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Minister Slams ‘Reprehensible’ Cruise Line Threat To Operators

Tourism Minister Dionisio D’Aguilar. Photo: Terrel W. Carey/Tribune Staff

Tourism Minister Dionisio D’Aguilar. Photo: Terrel W. Carey/Tribune Staff

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Minister of Tourism has slammed as “reprehensible” the threat by a major cruise line to terminate Bahamian tour operators’ contracts if they direct-sell to passengers without its permission.

Dionisio D’Aguilar hit out after Tribune Business obtained a copy of Norwegian Cruise Line’s (NCL) August 30 warning letter demanding that Bahamian shore excursion providers “discontinue this practice immediately”.

Pledging to confront the cruise lines on the issue, Mr D’Aguilar said he “completely agrees” that NCL’s letter amounts to ‘restraint of trade’ and anti-competitive practices that have left Bahamian companies earning mere “crumbs” for years.

NCL’s August 30 letter, signed by Steve Moeller, its vice-president of commercial development, warns the cruise line’s ‘partner’ Bahamian tour operators that selling their product direct to its passengers violates their ‘Shore Excursion Agreement’.

“It has come to our attention that some of our tour operators are selling ours directly to our independent guests,” Mr Moeller wrote.

“As a reminder, NCL shore excursion operators are not permitted to sell directly to NCL guests without the prior consent of Norwegian Cruise Line Holdings. This is considered a breach of the Shore Excursion Agreement, and can result in the termination of the Agreement as per Section 5 (b).”

Mr Moeller then warned: “If you have taken part in unauthorised direct tour sales, we ask that you discontinue this practice immediately. Otherwise, we will be required to terminate our agreement.

“In any instance, where a direct tour sale is made to a Norwegian, Oceania or Regent passenger by a shore excursion operator, the operator needs to advise the vessel’s shore excursion destination manager of all direct sales.”

The NCL letter then reproduces Section 5 (b) of the standard Shore Excursion Agreement, which reveals that operators not only have to obtain the cruise line’s permission to direct sell, but its approval of the price they will charge passengers.

“In the instance that the operator is authorised to to directly market any tours to Norwegian passengers,” Section 5 (b) reads, “operator shall sell those tours at the price agreed upon in writing with Norwegian, and will report all Norwegian passenger direct tour sales to Norwegian.”

This clause allows NCL to dictate the margins, mark-ups and profits a Bahamian tour operator will make from ‘direct selling’ to its passengers, effectively controlling their ability to survive.

NCL’s letter thus provides the first written evidence of the ‘trade restrictive’ practices employed by the cruise lines, and which Bahamian tour and shore excursion providers have constantly complained about - under the cover of anonymity - for years.

“My position as Minister of Tourism is I find these practices by the cruise companies to be reprehensible,” Mr D’Aguilar told Tribune Business, when informed by this newspaper of NCL’s letter and its contents. “They should cease and desist from saying that right now.

“They have every opportunity to sell these excursions on the boat, and if a passenger comes off and seeks out a Bahamian company to provide them with services, this is free enterprise.

“This is what I have been talking about,” Mr D’Aguilar added. “The cruise companies are not permitting enough of the tourism spend to fall into the hands of Bahamians.

“It’s very important that when cruise passengers come to the Bahamas, more of the spend filters down into the hands of Bahamians and communities where it is not going. Too much of the spend is being retained by the cruise companies to the detriment of the Bahamas.”

With the cruise lines supplying the customer base that ensures their existence, no provider has been willing to speak out publicly for fear they will automatically lose their contracts with the industry.

Many operators feel they have little choice but to sign restrictive agreements such as the one outlined in NCL’s letter otherwise their tours will not be sold ‘on ship’ by the cruise lines to their passengers, thus costing them their livelihood.

Mr D’Aguilar said senior Ministry of Tourism officials had informed him that top cruise line executives always denied the existence of such practices when the issue was raised.

“The problem is that when you talk to senior cruise line executives they say this does not go on,” he told Tribune Business, “but people on the front lines say this goes on all the time.

“The people on Bay Street, the vendors, the operators say that the cruise ships only let us get the crumbs. We’ve got to get some of the fat. We’ve got to survive, too.”

