Deloitte: Dart deal a major economic stimulus

A financial analysis study conducted by Deloitte has concluded the ForCayman Investment Alliance plans known as the West Bay Corridor Project would significantly stimulate growth in Cayman’s gross domestic product, employment and government revenue. 

Dart Realty (Cayman) Ltd. engaged Deloitte to conduct the study “in order to provide additional information to the Cayman Islands’ public and various sectors of the government regarding the ForCayman Alliance”, the executive summary of the report read. 

The study analysed the current state of the Cayman economy, the need for an economic stimulus programme, the government’s current fiscal operation and its ability to fund programmes needed to effectively stimulate the local economy. The study also examined the contribution the ForCayman Investment Alliance’s projects, in particular the West Bay Corridor Project, would make in increasing GDP, employment and government revenue. 

  • The West Bay Corridor Project is part of the government’s “mega deal” with the Dart Group. That project consists of a number of elements including: 
  • The redevelopment of what was known as the Courtyard Marriott Hotel, which has been closed since the passing of Hurricane Paloma in November 2008, into a larger four- to five-star hotel;  
  • The redevelopment, enlargement and enhancement of the Public Beach on West Bay Road;  
  • The creation of another small public beach on West Bay Road near Yacht Drive;  
  • The closure of a section of West Bay Road and the completion of the Esterley Tibbetts Highway from its current end to Batabano Road in West Bay;  
  • The conveyance of approximately 20 acres of Dart-owned land on Batabano Road to the government to be used for parks and educational facilities. 

Current economic state 

The study notes Cayman’s economy remains weak and there are limited immediate prospects for significant economic growth. 

“An economic stimulus would be needed to return the economy to pre-recession levels of real GDP per capita in the short term,” the study reads. “The results of this analysis indicate that current economic trends and conditions do not support the Cayman Islands’ economy returning to pre-recession levels of activity on its own over the next three years. As such, an intervention by way of an economic stimulus would be required to reverse the decline in the economy since 2006-2007 and set the scene for health and sustainable economic growth.” 

To return to Cayman’s pre-recession economic state, the study calculates Cayman’s GDP per capita growth rate is required to be 3.35 per cent per year through the next three years. 

“The difference between the expected GDP rate and the required GDP rate, or each year’s GDP gap, can be closed by an appropriately scaled stimulus programme.” 

Although the study states the stimulus programme could come from direct spending from either the public or private sector, Deloitte’s analysis indicates the government would not be able to undertake borrowings “of the nature required to effectively stimulate the Cayman Islands’ economy and return real GDP per capita to 2006-2007 levels by 2014”. 

“Based on this analysis, the only foreseeable scenario for significant economic stimulus in the near term is through private sector participation projects, of which the ForCayman Alliance, including the West Bay Corridor Project, is a leading example.” 

 

Economic impact 

The study looks at the economic impact of the West Bay Corridor Project in both the short, stimulus period, term and longer term. 

For the short term, it looks at the years 2011-2014, apparently assuming an earlier finalisation to the definitive agreement and commencement of significant works than has actually occurred.  

In total, the study estimates $95 million of direct spending and $33 million of indirect spending on the West Bay Corridor Project alone through 2014. 

“For 2011-2014 … total spending, both through direct spending by the ForCayman Alliance on the West Bay Corridor Project and indirect (induced) consumption, closes a large percentage of the GDP gap,” the study reads. “On average, 26 per cent of the GDP gap is closed over the period as a whole. Further, for the years 2011 and 2012, 51 per cent and 61 per cent of the annual gaps respectively are closed, providing a greater stimulus when it is most needed.” 

During the initial 2011 to 2014 period, the Deloitte study also estimates average annual increases of employment of 410 jobs and of government revenues of $1.9 million. 

Looking longer term at the period between 2015 and 2019, the study concludes that the West Bay Corridor Project alone would continue to close the GDP gap. 

“While the impacts are of a smaller scale than during the short term stimulus period, they are more enduring as the operation of the new facilities will generate long-term employment in the hotel and restaurant sector and throughout the economy as additional consumption spending occurs and additional income is created.” 

 

Conclusion 

The study concludes that the contributions of the West Bay Corridor Project “are significant in both the stimulus period and the longer-term, with respect GDP, employment and government revenue.” 

