Seven months into his new job as chairman of insurance conglomerate Sagicor Group Jamaica, Richard Byles has started to see things quite differently.
Sagicor puts the brakes on expansion but holding on to hotel assets
SEVEN MONTHS into his new job as chairman of insurance conglomerate Sagicor Group Jamaica, Richard Byles has started to see things quite differently than he did from his previous perch for 13 years as president and chief executive. Having led an aggressive expansion into hotel ownership, driven
by Rohan Miller, Sagicor Jamaica’s recently departed executive vice president, chief investment officer and CEO of its hotel acquisition vehicle, Sagicor X-Fund, he is a bit protective of the US$700 million tied up in resort assets.
Byles is also dispelling rumours that Sagicor is selling off the hotels to the Playa Goup of Mexico.
“It is not our intention to sell the business. That is not part of what we are contemplating,” Byles said in an interview with the Financial Gleaner last Tuesday, mere days after Miller parted company with Sagicor Jamaica and took up a posting in Florida as Head of Treasury with the group’s parent company, Sagicor Financial Corporation.
Sagicor Jamaica, through various managed funds, owns four Jewel resorts in St Ann and St James, the most recent of which opened for business in Montego Bay this summer. It also owns the Hilton Resort & Spa at Rose Hall in Montego Bay and the Hilton Double Tree in Orlando, Florida.
Another 800-room Jewel hotel costing some US$200 was said to have been under consideration for Montego Bay, but in recent months Sagicor has pulled back from that disclosure.
Excluding the recently opened Jewel Grande, the hotels deliver revenues of US$150 million annually.
The risks attendant with the heavy investment in hotels appears to have now eclipsed Byles’ previous appetite for big profits, which he publicly embraced while he was the one running the conglomerate.
He retired as CEO last April and became chairman a month later on June 1. Christopher Zacca became CEO of May 1 and one of his early decisions was to second Miller to fully concentrate on growing revenues from the hotel properties.
“I would say that the only thing that has happened in our thinking about the hotel business, certainly in my mind, the issue of risk has evolved and grown larger – loomed larger – and says to me that we have to find a way to manage that risk,” said Byles.
Sagicor could enter into management contracts for the operation of the hotels earning a share of profits or straight leasehold fees. That was the model when Sandals Resorts managed Sagicor’s flagship Dunn’s River property before handing it back in 2010 — sparking the insurance group’s delve into resort acquisitions.
MUM ON ACTION
Byles, however, declined to say what actions Sagicor would take to manage the looming risk. The chairman, who is known for his candour, would not even be drawn on the range of options available.
“I can’t say anything more, but selling it is not what we have in mind,” he said.
He credited Miller for the growth of Sagicor’s hotel business, and also commended the management Miller put in place at the properties.
“Every one of those managers come out of the business and are Jamaicans; and it’s something that we are really very proud of and something that we want to preserve,” the chairman said.
“We love the tourism business – and every hotel makes money,” Byles added.
“I think that as a 100 per cent Jamaican operation, we have done quite well in the hotel business and it makes me think
sometimes why don’t other corporations get into that business. If we can do it, they can do it too. But we have to be very wary and cognisant of the risk appetite of our pension plans, and so that is making us consider ways in which we can manage that risk.”
Sagicor is the largest pension fund manager in Jamaica, and the hotel acquisitions were largely done with pension fund money.
“So here we are now with 2,200 rooms that employ 5,000 people. This is big business and a lot of it is concentrated here in Jamaica. And it’s not like it’s our money,” he said. “And we have sat down and said we are prepared to take this risk ... we understand this risk and we are going to take it. We are managing it on behalf of thousands of pension plans so we have to be even more careful than ever,” Byles stressed.
Asked if the fear was that Sagicor Jamaica, like its predecessor LOJ, was getting too far outside its core business, Byles said that was a concern but added that the circumstances were different.
“The LOJ that went through a crisis in the late 1990s was an LOJ that had a substantial banking operation and some hotel interest. So it’s like we are revisiting; and that makes some people nervous. But what’s important is: On what terms are you doing this thing? Is it the same? Are the conditions in the economy the same? No, quite different,” Byles noted.
“We have a far more stable and mature economic situation and management and that makes us feel comfortable – certainly me – in venturing beyond insurance into banking and into the hotel business.”