The Florida-Caribbean Cruise Association’s (FCCA) last tri-annual survey of the sector’s impact revealed that per capita passenger spending in the Bahamas had actually increased, from $64.81 in 2012 to $82.83 in 2015. But combined passenger expenditure in Nassau and Freeport remained stubbornly flat.

While acknowledging that the cruise lines had a right to maximise their profits, Mr D’Aguilar argued that this objective should not be achieved at the expense of the Bahamas and its private sector - which acted as a major passenger draw in the first place.

“They must understand that this government wants more of the tourism spend to fall into the hands of the average Bahamian,” Mr D’Aguilar added of the cruise lines. “They make a lot of money; it’s time to share it.

“Let the Bahamas enjoy in these passengers coming here. It’s very important that we get cruise ship passengers to spend more money in this destination.

“When the cruise companies involve themselves in these restrictive, anti-trade practices, we’re not happy. They’ll be hearing from us.”

NCL, in a response to Tribune Business, defended the Shore Excursion Agreement as a standard document that all its worldwide tour operators were required to sign.

“All tour operators who offer excursions to our guests around the world, in the more than 500 ports we call on each year, are required to sign and abide by our agreement,” the cruise line said.

“Any operator who has questions about the terms included in the agreement can certainly reach out to our Destination Services team for further clarification.”

One tour operator, speaking on condition of anonymity, said his firm had taken down its website to avoid “any hassle” from the cruise lines over passengers using it to book directly with them.

“This is a practice that’s been going on for a while, but it’s the first time I’ve ever seen it in writing,” they added of the NCL letter and ‘direct selling’. “Most of the cruise lines have that in their agreements.”

Agreeing that it represented ‘trade restrictive’ practices, the tour operator said it seemed as if the cruise lines had more rights in the Bahamas than Bahamians.

He added that all contracts between the cruise companies and Bahamian tour operators were governed by Florida law, “so if anything goes down you have to go to a Florida court”.

“How can you operate a business in the Bahamas under Florida law?” they asked. “They make you sign your rights away. If you don’t sign it, they won’t do business with you. We just want more protection.”

When it came to pricing, the tour operator added: “The cruise lines tell you it’s fair play, but they control the pricing. They dictate to you what you can charge and cannot charge.

“If your costs go up, you either eat the loss or beg for an increase. You sell to them [the cruise lines] net for $20, and they’re charging their passengers $40-$45 for the same tour. They make more money than you, but you’re the one covering all the overhead and expenses.

“The Florida-Caribbean Cruise Association (FCCA) dictate to you what you can and cannot do. It’s become a dog eat dog world, really. They’ve got more rights than we as Bahamians,” the operator continued.

“It’s sad. Here we are as Bahamians, investing in our country, and foreigners come here and get more rights and incentives than we do. The cruise lines have taken advantage of the Bahamas for so long.”

The tour operator pointed, in particular, to the cruise lines’ private islands scattered across the Bahamas. They said tours there were priced lower than similar products in Nassau or Grand Bahama, thereby ensuring the cruise lines retained more passenger spend.

“The cruise lines say they want us to provide new tours, but every tour we provide for them in Nassau and Grand Bahama they do on their private islands,” the operator said, either themselves or through local contractors.

A former tour operator executive, also speaking on condition of anonymity, said the threats and practices detailed in the NCL letter had been an issue for years.

They added that the sector formed BASE, the Bahamas Association of Shore Excursion Providers, to present a united front to counter the issue. But with companies ceasing business, and the cruise lines picking off members’ one by one, the Association has ceased to exist. Jacharic Holdings, which operated numerous tours, was among the more notable casualties.

The former operator added that the situation had created “a vicious circle”, with the cruise companies complaining about the appearance of downtown Nassau and demanding new on-shore activities, yet effectively denying Bahamian companies the revenues and profitability needed to upgrade their products.

“It’s unfair practices. They’d never do that kind of thing in the US,” the former operator said of the cruise lines, “but these are small countries that don’t have access to legal advice. It’s kind of a shake down.

“It’s almost as if they own someone on their ship. But it’s a free market. Dionisio should take it on. We need him to speak out against things like that, and allow operators to operate in a free market.”

