The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport’s potential emergence as a mega cruise port hub represents a potential threat to Nassau, Tribune Business was told yesterday, and may affect its own port’s management outsource.

Tourism industry sources, who only spoke on condition of anonymity, questioned why the cruise lines would continue to call on Nassau with their present frequency if they were developing their own ports on Grand Bahama.

Besides Carnival’s $100m port, which is billed as its largest wholly-owned facility in the world, Tribune Business this week exclusively revealed that the Mexican cruise port developer, ITM Group, is proposing a second Freeport-based destination that will also include the acquisition of the Grand Lucayan resort.

ITM Group is understood to have partnered with Royal Caribbean to develop four new cruise berths in Freeport Harbour, tripling its current capacity, and its plans could have significant implications for the ongoing bidding process to take over management of Nassau’s own cruise port.

This is because the Mexican developer, together with Carnival and Royal Caribbean, are all part of the same bid seeking the contract to operate a port that currently receives 3.6m passengers per year.

Several tourism industry sources suggested their respective Freeport plans could give their Nassau bid, in which they have partnered with the Bahamian group, Cruise Ports International, extra leverage given the possibility that they may avoid - or at least downgrade - the Bahamian capital as a port of call unless they are selected as the winner.

“I’m surprised people in Nassau have not asked more questions,” one industry source told this newspaper. “Why would the cruise lines now need to come to Nassau? They’re already complaining about it as a port of call.

“If they don’t win the bid will they go to Freeport instead, given that the economics are better for them with ports they own? Politicians, stakeholders, no one trusts the cruise lines, yet they want to give them more power in The Bahamas?

“Here is the Government potentially giving them two cruise ports in Grand Bahama. Why give them even more control over the economy of The Bahamas?”

Questioning whether the Government had thought through its strategy, and the implications of what it was doing, the source suggested that its “desperation” to revive Freeport’s economy and deliver on its 2017 general election/Speech from the Throne promises may be driving its decision-making.

“This does have the potential to move cruises from Nassau to Freeport,” they added. “I’m just hoping it will not hurt Nassau. That’s the risk. Royal Caribbean is spending $250m on its private island, Coco Cay, and if they’re spending hundreds of millions in Freeport what’s the motivation to come to Nassau on two-stop cruises?”

Another contact, describing Carnival’s cruise port alone as a “dagger aimed at the heart of Nassau”, said: “If you have that kind of interest in Grand Bahama, one, you should have something similar in Nassau, and two, you can’t give Nassau to the same set of guys, the cruise lines.”

ITM Group, which began life as a construction and development group, is the “independent operator” for Nassau’s cruise port in the Port of Nassau Partnership bid. This is an alliance between Cruise Ports International, a Bahamian investor group headed by former Family Guardian president, Gerald Strachan, and the Cruise Lines Group.

The latter’s membership features Carnival, Royal Caribbean, Disney and Norwegian Cruise Line. Tribune Business understands that ITM Group has no equity stake in the consortium’s bid, and will merely have a management role in Nassau if the group is successful.

“The Port of Nassau Partnership proposes to engage ITM Group as an independent operator of the Nassau Cruise Port,” its statement last year said. “ITM looks to mirror its success in other venues like Mexico’s Costa Maya port, where guest satisfaction ratings for cruise visitors have grown steadily and guest spending has increased annually- making Costa Maya one of the highest grossing ports in the Caribbean. And Caribbean experience was a critical factor in their selection.”

Besides Costa Maya, ITM Group is understood to also have an interest in the cruise port in Roatan, Honduras. And it is also proposing to develop a cruise port at Puerto Plata in the Dominican Republic.

If ITM Group’s Freeport proposal is given the go-ahead by the Government, together with Carnival’s facility it will likely result in a redistribution of cruise passengers and their spending from Nassau to Grand Bahama.

There is little doubt that Freeport’s economy needs such a boost, but the two mega ports may well effect a wealth transfer from Nassau merchants reliant on the cruise industry to their Grand Bahama counterparts. And that, in turn, would have consequences for the long-running efforts to revive Bay Street and downtown Nassau.

One source, familiar with developments, agreed that the Freeport proposals had strengthened the Port of Nassau Partnership’s hand in the bidding process since its selection as the winner was the only way to guarantee the cruise lines continued to call in Nassau at the same volume.

“The implications for Nassau are quite simple,” they said. “If the other guys win the Nassau port, Carnival and Royal Caribbean have elsewhere to go. They have enough interests elsewhere in The Bahamas. Carnival and Royal Caribbean have to come to The Bahamas; they don’t have to come to Nassau.

“We think Nassau is the port, Nassau is The Bahamas. The cruise ships have developed these other destinations in The Bahamas. They’re still selling The Bahamas, the Government will continue to get what it gets. The losers will be the established businesses downtown that are set up for that industry.”

Tribune Business understands that the Port of Nassau Partnership’s ownership structure, split 60/40 in favour of the Bahamian group, requires the cruise lines to invest $50m as their share of the group’s $125m total investment.

The source said this investment would force the cruise lines to continue using Nassau as a port of call, and upgrade it accordingly, as they would need to generate a return on this capital to satisfy shareholders and regulators. Hence the added advantage for the Port of Nassau Partnership’s bid.

“They would have an investment in the ground Nassau,” they said of the cruise lines. “This is the first time four cruise lines have got together anywhere in the world for a joint venture that the Bahamians will lead. The Bahamian group has a 60 percent voting block and majority vote on the board. What’s the problem.”

Tribune Business understands that the Cruise Ports International group, which also features former Central Bank governor, Julian Francis; Baker Tilly Gomez accountant and principal, Craig Tony Gomez; and ex-Scotiabank retail chief, Robert Pantry, will invest $5m of their own money. The remainder of the $75m Bahamian contribution will be raised via debt and equity capital from other investors.

Their rivals for the Nassau cruise port are Global Ports Holding and the consortium put together by Bahamian investment bank, Providence Advisors.

Tribune Business understands that the Bahamian investor group,