The setback threatens to complicate China's plans for winning new construction business in the U.S. and the Caribbean.
The developer, a group led by Bahamian businessman Sarkis Izmirlian, this week postponed for a second time the opening of their 2,200-room hotel-and-casino project, which was scheduled to receive guests on Friday. A unit of China State Construction Engineering Corp. is building the project.
The opening of the resort, known as Baha Mar, is being pushed back to May, the developer said. The original opening date was December.
Hotel analysts say the escalating tension between the Chinese company and its partner raises questions about whether issues at Baha Mar could run deeper than a simple delay. The two sides have had harsh words in private conversations, say people close to the matter, but this week some of that tension exploded publicly.
"In setting our opening date for March 27, we relied in good faith on the representations of the resort's construction manager and lead contractor," a Baha Mar spokeswoman said in a statement, referring to China Construction America. "Subsequently, it has become clear that our contractor hasn't completed the work with an attention to detail consistent with Baha Mar standards of excellence."
A spokeswoman for China Construction America said: "While the Baha Mar project has presented many challenges, [China Construction America] has responded to those challenges professionally and effectively." She added that "laying blame upon CCA for its decision to delay the announced opening of this project are wholly inappropriate and inconsistent with the history of this project."
Delays of a few months or more are common for large construction projects, and Baha Mar is an especially complicated one.
The parent's U.S. subsidiary, China Construction America, relied on thousands of Chinese workers brought to the Bahamas to build one of China's largest overseas real-estate projects. The laborers lived in temporary camps near the site, and a few dozen protested in front of the Chinese Embassy in the city of Nassau last year with complaints about working conditions and delays in pay, though Bahamian government officials have said the dispute has been resolved.
Accusations by its partner that China Construction America performed substandard work could cause headaches for Beijing that go well beyond the Bahamas. From the start, Beijing viewed Baha Mar as a showpiece that would help CCA win new construction and hospitality projects throughout the Caribbean and beyond.
"We think we can use this business model to grow our business in the United States," Ning Yuan, president of China Construction America, had said about Baha Mar in an interview last year.
China's commitment also goes beyond building the resort. The country's export-import bank provided a $2.5 billion loan to the developer, and China State Construction put in $150 million for a preferred equity stake.
"I see the combination of worker unhappiness, partner unhappiness and project tardiness as something they're going to have to explain before winning another large contract in this region," says Derek Scissors, an economist and resident scholar for the American Enterprise Institute who tracks China's overseas construction.
Baha Mar's opening is critically important to the Bahamas, too, which is counting on the project to create thousands of new jobs for a country that has been experiencing double-digit unemployment.
The site will include luxury condominiums, an 18-hole golf course, a 100,000 square-foot casino and a nightclub designed by singer Lenny Kravitz.
For now, China and Mr. Izmirlian are dealing with the ramifications caused by the delayed opening.
Baha Mar has launched an extensive advertising campaign, from glossy magazines to taxi cabs and subway stations in such major U.S. cities as New York and Boston. Guests who had reservations within the resort complex at the SLS Hotel, Rosewood Hotel and 1,000-room Baha Mar hotel had to be refunded or given alternative accommodations.
The developer also had invited media, tour operators and certain partners to the resort for the scheduled opening Friday. The developer has been scrambling to find other lodging for them in Nassau, which has been overflowing with U.S. tourists on spring break.
Source: Wall Street Journal by Craig Karman
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