“Although they do not eliminate the GDP gap on their own, and thus do not fully restore real per capita GDP to 2006-2007 levels by 2014, they do show the importance of private sector participations as significant stimulus programmes that create long-term benefits for the Cayman Islands economy.” 

In addition to the benefits of the West Bay Corridor Project, the study states “other indirect but tangible positive impacts” will occur in the longer term from the ForCayman Investment Alliance projects. These benefits would derive from the modernisation of Cayman’s waste disposal processes; an increase in available schooling space; the increased availability and quality of recreation and other lands available for public use; and from improved tourism infrastructure. 

“That will better position the Cayman Islands for increasing its share of the tourism market when growth resumes in that industry globally,” the report read. 

1 COMMENT

  1. This is shocking! A firm hired by Dart comes up with a conclusion that supports Dart’s agenda. Folks please remember that the tobacco lobby used to commission ‘expert’ studies on a regular basis that stated cigarettes were not harmful.

    Also how can a study that reaches out 8 years be considered long term. 8 years is long term for a hollywood marriage. Large infrastructure and developmental changes should be analyzed over 20 years or more.

    I am not saying this deal is right or wrong Cayman. Just know what you are getting. This project will forever change the face and character of the island. Hey I have no problem with Dart treating the Island like his personal Monopoly set if we are fairly compensated. It just needs to be the people as a whole that benefit and not just a few select politicians and their friends.

    Last observation. If you go to the beach in question you will see there is a reason it is the last large area to be undeveloped. The beach has a natural reef lying right off it comprised of large sandstone slabs. The sea floor is also very shallow here for approximately 100yds from shore. Can we honestly believe that a mega resort would be able to operate here without dredging away these natural features to allow the tourists to waddle into the water unimpeded and the dive party boats to pull up to the beach. Funny how the study did not look at the impact of these changes.

  2. Bottom line the West Bay corridor project will be a awesome economic stimulus, just not during 2 years of construction injecting 140 million, but long term for a better tourism product, more stay over room stock, more jobs and increasing West Bay Real Estate sales.

  3. to Divejay….just what Cayman needs…more empty rooms!

    DO NOT CLOSE OFF WEST BAY ROAD! The Island’s beauty is the ocean. Close it off and what is there? The bypass is not attractive and West Bay Road is. Stop giving in to the almighty dollar.

  4. Couldn’t agree with you more.

    A part of this issue is that the Courtyard Marriott was a white elephant investment that turned out to be a total failure.

    Why, with the debacle of the Hyatt Britannia sitting further up the WB Road, and another Marriott Hotel as well, did anyone in their right financial minds think that another major hotel in that particular area would have been a good investment, boggles my mind.

    The only way to make good on a bad investment now, is to create an all-inclusive resort, which by its very nature, must include privatising the beach area as a part of the resort;in effect, McKeeva Bush is selling that peice of the WB Road to Dart as a part of the resort property where the road will still be very much used by the resort to facilitate its services and extend the beach area up to the hotel as far as it will naturally go.

    Maybe the majority of Caymanians might not ever have stayed at an all-inclusive, private resort, although I’m sure, many have, as Caymanians are as sophisticated travelers as anyone else in the world but cutting out and privatising an entire section of what is a very public, loved and valued peice of their island for the exclusive use of others, regardless of how much they pay for the privilege is truly selling your soul for profit.

    At each juncture of every major development in Cayman, the promises have been made that jobs will be created for Caymanians…until the projects are completed, then go and check to see how many Caymanians are actually hired, holding decent jobs and forging careers at any of these completed projects…take the Ritz-Carlton Hotel as a prime example.

    If developments in a country needs to change a country’s entire landscape, heritage and even history, what long-term value can this type of development have for the people of that country ?

    Today’s generation will never know what it was to picnic, catch our own fish, dive up our own lobster and conch, fire up our cooking fires and eat the coco plums from that part of the 7-Mile Beach, as we did when we were children…fair enough…some things had to change and development take place but…

    Now you are saying current and future generations will never know what it is to even drive or ride along that scenic, historic road from town to town and at some point in time, will have to be vetted, checked and authorised to enter or pass through a historic part of their own country so that their tourist visitors can be made to feel that they are exclusive and special ?

    In my opinion, not even if this project could provide work and long-term employment for every single unemployed Caymanian, which it certainly can’t and won’t, would it be worth what is being surrendered and given up from the history and heritage of Cayman.