Comments

The_Oracle 2 years, 1 month ago

The cruise lines have you by the Balls, courtesy of prior administrations. Their shops, restaurants and casinos remain open in port, by Government agreement. As always, they threaten to pull out if they don't get what they want, via tax exemptions, private islands etc. Now, if the caribbean Countries actually got together......and blocked out all the ports unless you get your way........or at least some balance.....

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C2B 2 years, 1 month ago

Yes because Cuba wants to help us. LOL

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B_I_D___ 2 years, 1 month ago

It is a tricky one and the cruise line is within their rights. Let's say that Tour Operator A strikes a bargain to offer a tour as part of a package that their cruise guests can book through the cruise line. You entered into a contract for marketing that tour with the Cruise Line. The Cruise Line sells the spaces for that tour. The tour operator should NOT be approaching the guests directly in that regard then and selling the same tour to the cruise line guest on the side, bypassing the agreement signed with the cruise line. Now, if I am just a random taxi on the side of the road, with no written contracts with the cruise line for marketing, anything is fair game walking off that ship.

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C2B 2 years, 1 month ago

That's right, a contract is a contract. If you don't like it, don't sign it.

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observer2 2 years, 1 month ago

This is what happens when you sell your soul to foreigners (Baha Mar, the Cruise operators, Bahamas Power, Atlantis, tourism marketing contracts, gated communities). Then add to this Bahamian family monopolies like oil and gas imports, big box retail, container ports, foreign banks/exchange controls, numbers houses, Ministry of Education pushing out D students to most Bahamians, governments strangle hold on Water and Sewerage, NI and Post Office, MPs pretending to be legislators but are essentially executives in government corporations or agencies (legislation is non existent) and a backwards democracy with one vote every 5 years along with zero local government.

These are all monopolies at worst, cartels at best.

Neither the FNM or the PLP will be able to grow GDP or solve the debt issue. The foundation is wrong. Devaluation has already been done, have you looked at the interest rates on savings accounts recently? There is nothing that will change the paradigm. Every man for himself Bahama Land, God for us all.

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Well_mudda_take_sic 2 years, 1 month ago

Every astronaut that has ever circled the earth from outer space and looked at the Bahamas through the port hole of their spaceship or space-laboratory will tell you that our country is blessed with one of the most beautiful, if not the most beautiful, location on the entire planet. We have unmatched aqua-marine waters, coral reefs, beaches, atolls and islands. Our government (and the Bahamian people) need to tell the cruise-ship industry to go fly a kite whenever they threaten to leave our country if they don't get what they want. For decades now we have been raped, pillaged and plundered by the likes of NCL and enough is enough. It's high time we negotiate with these capricious and greedy cruise line companies from the perspective that we have what their businesses need and want most - one of the most beautiful environments in the world. And we should be taxing the likes of NCL and Carnival for the toll that their businesses take on our pristine environment!

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BMW 2 years, 1 month ago

I agree Mudda, these floating towns that pollute our waters with their chopped up garbage, plastics, ballons and sewer , they should be getting taxed!!!

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ThisIsOurs 2 years, 1 month ago

The scenario that DAguilar poses of passengers coming off the ship walking around and looking for a tour doesn't seem plausible. It sounds like these tours are prearranged, how else would anyone know if a group of people were from a particular cruise ship or not, they don't have a sign on their head. I suspect the tour companies are working with travel agents to market their services behind the cruise ship's back.

There's nothing wrong with that UNLESS the agents are favoring one company over others not giving passengers proper choices OR it violates an agreement already in place with the cruise line, whether it's fair or not, they agreed to it.

The correct and orderly thing to do would be to try to modify the agreement. Having a shouting match in the newspaper is definitely not the way to go. I agree with Oracle, they have us by the balls and we handed them over.

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C2B 2 years, 1 month ago

Forget the tours. Let's rezone and rebuild the downtown so that tourists will want to visit and cruise ships will stay overnight. Condos, cafes, a supermarket, lighting, music, and SAFETY, are all part of this. Word would quickly spread that Nassau is fun and has lots to do. This is after all, what we hear about Havana from the people who go there. Not everyone likes tours, but everyone drinks, eats, and likes to people watch while seeing beautiful things. Huntington Beach in LA, Miami Beach in Florida, The Jersey shore are just 3 examples of urban beach culture done right. With our natural beauty and wonderful people, we can do it.

