The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Any Mediterranean Shipping Company (MSC) interest in purchasing the Grand Lucayan resort would likely relate to plans to make Freeport a ‘home port’ for its cruise ships, Tribune Business was told yesterday.

As speculation intensified over the reasons behind the Prime Minister’s trip to Switzerland to meet with MSC executives, several observers suggested that a ‘home port’ proposal would be the only reason for the company to explore the Grand Lucayan’s acquisition.

A Bahamas Information Services (BIS) official told The Tribune on Wednesday that the Prime Minster’s trip discussions will focus on MSC’s economic interests, including proposals to acquire Grand Lucayan and further port-related investment.

MSC has never been in the real estate or hotel ownership/management business, the privately-owned, Geneva-headquartered company having stuck religiously to its core shipping, ports and cruise lines business.

However, acquiring the Grand Lucayan would make sense if MSC and the Government have plans for the cruise line to use Freeport as a ‘home port’ for several of its vessels.

If that is the ultimate goal, MSC would need overnight hotel accommodation for the hundreds of cruise passengers that it would bring to Freeport, hence any Grand Lucayan interest.

Making Freeport a cruise line’s ‘home port’ is not a new idea, and the suggestion has been ‘floated ‘ and discussed several times before, although to no effect.

However, an MSC purchase of the Grand Lucayan would effectively achieve several of the Government’s Freeport objectives in ‘one shot’.

Apart from a new owner for the hotel, a ‘home cruise port’ would boost activity and arrivals at Grand Bahama International Airport, and potentially help to revive Freeport’s moribund tourism product.

MSC would also have a better ‘in route’ than many other potential purchasers to the Grand Lucayan’s owner, Hutchison Whampoa, given that the two are already investment partners in the Freeport Container Port.

K P Turnquest, the Opposition’s deputy leader, told Tribune Business yesterday that an MSC ‘cruise home port’ in Freeport “could work”.

The former Grand Bahama Chamber of Commerce president said a Grand Lucayan purchase would represent something of “a gamble” for MSC, given that it has no background in property ownership, development or management.

But the east Grand Bahama MP agreed that a deal would make sense as part of a wider ‘home port’ strategy.

“If it is tied to a home port programme it would make sense and bring benefits to us,” Mr Turnquest told Tribune Business.

“For many years we’ve been trying to get one of the major cruise lines to home port. The whole idea being that you’d have airlift of cruise passengers, increasing the use of the airport, with them staying at the hotel and then the ship here.

“It’s a win-win if we can get it.”

MSC already has strong connections to Freeport, which is the location of its Bahamas head office and Container Port investment, as well as its proposed maritime training centre.

Its links to the Bahamas have also been strengthened considerably by its $100 million cruise private island, planned for Ocean Cay near Bimini, an investment that would further underpin the rationale for a Grand Lucayan deal.

MSC also wanted to play a greater role in financing New Providence’s new container port, an idea that was rejected by the former Ingraham administration, which went ultimately with the Arawak Port Development Company (APD) plan. MSC, though, remains one of the two main commercial shipping lines serving Nassau.

Mr Turnquest yesterday, though, suggested that it was possible the Prime Minister’s MSC discussions may not involve any deal for the Grand Lucayan at all.

Other subjects that the two parties have to discuss include the proposed $250-$300 million Container Port expansion, and the renewal of Freeport’s expiring tax incentives, which will be key to ensuring the project goes ahead.

MSC may also be seeking clarification on the Government’s wider objectives for Freeport, including the sale of the Grand Bahama Port Authority (GBPA) and governance ‘reclamation’, both of which could impact its business.

A report to the Government by the international consultants, McKinsey, warned in November 2014 that the Freeport Container Port’s market share could be slashed by 20-30 per cent if the city’s expiring tax breaks are not renewed, with more than 60 per cent of existing cargo volumes put “at risk”.

McKinsey warned that failure to renew them could result in a 15-20 per cent decrease in the operating margin for MSC, the Container Port’s major customer.

“Full tax pass through could decrease MSC’s operating margin by 15-20 per cent, and put more than 60 per cent of existing transhipment volume at risk of being moved to other ports,” McKinsey warned.

“The increased cost of operations at Freeport could decrease its market share by 20-30 per cent in this highly competitive industry. There is material risk that MSC could reduce transhipment volumes considerably if Freeport Harbour and Freeport Container Port pass taxes on. The Government stands to lose more than $2 million in Customs duties.”

In its interviews with Freeport stakeholders, McKinsey reported that it was bluntly informed that “MSC would leave, and no new shipping lines will enter”, should the increased burden from the non-renewal of the city’s tax breaks be passed on to the shipping line.

Detailing some of the comments, which appear to have come from MSC executives themselves, McKinsey said it was told that any new or increased taxes would make Freeport “uncompetitive”.