, 2007, after which construction on the 100-bed hotel began. According to the 2010 annual report by MTDC, the project was halted after just 40 percent of the development had been completed.
“There have been certain issues to contend with in the project’s development. We have had some difficulties in attracting investors because of the US$1.5 million land rent and problems with the possibility of serving alcohol on the island.
“The previous board of directors had decided to terminate the contract as the land rent is costing too much. However I have made a lot of progress in trying to change that, and City Hotel can be completed by the end of this year,” Matheen claimed.
According to the MTDC website, the Maldives government has leased nine islands to the company “at a rate substantially below the market rate”. MTDC’s 2008 annual report stated that the company has over 21,000 shareholders making it one of the largest public companies in the Maldives.
In November last year, shareholders of MTDC expressed concern after the company failed to pay dividends for three consecutive years while also recording a net loss for the first time in 2011, local media reported.
Minivan News witnessed that the entire development, including the inside of staff and residential quarters, had become overgrown with vegetation. Assorted earth-moving machinery was idle and in disrepair.
The MTDC Managing Director stated that MVR 80,000 (US$5,181) per month – MVR 960,000 (US$ 62,176) per year – is currently being spent on the “upkeep” of the development.
“We have 14 people looking after this facility, but it seems they are not able to keep the overgrowth down.
“With another seven to eight million dollars this development would be complete. It won’t cost us much to remove the overgrowth and the rooms were already completed to their rafters. It would involve minor repairs,” Matheen added.
According to the former surveyor – speaking on condition of anonymity – construction was halted due to external pressures from conservative religious groups regarding the sale of alcohol on an inhabited island.
Asked about this issue, Matheen said discussions had taken place with native islands , however they were “divided” on the issue of alcohol sale.
“Ninety-nine percent of tourists are drinkers, they are not coming here for many activities, and they are coming for relaxation and peace of mind. We have to cater to their needs,” Matheen added.
A committee formed by Uligamu islanders had submitted a court case regarding the halted development, according to Matheen.
“The island committee is not happy. They also think the development is controlled by the government when the majority is controlled by public shareholders. The government is not a major shareholder.
“The case is a pressure tactic. They think we have the money and they think we are purposefully not building here. They don’t accept the reality of the situation,” Matheen added.
In January 2012, local media reported that five people have been arrested in a youth-led demonstration at Uligamu against MTDC.
The protestors had demanded a reason as to why the development of the City Hotel had ceased, according to local media reports.
Matheen said that he was attempting to reduce the land rent costs as stipulated in the Tourism Act and that a new survey report of Uligamu is to be submitted this year.
US$25 million loss in Herethera Resort
Herethera resort – owned and operated by MTDC – was also said to have made a US$25 million loss following a series of “logistical issues”, Matheen said.
“We had pumped US$53 million into Herethera, however we are paying US$2 million in land lease and our operating costs are nearly 17 percent higher than resorts in the Male’ area because of location being so far away.
“When I took over this role in July, we did not have a single booking at the resort. Now we are fully booked until February 17,” Matheen said.
The MTDC Managing Director revealed that while no other resorts owned by MTDC are currently working at a loss, he admitted that because of the locations of the properties in the far south and far north, there were certain infrastructure issues.
Last month the bidding period for the management or purchase of Herethera Resort was been extended for the third time by the MTDC.
The company has not stated why the bidding period prior to this one ceased, but in previous instances the company said it had to cancel bids due to a lack of interest from potential investors.
ONYX, a company from Thailand, managed the resort until February 2012.