BAHAMAS GOES PRIVATE
The islands’ government has stopped paying ships to come. Instead, it is calling on the cruise lines and other private-sector companies to continue investing in public and private ports and in infrastructure.
By Tom Stieghorst
TW illustration by Jenn Martins
TW illustration by Jenn Martins
Until last year, there was a not-so-secret reason why cruise lines would set course for the Bahamas: They were getting paid to go.
After reaching a certain number of passengers, a cruise line would get a rebate of the $18 departure tax paid on behalf of passengers.
“Some were getting rebates of $6, $7, $10, $12 [per person] based on the number of people they brought,” said Dionisio D’Aguilar, Bahamas minister of tourism and aviation. Together, the cruise lines got back $12 million a year, he said.
But a year ago, D’Aguilar canceled all the incentives, part of a new approach to cruise development that is sweeping the Bahamas and could transform the way tourists perceive the island chain.
Now, the cruise lines have to evaluate cruising to the Bahamas on the merits of the destination.
“So there’s nobody being paid anything to bring anybody to the Bahamas,” D’Aguilar said. “Come if you want to come. Don’t come if you don’t want to come.”
Despite the loss of their rebates, it looks like the cruise lines have decided to come. Nearly every major line sailing from Florida is either developing a private island in the Bahamas, adding another one or upgrading an island they have operated there for many years.
In addition, private companies have won concessions to redevelop the cruise ports in Nassau and Freeport, which have long underperformed their potential for cruise visitor engagement and spending.
In Nassau, a group of Bahamian investors and Global Ports Holdings will spend $250 million to overhaul the waterfront. In Freeport, a joint venture of Royal Caribbean Cruises Ltd. and Mexico’s ITM Group has agreed to expand the harbor and restore the Grand Lucayan hotel in a $195 million deal.
All together, the projects represent more than $1 billion being invested in new cruise facilities in the Bahamas.
A more vibrant Bahamas would be a boon to travel advisors, boosting the satisfaction ratings of cruises to the area and addressing the cruise customer’s perception that there’s little to do there.
Even D’Aguilar acknowledged fatigue with the shopping strip along Bay Street in Nassau.
“People are becoming more and more jaded with the retail options, so they want experiences,” he said.
PRIVATE ISLAND INVESTMENT
If there’s any place where experiences are gospel, it is at Royal Caribbean, which in May opened its reimagined private island as Perfect Day at CocoCay. Located about 55 miles north of Nassau, the 140-acre island has been used exclusively by Royal since 1990.
The $250 million upgrade split the island experiences into “thrill” and “chill,” the latter connoting relaxing, lounging and loitering in cabanas and pools, while the former is embodied by a 13-slide waterpark and a 1,600-foot zipline.
The big investment is part of a twofold strategy. One is to amp up the landside venues Royal owns to the quality level of its ships, with CocoCay being just the first of five Perfect Day venues in the works.
More specific to the Bahamas, Royal also hopes to transform the market for three- and four-day cruises from Florida, with CocoCay a keystone of the strategy.
As part of the project, Royal built a $50 million pier that will be able to accommodate more and bigger ships, such as the Oasis of the Seas when it begins sailing from Miami in November.
With the transfer of the Independence of the Seas to Port Everglades next summer, Royal will have 3,000-passenger, short-cruise ships in Miami, Fort Lauderdale and Port Canaveral, mostly going to the Bahamas.
“There is that consumer out there who wants to take shorter, more frequent vacations,” said Vicki Freed, senior vice president of sales, trade support and services at Royal. “And they don’t necessarily want to be gone for seven days even if they can afford it. It really is the time they want, and they want more vacations in the short-cruise market.”
With capacity for 10,000 guests a day, CocoCay could host more than 3.6 million cruisers annually, about the same number that visited Nassau last year.
Somewhat surprisingly, the busiest cruise line in the Bahamas has never had its own private island there. Instead, Carnival Cruise Line has piggybacked on two islands developed by sister lines: Holland America Line’s Half Moon Cay and Princess Cruises’ Princess Cays.
That will change as a result of Carnival’s agreement to develop a $100 million private port on Grand Bahama Island. The project has been slow to get off the ground, in part because the plan was approved just as the government changed hands in 2017.
The project is expected to include a mile-long beach, a pier for two ships and capacity for up to 1 million guests a year.
One reason Carnival is building its own spot in the Bahamas after all these years is that its ships are getting bigger. The Mardi Gras, debuting next year in Port Canaveral, will carry at least 5,200 passengers, too many to tender at islands such as Half Moon Cay.
By building its own destination in the Bahamas, Carnival puts that problem behind it.
MSC Cruises plans to open the 95-acre Ocean Cay MSC Marine Reserve on Nov. 9. Part of the Geneva-based cruise line’s strategy is to use the development as more proof that it is in North America to stay.
A relative latecomer to the Caribbean, MSC will have four ships sailing from Miami this winter, including the 4,500-passenger Meraviglia, its largest ship to date. Although MSC is building ships at a faster clip than any other cruise line, MSC president Gianni Onorato said the 100-year lease on its island near Bimini is a big step.
“For us, this is a little bit more than to have a new ship, because it’s really something new for us,” he said.
Disney Cruise Line opened its private island, Castaway Cay, in the Bahamas in 1998, and it is now likely to be the first cruise line with two private Bahamian stops.
In March, Disney finalized the purchase of Lighthouse Point on the southern end of Eleuthera, which will complement the Castaway Cay experience that Disney customers rate highly among port calls.
