In a recent development, the government of Samoa has acquired a 30% preference share in Aggie Greys Hotel Limited, the owner of Sheraton Samoa and Aggies Greys Hotel & Bungalows. This move comes as the government aims to recover unpaid loans from the Development Bank of Samoa (D.B.S.) and ensure adequate premium accommodation options for upcoming events.
The decision to invest in the hotel industry reflects the government’s focus on national interest, particularly with Samoa set to host the Commonwealth Heads of Governments Meeting in October 2024. Anticipating a surge in visitor numbers, the government sees the acquisition as a strategic move to address the potential shortage of major accommodation venues during the event.
The investment is based on shares worth SAT$30 million, representing a mortgage loan owed to the D.B.S. dating back to 1993. By intervening in this matter, the government aims to safeguard its financial interests while utilizing the premium facilities and prime location offered by the hotel.
Additionally, the government has endorsed a grace period for local hotels that faced potential auction due to loan repayment difficulties with the D.B.S. The objective is to provide these businesses with an opportunity to recover and prepare for the Commonwealth Heads of Governments Meeting, which is expected to bring a significant number of delegates to Samoa.
To negotiate new conditions, the Minister of Finance, Mulipola Anarosa Ale-Molio’o, has engaged with the China-based parent company of Aggie Greys Hotel. This step aims to establish mutually beneficial terms for all parties involved.
However, concerns have been raised regarding the government’s involvement in the private sector. Critics argue that it may create conflicts of interest and potentially compromise the independence of regulatory functions. Furthermore, industry stakeholders question the impact of the government’s entry into the hotel industry on fair competition and the perception of hoteliers, resort owners, and beach fale owners.
The outstanding mortgage balance for Aggie Greys Hotel Limited stands at SAT$22,608,507, and the government has established repayment conditions. These include a three-year grace period starting from January 2023, charging a loan interest of 3% effective from January 2026, and a monthly loan repayment of $220,000 effective from January 2026. Other conditions, such as insurance for the hotel and its assets, are currently being finalized.
The government has directed the D.B.S. to discuss remedies for the repayment of the total credit line facility of SAT$37 million with the Central Bank of Samoa (C.B.S.). The D.B.S. is also considering reclassifying its status as a public trading body and appointing its CEO as a member of the Aggie Greys Hotel Limited Management Board.
As Samoa aims to revitalize its tourism industry following the COVID-19 pandemic, the government’s investment in the hotel sector represents both opportunities and challenges. The success of this venture will depend on effective management, economic recovery, and maintaining a balance between regulatory roles and fair competition practices.
The government will need to navigate potential conflicts of interest, address industry concerns, and ensure transparent governance mechanisms to foster investor confidence and maximize the potential benefits of this investment.
Disclaimer: This article is based on available information and does not constitute financial or investment advice.
