Estimates of the potential economic impact of Grand Cayman’s cruise port project have varied widely during the planning phase of the project.
At almost every point in the process, PwC, government’s consultant on the project, has cautioned that an absence of data has made it difficult to make precise predictions.
PwC’s conclusions, in two additions to its Outline Business Case for new piers in George Town harbor, indicate potential economic impacts based on numerous scenarios that vary by as much as $500 million.
The differing outcomes depend largely on contrasting assumptions where hard data is absent, principally around the impact of the loss of George Town reefs on scuba divers’ spending, but also in other key areas, including the likely impact of the port on passenger numbers.
The addition of new data, updating figures on cruise passenger spending in Cayman, also impacted PwC’s analysis.
The original draft Outline Business Case, published in 2013 at the outset of the process, forecast an economic gain for the country of around $250 million over 20 years, based on an assumption that new piers would lead to a 1 percent annual increase in passengers, while continuing to use tenders would lead to a 1 percent annual decrease in passengers.
That could rise to more than $1 billion, it said, if the piers brought a 3 percent increase in passenger volume.
That report said the assumptions were based on information gleaned from the cruise industry and general trends elsewhere.
Future analyses by PwC built on the more conservative assumption of 1 percent growth, with the consultants noting “The poor quality of the data currently available means that this upside scenario should not be relied upon for the overall assessment of the costs and benefits of the Cruise Berthing Facility.”
Following the environmental impact assessment’s analysis of the economic impact associated with the loss of George Town reefs, PwC was asked to crunch the numbers again.
The EIA estimated significant losses in direct spending to water sports businesses in the harbor as a result of the loss of the reefs.
PwC, in its analysis of that estimate, questioned the basis for that prediction, particularly the EIA’s assumption that nearly 50 percent of all diving in Cayman takes place in George Town.
If that were true, and the divers who used the harbor reefs stopped coming to Cayman – a worst case scenario envisaged in one of PwC’s statistical models – the downside of building the port would outweigh the benefits.
The report also puts forward an alternative scenario where the economic impact of losing the reefs is almost nothing if the divers who use George Town harbor simply choose to dive elsewhere on island.
It states, “Essentially, the level of impact is driven by the number of visitors to the Cayman Islands who participate in ‘diving’ and their behaviour in response to any damage to the reefs in George Town harbor,”
The report says there are several unanswered questions, including: How many visitors to George Town harbor participate in “diving?”
Will they choose to “dive” elsewhere in Grand Cayman?
Will they engage in other activities, such as shopping, which will partly compensate for lost spend on diving?
Or will they choose not to come to the Cayman Islands (in the case of overnight air visitors) or choose not to disembark from the cruise ship (in the case of cruise passengers)?
At that point, depending on how those questions were answered, PwC put the economic impact of the project at anywhere from a $72 million loss to a $213 million gain to the economy over 20 years.
In its July analysis, PwC noted, it would “be valuable to develop a more detailed understanding of the scale of the impacts put at risk by the Cruse Berthing Facility and the anticipated behavior of ‘divers’ in response to loss of parts of the George Town harbor reefs. This could be conducted through a detailed survey of tourists, combined with questionnaires/interviews with dive, water sports and other leisure industry operators.”
It is not clear whether any such survey was commissioned. However, PwC was asked to factor in another report, produced by Business Research & Economic Associates, updating data on passenger spending.
The report shows a higher passenger spend than originally predicted in PwC’s first outline business case, causing PwC to scale up its prediction for the impact of the pier to $112 million to $439 million. If, as the BREA report suggests, passenger spending increases further with more time on shore, the impacts could be higher, PwC notes.
For example, it says, a 15 percent increase in passenger spend would increase the total economic impact to about $749 million.
Government will now attempt to negotiate with cruise lines to come up with a funding model for constructing the piers. The original Outline Business Case suggested government should partner with the cruise lines to build the piers, paying off the cost through a mix of fees that currently go to tender operators and a share of the per-passenger head tax that currently goes to government.
“The Ministry of Tourism is engaging in discussions with cruise lines to arrive at a funding model that will deliver the best possible outcome for the country while ensuring that the berthing facility is owned by the people of the Cayman Islands in 20 years,” the ministry said in a statement.
“The installation of the proposed cruise piers will finally and effectively bring the Cayman Islands on par with the expected norms of modern cruising and will allow us to provide a safer, standardized and more enjoyable experience to the passengers who visit our shores.”