Stalled hotel development costing MVR 24 million annually: MTDC

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 visited the City Hotel development last month with a surveyor who had worked and lived on the site in 2009.

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.

“The bread and butter of the Maldives is definitely tourism. We are maintaining [Maldivians’] livelihood through tourism, and tourists want different products other than just sun and sand.

“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.

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MTDC to temporarily operate Club Faru resort: Tourism Minister

The Maldives Tourism Development Corporation (MTDC) is to temporarily operate Club Faru resort, Tourism Minister Ahmed Adeeb has said.

Local media has reported that the MTDC will run the resort until the second phase of reclaiming Hulhumale’ begins this year.

On Saturday (January 5), the Ministry of Tourism, Arts and Culture said it had assumed control of Club Faru after the resort’s operators failed to hand over the property following the expiry of their lease agreement.

Adheeb told Minivan News the next day (January 6) that the property was to be closed down within two months of the government taken over the resort this weekend.

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First charter flight from Mumbai brings 107 tourists to Addu

An inaugural charter flight from Mumbai, India to Seenu Atoll Gan arrived in the country on Sunday with 107 tourists, reports Haveeru.

The Kingfisher charter flight was organised by Indian travel agency Make My Trip in collaboration with the Maldives Tourism Development Corporation (MTDC).

The tourists were greeted upon arrival by Home Minister Mohamed Shihab, Indian Ambassador B M Muley and senior officials of MTDC and Gan Airport Company in a backdrop of traditional boduberu music.

While over a 1,000 Indian tourists have booked holidays at the Herethera resort, according to MTDC, the Kingfisher charter flights will operate bi-weekly on Wednesdays and Saturdays.

The travel agency meanwhile revealed that their goal was to bring over 6,000 Indian tourists to the Maldives – Indians currently account for just three percent of visitors to the country.

Previous charter flights from Italy and Germany introduced after the opening of Herethera in 2007 were short-lived and cancelled prematurely.

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MTDC profits drop 29 percent

Profits of the Maldives Tourism Development Corporation (MTDC) in 2009 dropped 29 percent to Rf86 million, according a report in Haveeru.

In its annual report MTDC claimed management issues at Herathera resort were the major reason for the decline in 2009. The company received a profit of Rf46.6 million from the resort in 2008, but this fell to Rf76,458 in 2009.

MTDC also invested heavily in settling disputes with Yacht Tours Maldives, spending RF23.3 million to extricate itself from the arrangement and losing a further Rf17.3 in land rent.

The report also blamed the 2009 economic recession for MTDC’s difficulty in obtainnig bank loans to pursue investment projects.

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MTDC agrees to pay Yacht Tours $3.5 million to end court dispute

The Maldives Tourism Promotion Board (MTDC) has agreed to an out of court settlement with Yacht Tours Maldives (YTM) after a long-running dispute over Herathera Island Resort.

MTDC claimed that YTM had been running Herathera Island Resort without paying rent and took the company to court. In May last year YTM was ordered to pay US$8 million in outstanding rent to MTDC.

Managing Director of MTDC Mohamed Mihad said if necessary, the board would withdraw the funds from the US$10 million bank guarantee YTM had paid to to secure the resort during the bidding process to sublease the island.

YTM stopped paying rent in December 2008, claiming MTDC had failed to fulfil a contractual obligation to build a channel between Herethere Resort and Hulhudhoo, an adjoining inhabited island, by 30 November 2008.

MTDC responded by terminating the company’s contract and giving Yacht Tours seven days to hand over the resort. In response, Yacht Tours lodged a civil case to sue MTDC for US$47 million in compensation for the incomplete channel and projected losses.

“Yacht Tours doesn’t have the right to stay on the island and do business without paying rent… We have sent them a letter asking them to leave as soon as possible,” Mihad told Minivan News at the time, adding that MTDC would file a court case if YTM refused to hand back the island.

YTM claimed it was unable to pay the rent because the occupancy of the island was low, due to the financial crisis. At one point YTM CEO Ahmed Mohamed claimed 600 staff were working at the resort despite there only being 28 guests.

In October 2009 the court gave MTDC control of the resort, which it claimed to have spent US$55 million developing.

At a press conference held today, journalists expressed confusion when the chairman of MTDC, Ibrahim Saleem, said that the organisation would now pay YTM would US$3.5 million over 24 months including including a US$1 million down payment.

Saleem said the decision was “a commercial decision” and “the best way we found to solve the problem.”

“If we continue disputing this we might have to continue for two or three years. It’s taken too long to solve this problem,” he said.

MTDC would earn a substantial profit from running the Herathera Island Resort while courting interest from foreign investors, he said.

YTM and MTDC sent a letter to the court saying both parties considered the problem resolved.

CEO of YTM Ahmed Mohamed was unwilling to comment to Minivan News regarding the matter.

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