Disney Signature Experiences president Jeff Vahle said, “Today, almost three-quarters of our cruises have at least one call in the Bahamas, and we expect that to continue as we expand our fleet from four to seven ships,”
In its development agreement, Disney pledged that by 2024 it will increase ship visits to Nassau and Freeport by 30% to 40% from 2018 levels.
Also dipping its toe into Bahamian waters starting next year is Virgin Voyages, which will make a stop in Bimini on every cruise.
For Virgin, the Bimini Beach Club will help establish its newly launched brand as something hip and different. It will have a DJ-driven pool party on the site, which is being developed at virtually no cost to Virgin by its partner, Resorts World Bimini, which runs a casino on North Bimini.
Several other cruise lines continue to upgrade their private islands. Princess Cruises recently added high-speed WiFi at Princess Cays as well as refurbished retail and bar areas, improved landscaping and new excursions. And in March, some of the new air-conditioned villas on Norwegian Cruise Line’s private island at Great Stirrup Cay became available for preview by guests.
Beyond brand-specific strategies, there are several other reasons why the Bahamas is seeing new private island development.
Among the biggest is that the cruise lines have a record number of ships on order and need places to put them. By deploying them in the Bahamas, they can leverage the big infrastructure investments they are making in Florida ports, such as new terminals, berths and the capability to use liquefied natural gas as fuel at Port Canaveral.
Second, the geography of the East Coast makes for easy cruising from Florida. In addition, the Bahamas is one of the few tropical destinations reachable on a seven-day, roundtrip cruise from New York. Cruises departing from Baltimore; Norfolk, Va.; and Charleston, S.C., can also visit Bahamian private islands.
The Bahamas are one of the few tropical destinations reachable on a seven-day, roundtrip cruise from New York.
In addition, many cruises to the Bahamas are operationally cheap. Miami is only 106 miles from Freeport and 184 miles from Nassau, so ships can cruise at a fuel-saving speed of about 11 knots. Bimini is only 80 miles from Miami.
Finally, the government of the Bahamas is starting to make the passenger experience more attractive.
Recognizing that too many cruisers were staying onboard in Nassau, the government staged a competition to redevelop the waterfront. The winning plan will, in addition to rehabbing the piers, create a museum devoted to Junkanoo, the Bahamian national festival, as well as an amphitheater for performances.
“People have said for many years that the Port of Nassau is fairly underwhelming,” D’Aguilar said. “We felt the time had come to really give that a refresh, to invest some resources into reinvigorating its stature in the Caribbean.”
Likewise, in Freeport, where the port is primarily industrial, there is the additional problem of leftover damage from Hurricane Irma in 2017. The biggest hotel, the 1,200-room Grand Lucayan, was mostly shuttered after the storm, and when the owner moved to close it entirely, the government bought it.
To get things rolling again, the government agreed in March to sell the resort to Royal and ITM for what it had paid for it a year earlier. D’Aguilar estimated the Bahamas will incur losses of about $25 million in running the hotel but called that “peanuts” compared with the potential economic benefit.
“We think that’s a tiny investment on the front end to bring about not only the construction of the new attraction and the renovation of the new hotel but also the thousands of jobs that are being created over X amount of years, the value-added tax [and] the tax revenue that the government’s going to receive for economic activity,” he said.
D’Aguilar said the new government was elected to revive the economy, and that is one of the major reasons that things are happening in the cruise sector now that weren’t happening before.
But some critics say that by partnering with private companies on long-term leases, the government is signing away the country’s patrimony to cruise lines and port developers. D’Aguilar concedes that the cruise lines get their islands “for a song” but said that once $100 million or $200 million has been invested, the lines are in the Bahamas to stay.
“They’re the hook,” D’Aguilar said. “So our key now is to get them not only for the private islands but to get them to come to our population centers. Our job here in Nassau is to up the standard. If you come from a brand spanking new CocoCay, you think ‘Oh God, all of this looks tired.’ So now we need to cause the redevelopment of the port and the downtown to take place so that you say, ‘The Bahamas is amazing. We went to CocoCay, we went to Nassau, and it was clean, fresh, looked new. That place is carrying on,’ as we would say in our Bahamian vernacular. ‘It’s impressive.’”
‘Our job here in Nassau is to up the standard.’
While cruise ships account for roughly 75% of the 6.6 million visitors each year to the Bahamas, they only account for 11% or 12% of the spending, D’Aguilar said. And not much of that occurs on private islands. “There are some Bahamian jobs there, but the vast majority of them, that project doesn’t really impact that many Bahamians,” he said.
By coming to the cities, cruise lines raise their benefit to the Bahamas as well as offer a more diverse itinerary.
Cruises bring 75% of the 6.6 million annual visitors to the Bahamas, but they only account for 11% or 12% of the spending.
For its part, the Bahamas has to focus on making experiences that are worth the trip, D’Aguilar said.
“I’m challenging my people, especially in the Port of Nassau, to say, look, we have 3.6 million people coming here,” he said. “Let’s make sure we get them to drop a little bit more money when they’re here, to engage them with something that people say, ‘Oh yeah, I want to do that.’”
The old vision of paying incentives and steering clear of the private sector wasn’t cutting it, he said.
“The government doesn’t always have to do these things,” D’Aguilar said. “There’s a feeling that governments must do these things, but how is the government of the Bahamas, with a budget of $2.5 billion, going to come up with $250 million to redevelop the port? We don’t have the resources to do it, so why not engage the private sector?”
As for how fast the port redevelopment can happen in a nation not famous for alacrity, D’Aguilar said there’s a natural deadline he’s pushing for: The next Bahamian general election in 2022.
“The elections are generally in May, so May 2022, roughly 36 months to go,” D’Aguilar said.
“We want to get it done so that we can say to the Bahamian people, ‘Look what we’ve done.’”