  5. Commenter posts: ‘The only way to make good on a bad investment now, is to create an all-inclusive resort, which by its very nature, must include privatising the beach area as a part of the resort…’

    Mr. Firery raises a number of valid questions/points here. However, we don’t have any evidence that Dart intends to build an all-inclusive resort at this location or to close off the beach anywhere. So, could he enlighten us as to where this information comes from?

  6. Caycompass

    If you knew anything about hotel investments from a financial point of view, you would know that when Dart speaks of resort…that is the only type of resort that would stand a chance of any financail success after the failure of the hotel as it stands.

    The closure of the road is all the proof I need; if this were not the type of resort planned, there would be absolutely no need to close the road.

    Do you think that at this very sensitive stage of negotiations Dart will reveal his full plans to anyone…

    No successful businessman or corporation ever does that.

  7. Firery

    The only way to make good on a bad investment now, is to create an all-inclusive resort, which by its very nature, must include privatising the beach area as a part of the resort;in effect..

    Not true, the more exclusive beaches almost by their very nature tend to be small covy-type places as opposed to big expensive beaches, remote areas accessible only by private ferry or plane. Do you think SMB area is that remote to promote private beach?

    At each juncture of every major development in Cayman, the promises have been made that jobs will be created for Caymanians…until the projects are completed, then go and check to see how many Caymanians are actually hired, holding decent jobs and forging careers at any of these completed projects…take the Ritz-Carlton Hotel as a prime example.

    Not true, it’s a shallow analysis for just physically counting the jobs occupied by Caymanian at Ritz Carlton, you should consider who are the businesses, suppliers, concessionaires, contractors, and subcotranctors who have tied up with Ritz Carlton operations.

  8. Nice try…but its your analysis that is shallow, expecially the one counting sub-contractors, suppliers and others as part of the Caymanian work-force.

    We both know that we are talking about man-off-the street jobs here, not collateral contractors etc.

    A reallly good attempt at covering up the fact that there are very very few Caymanians on the payroll at the Ritz-Carlton, and many other major establishments in Cayman.

    That is a fact that you cannot truthfully deny.

    And I’ve already used Negril Beach in Jamaica as as wide and open a beach as one would like that has been cut up into ‘exclusive’ little portions by fencing and barriers by the establishments that own property on that beach; I’ve vacationed in Negril for years so I’m speaking from first hand experience.

    Father time will prove me right or wrong here.

  9. As a young Caymanian the only future we have is the development and expansion of our country and its industries. My children need oppurtunities when they become of age to fend for themselves. The current economic base can’t even support the graduates of 2005 much less the class of 2022. There is no strategic plan for placing our children in jobs and they are graduating high school and college by the hundreds. If we don’t create something worth having here we will be compared to the city of Detroit Michigan with poverty on every corner and stories of how great the place used to be.

    The older generations need to wake up! The young people of this country need work and you all have the jobs. Either step aside to let the kids of this country get an oppurtunity to work or do something useful and push for projects of growth and positive development of this island. When your dead and gone, the children of these islands won’t care if they can see the sea on their way to work. Remember, they are unemployed becuase you didn’t create oppurtunities for them!

    This is sickening now – we need to get our youngsters in jobs and away from a life of crime, guns, and drugs…… Already sounds like Detroit

  10. Caycompass

    One very important and relevant question, that your good selves, as guardians of information to Cayman’s public might like to seek or provide an answer for…

    Have yourselves, or anyone else actually seen a plan of Dart’s hotel resort for which the WB Road will be closed (that section of it at least)?

    Has Dart or McKeeva Bush’s government shown the public maps and a project diagram of what this finished hotel resort will look like, including the impact and use of the WB Road, the beach areas included and surrounding the proposed resort and the other businesses in the surrounding areas ?

    Until this is provided, anyone’s guess is as good as another’s as to what this hotel resort project will actually be and how it will imapct the entire area.

    Has any environmental impact studies been done on this project ?

    No one seems to have raised these important issues before jumoing on the bandwagon of either for or against this project but..

    The closing of the road as a part of this resort development is a major issue; no government allows a private entity to own land and do whatever it wishes with a major public road until all important and relevant issues have been revealed to the public and basically agreed upon.

