By NEIL HARTNELL
Tribune Business Editor
A Cabinet minister yesterday said he wanted to increase passenger spending in Nassau by at least “20-30 percent”, urging cruise lines “not to be fearful” after their port bid was rejected.
Dionisio D’Aguilar, Minister of Tourism, reassured the cruise lines they will not face excessive port fees or berthing/itinerary disruptions as a result of the government selecting Global Ports Holding’s rival $250m bid as Prince George Wharf’s preferred operator/manager.
He told Tribune Business that concerns over the potential conflict of interest resulting from the cruise lines owning the Nassau port operator, while also being its main customers, were “the main reason” why the industry’s alliance with the Bahamian investor group, Cruise Ports International, was turned down by the government.
Comparing such a situation to “the airlines running Lynden Pindling International Airport”, Mr D’Aguilar said questions would inevitably arise at times as to whether the cruise lines were acting in their - or the Nassau cruise port’s - “best interests”.
He added that selecting the cruise line-backed bid would also have been “unacceptable to the Bahamian people”, given rising concerns about whether it has too much power over The Bahamas given that the majority of the economic benefits appear to be retained by the industry itself.
Asked why the government selected Global Ports Holding’s offer, Mr D’Aguilar told this newspaper: “We thought it was far more transformative, far more iconic. We felt this proposal allowed for, offered the best possibility to as many hard-working Bahamians as possible to become shareholders.
“It’s a concern of every Bahamian to have the cruise companies running your port. It’s like the airlines managing the airport. It’s concerning. Are they looking out for their best interests or the best interests of the port? That was the main reason. We don’t think having the cruise lines run the port would be acceptable to the Bahamian people. I don’t think they’d buy into that.”
Mr D’Aguilar, though, immediately moved to reassure the cruise industry that he was not trying to diminish its importance. And he emphasised that their Nassau business and calls would not face any disruption, financial or otherwise, once the government concludes management/operator agreement terms with Global Ports Holding.
He added that the government would “retain” certain rights under any deal with the UK-listed, Turkish-headquartered port operator, including berthing policy and the pricing of any passenger facility fee (PFF) charges that will provide the revenue stream necessary to finance the Nassau cruise port’s redevelopment and repay investors/financiers.
“We’ve recently allowed Disney to go into south Eleuthera, and the Carnival deal in Freeport,” Mr D’Aguilar said in reference to the cruise lines’ private ports and islands. “So we recognise the importance of the cruise companies. They are an integral player, and we will give them assurances not to be fearful.
“The Bahamian government retains the rights to the berthing policy. We will give the legacy cruise companies preferential treatment and, on the pricing, they’re the customer and we will be very mindful of their comments. The government will not abdicate in totality it’s right over the setting of passenger facility fee charge (PFC).”
The cruise ships currently pay $18 per passenger “head tax” to the Public Treasury, now that rebates ceased from June 30 last year, plus an estimated $3-$4 per head in docking fees. This takes the total levy imposed on them to around $21-$22 per passenger.
“The new charge will not be materially off that,” Mr D’Aguilar told Tribune Business. “The Government will still get its $18, and there will likely be an incremental charge or increase to fund this substantial investment. Every proposal proposed to increase that charge.”
Mehmet Kutman, Global Ports Holding’s chairman, yesterday pledged that the cruise port’s management outsourcing would result in no change to the government’s $18 per head tax take.
And he suggested that the cruise lines typically overplayed the issue, pointing to financial filings with the US Securities & Exchange Commission (SEC) which showed that port charges typically accounted for just 1.5 percent of their annual costs.
“These port charges are being made a big issue by the cruise lines but they shouldn’t be,” Mr Kutman said. He added that Nassau “deserves” to be charging as high or close to Havana, a port Global Ports Holding also manages, and which it wants to get to a $75 fee by 2022.
The Global Ports chair said Nassau fees would not go so high, but argued that The Bahamas as a destination was generally being “undersold” when set against the quality of its tourism product. Only the air fares, Mr Kutman added, were expensive.
