The Tribune

• Urging unity, cruise giant says: 'We can win or lose together'

• Bahamian investor equity raise targeted for 2023 latter half

• $175m investment eyes full approval go-ahead by year-end

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Top Royal Caribbean executives yesterday pledged that "more than 60 percent of our guests" will never visit its Paradise Island project, as they urged: "We can win together or we can lose together."

Michael Bayley, the cruise giant's president and chief executive, told Tribune Business that the Royal Beach Club represents a "win-win" for all parties on the basis that it will enhance the Nassau "brand" and visitor experience, as well as providing increased Bahamian ownership, jobs and entrepreneurial opportunities through a first-of-its-kind tourism model.

Besides the Government converting the four Crown Land acres it is contributing into an equity stake in the Royal Beach Club, Bahamians will also be able to acquire an ownership interest by buying into an investment fund that will hold shares in the project. That equity raise will take place during the 2023 second half, once the Government's Crown Land has been valued, and between the two they will hold a combined 49 percent stake in the Paradise Island development.

Disclosing that Royal Caribbean's total investment in the Royal Beach Club, between construction costs and the acquisition of 13 acres of privately-owned land on western Paradise Island, is likely to total $175m when full build-out is complete, Mr Bayley told this newspaper that the cruise line is hoping to complete the environmental approvals process and obtain all necessary permits to proceed by year-end 2023.

This will enable construction to begin in early 2024, with the Royal Beach Club's opening targeted for June/July 2025. Jay Schneider, Royal Caribbean's chief product and innovation officer, yesterday told Tribune Business that the project will likely create "hundreds" of Bahamian jobs - "far in excess" of the 200 originally referenced by Mr Bayley - via the local entrepreneurs that will provide its retail, food and beverage, entertainment, water sports, security and other functions.

Disclosing that the Royal Beach Club will cater to 2,750 guests "on average per day", Mr Schneider also clarified previous remarks by Chester Cooper, deputy prime minister, saying that the latter's reference to the project accommodating no more than 5 percent of cruise passengers was not based solely on Royal Caribbean's visitors but the total brought to Nassau by all cruise lines.

Pointing out that Royal Caribbean is poised to "grow capacity to Nassau far in excess of what could go to the Royal Beach Club", with its passenger volumes set to increase by 150 percent compared to pre-pandemic levels come 2027, Mr Schneider asserted that the Paradise Island will accommodate a minority - rather than a majority - of its guests.

"When we started this project we were bringing one million to Nassau per year," he explained. "By the time we hit 2027, we will be at 2.5m. Less than 40 percent of our guests on an annual basis will be able to visit the Royal Beach Club. That means 60 percent of our guests, at a growth rate of 1.5m over that period, will be able to visit other attractions.

"You'll have more than one million passengers a year looking to have other things to do, like Blue Lagoon, Stuart Cove, Baha Mar..... More than 60 percent of our guests will never have the opportunity to visit. We need a lot of really great attractions for them."

Mr Bayley said the Royal Beach Club should be viewed as just one element among many that is badly required to enhance the Nassau tourism product with fresh attractions, tours and experiences - especially given that a significant number of cruise passengers have visited the city before.

"Our customer data shows our number one destination is Coco Cay [Royal Caribbean's private island in the Berry Islands] from a pure experiential destination perspective, and it rings every bell," the cruise chief explained. "They go to Nassau next day, and it ranks in the bottom 10 percent/

"We've all got to work together as a team to improve the product. There's a lot of groups that are interested in that. We've talked to a lot of resorts, and everybody is on the same page on how to deliver a world-class product all around. It's the totality that makes people purchase the product."

Those weaknesses were acknowledged by Nassau Cruise Port in its just-released $134m bond refinancing offering document, which said: "Unfortunately, the previous port infrastructure limits further growth and, coupled with an underwhelming passenger experience, Nassau’s image as a favoured cruise destination has been negatively impacted."

Addressing fears from Bay Street merchants and other tourism stakeholders that the Royal Beach Club will suck cruise passengers, and their spending power, away from Bahamian-owned businesses, Mr Bayley said: "I'd say that's just inaccurate. It's just not factually correct.