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ThisIsOurs 2 years, 1 month ago

Some people are saying "forget downtown", but I think you have the right approach

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BahamasForBahamians 2 years, 1 month ago

By the time D'Aguilar is finished with us the only tourists we will have are the ones from the south who aren't necessarily interested in spending money in our country.

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TheMadHatter 2 years, 1 month ago

C2B.....you have the right idea but keep in mind the Christisn Council would never allow any fun establishments to exist in our country. Could you imagine a license application from Hooters?

We are simply doomed.

The best investment for Bahamians right now is in pre-paid personal funeral expense programs. Go for the cremation ones too, cause ya know yinnah can't afford no casket.

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TalRussell 2 years, 1 month ago

Comrades! Reports coming out the tourism ministry is that a group of 234 & 3/20th tourism workers have had enough and will soon be heading to higher ground atop Hawkins Hill where they're planning to stage a coup d'état to remove Dionisio D’Aguilar as one Minnis's senior crown ministers? The workers are saying that they just do not possess any more patience to wait for PM to step in to fire the minister. { You can't make this up }.

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observer2 2 years, 1 month ago

Tal, are MOT employees going to strike before or after Cat 6 Hurricane Irma with winds at 180 mph impacts to some extent every island in the Bahamas and all of the tourist have been evacuated?

While disaster strikes the FNM seems to be more interested it talking nonsense to the Tribune. Trust me, after Irma the NCL Tour Operators will be only too happy to have some business if their boats haven't been damaged by the hurricane.

We need to be more grateful as a people and not so angry all the time. God is not pleased.

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sealice 2 years, 1 month ago

Wowee - dese damn cruise ships tink dey is the PLP!!!

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birdiestrachan 2 years, 1 month ago

All of those people you have put out of work and now you talk. Are you serious?

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birdiestrachan 2 years, 1 month ago

Big and Bad D'Aguilar when he send people home it is all right. When others do it he has crocodile *tears. show your stuff what are you going to do about it.? the former spokesman for BAH MAR

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SP 2 years, 1 month ago

F-I-N-A-L-L-Y a Minister of tourism not interested in under the table deals, bartering away concessions for personal gain and employing common sense aimed at enhancing national interest with the cruise industry.

Before gathering the troops and running out with guns and bayonets drawn, Minister of Tourism Dionisio D’Aguilar must first be cognizant that resort shore excursions are a huge profit center for cruise lines. In one year, Royal Caribbean earned a third of its profits from selling shore excursions alone!

D’Aguilar is in for a fight and must approach the situation from "outside the box" to effect change in the cruise excursion business to benefit the Bahamas. He must stand his ground, and demand more equitable participation for Bahamian excursion operators.

Unquestionably cruise lines have been allowed to rape the Bahamas for shore excursion spend for decades to the detriment of shore excursion operators and to a greater extent the Bahamas at large.

CARICOM miserably failed the region by not having sense enough to work in concert regulating the cruise industry regionally for the benefit of CARICOM countries. Instead, sister regional governments have individual ministers of tourism the likes of Obie Wilchcombe and Prime Ministers such as Christie and Ingraham sitting with multi-billion dollar cruise companies negotiating one on one, which has always proven a total non-starter.

That all being said, as the Bahamas is now heading to a more digital booking experience overall for tourism, the best course of action to remedy the Bahamas cruise tourism excursion shortfall and increasing, or getting better market share of excursion sales spend is to offer excursions digitally along with bookings, and have excursion tour operators receive bookings through, and pay commissions directly to the ministry of tourism.

Cruise lines must be made to unshackle excursion tour operators one way or another, not just in the Bahamas but also regionally! CARICOM must finally get some teeth and begin to do what it is mandated to do...Starting with regulating the cruise industry for the greater benefit of the Caribbean diaspora!

I would L-O-V-E the opportunity to lead this charge!!!

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sengli02 2 years, 1 month ago

The whole Carribean Region should stand up to these Maga Ships and their Executives for disrespecting our people and country. They treat us like we're not part of the human race. God forgive them for they don't know what they (Cruise Executives) have done. Amen.

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