Mr D’Aguilar reiterated that port-related fees and charges were “a very sensitive issue” for the cruise lines, and any changes in Nassau would only be undertaken after a period of consultation and “benchmarking” against what is charged by rival Caribbean ports.
“We will ensure it remains affordable, reasonable and give them [the cruise lines] advance notice if there are to be increases, which will be benchmarked with other destinations,” the minister said. “We will have a passenger facility charge in much the same way as the airport, but it will not be significantly greater than what it is now.”
Expressing hope that the Nassau cruise port’s “transformation” will yield economic benefits for all downtown merchants and vendors reliant on the sector, Mr D’Aguilar said he was aiming to boost per capita passenger spending beyond the current $70-$100 level.
“Obviously we would like to increase that 20-30 percent or even higher,” he said. “Another thing we need to take into consideration, but which we seem to ignore, are the crew of the ship. With 3.6m passengers coming to Nassau every year there are probably 2.5m crew.”
Mr D’Aguilar, arguing that The Bahamas must be “ingenious and creative” to get cruise ship crew “off the boat”, said many were likely to currently “talk down the destination”.
Global Ports Holding, which effectively kick-started the bidding battle to take over Nassau’s cruise port through the “unsolicited” management proposal it submitted to the Government last year, had to see off two rivals - the $125m offer by the Port of Nassau Partnership, featuring an alliance between Bahamian investors and the cruise lines, and the $225m proposal from a consortium headed by Bahamian investment house, Providence Advisors.
Tribune Business understands that the choice eventually boiled down to the duelling Global Ports Holding and Port of Nassau Partnership bids, with both asked to give Cabinet presentations the week before last.
Besides the “conflict” over any cruise line involvement/ownership of Nassau’s cruise port manager, this newspaper was told that another concern related to the fact that the Port of Nassau Partnership’s $125m bid was half the investment value of the sum Royal Caribbean alone is pumping into its private island, Coco Cay.
As a result, there were fears that the cruise line-backed bid would do “just enough” to keep Nassau a viable port of call - something that fell short of the “transformation” deemed necessary by the Government and downtown stakeholders to preserve the city’s cruise tourism competitiveness.
Ed Fields, the Downtown Nassau Partnership’s (DNP) chairman, hailed Global Ports Holding’s selection as “a great day for The Bahamas” and compared the cruise port’s redevelopment to the overhaul of Lynden Pindling International Airport (LPIA) one decade ago.
“It is a great day for The Bahamas, and having had the privilege of serving on the LPIA board when it oversaw the NAD (Nassau Airport Development Company) development, this announcement can be seen in a similarly positive light with similar expectations,” Mr Fields said.
“It will remove from the capital the constant criticism with respect to the experience at Prince George Wharf, and will become both the gateway into the city and a significant catalyst in its redevelopment.”
He added: “The DNP, first and foremost, is extremely pleased that, at long last, a decision has been made to move forward with the port development.
“We are also pleased that Global Port Holdings was selected based on what we see as their vision for the port’s development and its integration into the overall revitalisation of downtown.
“Global Ports Holding reached out to the DNP, as they had done with an array of stakeholders, even prior to the RFP being initiated - when they offered an unsolicited proposal - and we are comfortable that they will be good partners in the redevelopment of downtown Nassau.”
The government’s political Opposition were much more muted in their reaction to the Global Ports Holding announcement, adopting a “wait and see” approach until all details of the agreement were made public.
Fred Mitchell, PLP chairman, in what he described as “initial reactions” said: “We need to see the absolute details.” He urged that there be “no participation” from any shareholder in Arawak Port Development Company, the BISX-listed container port operator, although he did not make clear whether this just referred to owners of the shipping companies that hold a collective 40 percent of its equity or also included the 12,000 Bahamians that have another combined 20 percent.
Urging that it emulate “the NAD model”, and that there be “no sale of the port” itself, Mr Mitchell also said that “Bahamians at large must have shares and the financing provided to buy the shares.”
He added: “Bahamian vendors are a must, and appropriate access for taxi drivers and other Bahamian transport interests.” Almost all Mr Mitchell’s concerns were addressed at yesterday’s unveiling of Global Ports Holding’s selection.