"We need to start working together as a collective team to improve the overall experience for our customers and tourists we're bringing to the destination, and we need to start thinking win-win. How do we create experiences that make Nassau a desired destination for tourists? It's not going to happen with a negative narrative; it will happen by positively working together. We can win together, and we can lose if we can't work together."

Mr Bayley promised that the Royal Beach Club, if it proceeds, will have a "pretty significant" economic impact for Nassau and, by extension, the wider Bahamas. "First of all, we've already invested around $70m in this project so far," he revealed. "By the time we've built the project it will be close to $175m worth of investment.

"The vast majority of that investment is going back into the Bahamian economy, not only for construction but landscaping and utility services that will be required by Royal Beach Club." Mr Bayley pledged that all workers employed at Royal Beach Club will be Bahamian, saying "200 full-time jobs will be coming almost immediately as soon as the Beach Club opens", while all goods and services required will be sourced by local vendors.

"I think the economic impact of the Royal Beach Club will be significant in the grand scheme of things," the Royal Caribbean chief reiterated. "It's really again a win-win." Mr Schneider, who confirmed that "hundreds" will likely be hired once full-time operations begin, explained that the 49 percent Bahamian equity stake in the project will be split between the Government and local investors.

"Bahamians will be able to buy equity in the Beach Club," Mr Schneider said. "We're going to partner with a local financial management company who will develop a Royal Beach Club equity fund and Bahamians will be able to participate directly in that equity fund. The goal is up to 49 percent of the Beach Club could be owned by Bahamians - the equity from the land, and the remainder from Bahamian investors."

The pricing and amount of capital raised, as well as the terms and conditions of any equity offering, have yet to be determined. Much will depend on the value assigned to the Government's four Crown Land acres, as this will determine how much capital must be contributed by Bahamian investors.

"We have to go through the land valuation, which we're doing now with the Government, and that will determine the raise," Mr Schneider explained. "The land valuation will be done in the first half of this year. The goal is the equity fund, it's raise will be between July and December this year. We can't do that raise until we look at the land valuation."

He added that the investment firm which will structure the fund, and manage any equity raise, has yet to be selected. However, the concept appears similar to the Nassau Cruise Port offering, in which Bahamians bought shares in the Bahamas Investment Fund, a vehicle that holds a collective 49 percent interest in the cruise port.

Both Mr Bayley and Mr Schneider credited Mr Cooper, the deputy prime minister and minister of tourism, investments and aviation, for developing the so-called public-private partnership (PPP) model for the Royal Beach Club. Mr Bayley said the project has been six years in the making, with Royal Caribbean having started to first acquire land on western Paradise Island in the Colonial Beach area in 2017.

"I think we spend a huge amount of time trying to understand how we make our customers happy, and how we design and innovate with product and ships," Mr Bayley told Tribune Business: "Certainly, when we thought about opportunities in Nassau, a kind of laid-back, easy-breezy Bahamian beach club came to mind. We started the journey to acquire the land over several years."

The acquisition of what he referred to as "derelict land" back in 2017, with Royal Caribbean assembling 13 privately-owned acres and then seeking to lease additional Crown Land from the Government. While COVID-19 had intervened, the cruise line ultimately picked up where it had left off, and views the Royal Beach Club as "another element" that adds to the options for visitors to Nassau alongside the likes of Baha Mar and Margaritaville.

"We think we have an exciting addition to Nassau's product, to Nassau's brand," Mr Bayley said. "Nassau compared to many destinations, and is like a destination and brand.... There's a good opportunity to work together as a team to continue the journey of reimagining and reinventing experiences in Nassau. We just want to be part of that dialogue.

"What we see for the Beach Club is that it's truly a win-win project. It's the first PPP in tourism model. It's a win for the Bahamian people. It allows access to the Bahamian people to participate in the venture. It takes Crown Land and puts it in a profitable business that will provide a return for the sovereign wealth fund for years to come. It allows for revenue streams to go into a national fund.

"We think this model is going to be very successful, and we're having discussions in other destinations around the world and in the Caribbean about using the same model." Mr Bayley said that despite giving up 49 percent ownership Royal Caribbean views its Paradise Island project as still viable from an economic and investment return standpoint.