Aug. 13, 2004 – After less than a year of operation, the Grand Beach Palace Resort is going out of business, leaving its staff of nearly 300 persons out of work.
The resort's general manager, Luis Entrala Fabregas, announced on Friday that the property will be "permanently closing."
Mexico-based Palace Resorts purchased the 290-room hotel last November from CTF St. Thomas Corp. for $9.75 million. At that time the hotel was being operated as the Renaissance Grand Beach Resort under the management of Marriott Resorts. Palace Resorts converted the property into an all-inclusive resort.
Grand Beach officials announced on July 1 that the hotel would close temporarily on Aug. 28 for $12 million worth of renovations. Their local attorney, Derek Hodge, said at that time that management was projecting occupancy of 10 percent in August and 1.5 percent in September levels unheard of for a major V.I. property except in the immediate aftermath of a devastating hurricane.
However, Randolph Allen, United Steelworkers of America international staff representative, charged at that time that the resort was closing to thwart union efforts to organize its workers. (See "Grand Beach Palace Resort to Close for Renovations".)
The impending fate of the employees became a center of political controversy. Palace Resorts said it would give everybody one week's severance pay plus pay for accrued leave time. Objections were raised because many staff members have been with the property for as much as two decades through various ownerships and managements.
But Palace Resorts officials said they were exempt from the territory's plant-closing law, which calls for a week's severance for every year worked, because the company has been in business for less than a year. And Labor Commissioner Cecil Benjamin later said that did seem to be the case.
Also causing controversy were statements by the Palace Resorts officials that they would have to receive Economic Development Program tax benefits in order to continue doing business in the Virgin Islands.
On July 1, Palace Resorts said the closing would be temporary without specifying a targeted reopening date. Hodge expressed the hope that it would be about six months. Now, however, hotel officials say they have abandoned the idea of reopening.
"My clients have come to the conclusion that it is too difficult to do business in the territory," Hodge said on Friday.
Hodge said his clients were "enormously hurt" by statements made by senators during recent hearings on the proposed closing of the hotel. Neither Entrala nor Hodge attended the two hearings of the Senate Labor and Veterans Affairs Committee, although they had been invited to testify at the first, on Aug. 3, and subpoenaed to do so at the second, on Wednesday.
Entrala sent a letter to the committee in lieu of appearing on Wednesday. In it he stated that he had watched part of the previous week's hearing on television and charged that some senators had made derogatory and defamatory remarks. He also stated that the subpoena he had received was "unenforceable." (See "Subpoenas Fail to Get Resort Officials to Appear".)
"They came here in all good faith," Hodge said on Friday of the Palace Resorts ownership and management. But, he said, hostility from the V.I. government has turned them away.
Hodge also said that his client's business model — as an all-inclusive resort (in which guest rates include all meals, entertainment, leisure activities and other amenities) — will not work in the Virgin Islands, although it has been quite successful in many of the other Caribbean Islands.
The nearby Wyndham Sugar Bay Resort and Spa, which with a few more rooms than the Grand Beach is the second-largest resort on in the territory, and the smaller, family-owned Bolongo Bay Beach Club have operated as all-inclusive properties for years.
Since it was developed in the mid-1980s as a Wyndham property, the Grand Beach has been one of the four largest in the Virgin Islands. Marriott Frenchman's Reef Beach Resort has 408 guest rooms and suites, Wyndham Sugar Bay Resort has 300, and the Westin St. John Resort has 282.
Severance pay will be given to the workers as previously announced, Hodge said. But he also said, "We're working that issue out."
The property will once again be put up for sale.
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