    I have vacationed in Negril, lived in South Florida where Biscayne Blvd runs from South Miami up through Hallandale and Hollywood Beaches…all major tourist areas and beaches in South Florida with world-class resorts along the both sides of the road and not once…have I heard of any plan to EVER close any portion of an oceanside road because of a hotel resort.

    Don’t you think Cayman’s public deserve more detailed information on this resort and how their closed road will imapct this resort and the adjacent beach area ?

    I certainly do.

  11. To Sawana Bodden…I remember when I used to come to Cayman and Caymanins were working everywhere we went. That’s not the way it is now. I remember having the same maid year after year….seeing the same people year after year…what a great time that was. Now you come to Cayman and you don’t get to know the wonderful Cayman people. There are Canadians working in the tourtist industry than there are Caymanians. That’s one way to create more jobs!

  12. @Sawana Bodden:

    Not wanting to repeat the mistakes of a depressed American city should be the idea. Detroit once boasted a booming industry, they saw their production line made obsolete by good cheap Japanese imports. Cayman has an economic base which require importing fifty percent of the workforce, so lack of employment opportunity is not the problem for our kids..

    One positive step made recently by government to address part of the problem is; the disbanding of social promotion in our schools.

    Further’ Cayman can continue to develop without sacrificing something I know your children will too hold dear, their connection as an islander to the sea.

    Maybe they will say one day, Daddy you mean when you were a kid you could drive along the road and see the sea, what happened!.. Oh we don’t have to destroy our little island to get a job, even if it mean going to a far off country to work..

  13. This is why Negril is the secret getaway spot in Jamaica for the world’s tourists…ask any of the crowd who gathers at Ricks Cafe for the party.

    If you travel along the road from Negril village to the border of the parish of Hanover, you are basically travelling the West Bay road; same scenery, eerily so, same tourist establishments along the road…in some places, even the same scenery of the beach.

    No hotel developer, be they Jamaican or foreign, would ever consider closing Negril road because it IS part of the ourist attraction to the area and dear to the local people…

    And its not like that area does not have the land on which to build the same highway to by-pass the local road but it would never even be considered.

    Hotel developers coming into the area build on the land as it is, or they do not build at all…and when since did Cayman ever need the developers money more than Jamaica does…

    But in Jamaica, god bless, some things are simply not for sale.

  14. Firery, One thing you are not mentioning about the places that you are using as comparisons is the fact the these place collect taxes from their residents which helps pay for Government expenditures and Civil Services and I am not talking about Sales tax on purchases which cannot begin to be compared to Income and Property taxes. This may be why Cayman is so cash strapped and finding it necessary to rely on other means of bringing money in such as selling out to developers. These places basically make the residents pay to keep their homeland that way it is..

    It may one day come down to selling the majority of the island to the highest bidder or asking the people to pay to keep it. What do you think most folks will chose?

  15. Buck1017, I see your point. Maybe the CIG should commission their own study. But the problem here is that the people would scream bloody hell and say it was a waste of money or that Mac manipulated the study to be in favor of the deal.

  16. I have visited the Island again after 15 years of absence. I was shocked by the ugly 7 story buildings directly on the beach which prevent sunshine to reach the waterline in the morning. Cayman was previously attracting the more affluent crowd due to the tranquility it offered. I don’t mind development on the other side of the road, but NOT directly on the beach!
    Just building more hotels on this small island is not going to help the locals. It will actually destroy the ambience even more. Quit developing the beach and focus on preserving the few green spots that are there…make small parks with benches and different plants and trees for shade that everyone can use. Locals also need to start taking up jobs in hotels.

  17. NJ2Cay

    I agree that I’ve only commented and focused on the one issue…the closing of the WB road for the development of the hotel resort…but

    Have you read some of the other comments related to the same issue ?

    One poster has stated it in clear, concise terms…Cayman does not need to destroy its culture and foundation to provide jobs in its economy.

    Maybe you have no real clue as to the impact that closing this historical, oceanside route between George Town and West Bay will have on the people of Cayman…given the history of the two districts and the importance of the relationship between the residents of Cayman’s two largest metropolitan areas.

    I will leave other posters to try to convey this to you.

  18. Don’t get me wrong Firey, I totally understand everyones grip about it. I was just pointing out one of the possible reasons why the folks in charge or willing to make such drastic choices. I’ll bet if Cayman wasn’t in the financial situation it currently is. Something like moving this road wouldn’t have even been considered.

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