The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday told Bahamians to "stop focusing on the peanuts" as he revealed that the cruise lines' Freeport projects will generate $63m in annual taxes from just one revenue stream.

Dionisio D'Aguilar, minister of tourism and aviation, told Tribune Business that it was "impossible to put a negative spin" on the Grand Lucayan's sale to the ITM/Royal Caribbean joint venture as he pushed back hard against the deal's critics.

Pointing to the 2.5m extra cruise passengers that this partnership will bring to Freeport Harbour annually, Mr D'Aguilar said when combined with the 1m visitors that Carnival plans to bring to its Grand Port, and multiplied by the $18 per head departure tax, the government stands to earn an extra $63m annually from this one revenue stream alone.

Mr D'Aguilar, who announced in late 2018 that he had scrapped the long-standing departure tax rebates previously granted to the cruise line, said this illustrated why Bahamians needed to focus on the employment, economic output and revenue gains that both projects will generate when they begin full operations in 2022.

While the government's opponents wanted to keep the focus on the Grand Lucayan purchase price and the operating losses sustained by taxpayers during its 18-month ownership, Mr D'Aguilar reiterated that these will be far outweighed by the long-term benefits of what he branded "a bloody good deal".

And he argued that the operating subsidies incurred by the Minnis administration were far less than the annual sums paid to the previous owner, Hutchison Whampoa, by the last Christie and Ingraham governments to merely keep the Grand Lucayan open and its workforce employed. These subsidies, the minister said, often amounted to as much as $20m or more per annum.

"A lot of focus has been put on the cost of the transfer, and the cost the government incurred while holding the hotel," Mr D'Aguilar told Tribune Business. "While that may be news worthy at the moment, more focus needs to be on future revenues and the future economic impact.

"If you take the projection of 2.5m extra passengers that ITM/Royal Caribbean are going to bring to Grand Bahama, and the 1m extra that Carnival is going to bring to Grand Bahama, and multiply that by the $18 per head departure tax - if you just zero in on that one tax, that's $63m in one year.

"That isn't even looking at the hotel, the VAT receipts on the hotel sales, employment and entrepreneurial opportunities in excursions and transportation..... We're focusing on the peanuts. We need to focus on the revenue end of it. That's huge. In one year alone we're going to get $63m in head tax," he continued.

"You have 3,000 persons being employed directly and indirectly, you have visitors coming by air, you have persons contributing to the restoration of the airport, people employed in excursions, operating those hotels. The VAT that's going to generate, the activity at the port.

"While the Opposition [the PLP] want everybody focused on buying and selling - we bought it for $65m and sold it for $65m, so there's zero gain - and some operating losses, it ain't as large as $63m in head tax in one year.

"Their focus is going to be on what this cost. I'm focused on what we're getting in return. Is this a good deal? It's a bloody good deal. You cannot put a negative spin on it."

Much attention following Monday's Heads of Agreement signing has centred on the fact that the Government will receive a "net" $50m on the Grand Lucayan's sale as a result of providing ITM/Royal Caribbean's joint venture with a credit from the Hurricane Dorian-related insurance claim. The Government's share of these proceeds, though, will ensure the "gross" price remains $65m.

Mr D'Aguilar, meanwhile, said the terms of the deal required Bahamian entrepreneurs to own and operate the retail and restaurant facilities at the Freeport Harbour cruise port - something he hailed as a first-time achievement.

He added that both the Carnival and ITM/Royal Caribbean deals, together with agreements involving Disney Cruise Line at Lighthouse Point in Eleuthera and Virgin Cruise Lines in Bimini, had stayed true to the FNM's election manifesto promises of spurring economic activity near population centres where it would have the most impact rather than on the cruise lines' private islands.

Pointing out that "investment is a function of optimism", Mr D'Aguilar said the Carnival and ITM/Royal Caribbean deals represented a tremendous confidence boost that would cause Bahamian businesses to think of expanding their workforces and equipment in a bid to offer services to these projects.

He added that it would also likely encourage Grand Bahama residents to return and repair their homes knowing jobs and income-earning opportunities will be coming. "Optimism is such an important catalyst. If you're not optimistic you're not going to invest in the future of the economy," Mr D'Aguilar told Tribune Business.

"Eveybody is: How much does it cost? That's fine. I get that, but how much revenue are we going to get? How much economic impact? There's not a negative thing you can say about this transaction in my humble opinion."

He added: "The crazy thing was even when we didn't own the hotel we were paying subsidies as high as $20m a year. The PLP were paying as high as $20m a year to keep the people employed. It was a crappy property and no one was investing in it.

"Now we've got someone to invest $300m in it. You can say what you want but that sounds a bloody good deal to me. Hutchison had told us they were going to close it: 'Take it or leave it'. If it closed it would have become much harder to sell as you would have had all the vagrants living in there destroying and stripping out the product.

"It's very hard to sell a closed hotel. The Royal Oasis is a glaring example of that. Once that closed it was never opened. You cannot ask for better than this deal in Grand Bahama following a hurricane. It wasn't easy to seal the deal. Here was a property that everyone knew we were determined to sell, and we had a hurricane in the middle of the sales process.

"I don't want to sound trite, but the couple of dollars at the outset are far outweighed by the tremendous amount of revenues, economic activity and output these deals are going to generate."

Mr D'Aguilar said Freeport's proximity to Florida and the major cruise ports 65 miles away provided a further competitive advantage for Freeport, while passengers were able to visit multiple destinations in The Bahamas paying the $18 head tax just one time.

He added that the rate compared favourably with the $20 charge levied in Bermuda and Havana, and the $17.50 and $15 per head that was imposed by the Cayman Islands and Jamaica, respectively.