Up in a puff of smoke: The old Club Med resort was imploded in August, providing an opening for Park Hyatt. They have re-stated their support for the scheme but could the global credit crunch hamper progress?  *File photo by B. Candace Ray
Up in a puff of smoke: The old Club Med resort was imploded in August, providing an opening for Park Hyatt. They have re-stated their support for the scheme but could the global credit crunch hamper progress? *File photo by B. Candace Ray
A huge question mark hangs over the new five-star resort planned for the former Sonesta site after the bank funding the development collapsed in the credit crunch.

Despite hype regarding proposed hotels in St. George's, Hamilton and Morgan's Point, the Southampton Beach Resort is the only development that appeared to be heading steadily for completion. Demolition of the former Wyndham resort - the second property to occupy the Sonesta site - is well advanced, and developers have insisted that a new eco-friendly complex would rise from the rubble by 2011. It would become the first new resort to open in Bermuda in decades.

However, the project was being financed by Lehman Brothers, the venerable U.S. bank that folded in the midst of stock market turmoil. Scout Real Estate Capital, who own the prime 32-acre South Shore site, were avoiding calls for comment yesterday, but hotel insiders say that the company is struggling to find refinancing for the project in the current economic climate. It was revealed last week that building work on a 125-bed hotel taking shape in Turks and Caicos has also ground to a halt because it was being financed by Lehman Brothers. The developers have put the project on hold indefinitely despite the hotel being 75 per cent built.

The difficulties faced by the Southampton Beach Resort have confirmed what many experts have been predicting: that proposed hotel developments will have a very hard time securing funding in the current economic climate.

Removed from website

At a time when tourist spending continues to nosedive, Premier Dr. Ewart Brown has insisted that a roster of planned hotel developments is proof of a revival. However, funding has not yet been secured for the proposed Park Hyatt hotel in St. George's. Jumeirah - linked to a new resort in Morgan's Point after ditching controversial plans to build at Southland - once advertised Bermuda as a future hotel destination but has now removed that link on its website.

Alan Worden, CEO of Scout Real Estate Capital did not return calls for comment about the Southampton Beach Resort yesterday. John Harvey, head of the hotel association, said: "Of all the projects, Alan's [Alan Worden's] is the furthest advanced. But it started before this international financial tsunami. We all know how hard it's going to be to get funding now. It's a major concern, but it's too early to say if any project is or isn't going to go ahead."

Another industry expert, who asked not to be named, said: "A project that was relying on Lehman Brothers for funding will now face the giant task of getting that project refinanced. In the current climate that is going to be far from easy. Scout Real Estate own the land, and it's valuable land, so they're not going to want to give up on it. But if the funding for the new hotel is gone then at present the land is all they have got."

Alex DeCouto, president of the Construction Association of Bermuda, said that the country needs new hotel development to take up the slack once the current round of office construction is complete in Hamilton.

He said: "There are 3,800 people who work in construction, up to 3,000 of them Bermudian. The conventional math is that half of those jobs will go in a major downturn. I can see that could be feasible come the end of next year. Jobs should be safe for the next year - there are enough projects on the go; but there isn't much on the horizon, so we do need at least one of the major hotel developments to go ahead." Mr. DeCouto agrees with other commentators who say that government should have been more frugal in times of plenty so that in lean times it had plenty in reserve to stimulate the economy by starting public construction projects.

Park Hyatt (which has been linked to a proposed hotel in St. George's), said yesterday they are "enthusiastic" about bringing their brand to Bermuda. However, the company could not say if any funding has so far been secured. When asked why the Bermuda project had disappeared from its website, Jumeirah were unable to respond by press time.