Port economic impact predictions differ dramatically

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. 

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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.” 

The government proposes to build a cruise ship berthing dock in George Town harbor.

The government proposes to build a cruise ship berthing dock in George Town harbor.
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  1. People who come to dive in Cayman either dive by boat or do a shore dive. Most of the resorts make it easy for them to dive in front of their resort. The rest of GT is shore diving : Eden Rock, Devil’s Grotto can be done as one dive , Cali shipwreck shore dive from Dive shop next to Casanova, Sotos’ Central (cheeseburger reef and fish pot reef) Sotos’ reef south dive sites from Bob Sotos’ dive shop under Lobster Pot. These companies charge for 1dive tank and 1 weight belt. At Eden Rock weight is US$.30 a pound,weight belt US$1.25 ,tanks from US$ 12.50-14.00 per dive. They compete with each other. Largely people rent only these pieces of equipment because dive gear is kind of a personal hygiene thing. You know "what did the person before me do in that wet suit". So most people have their own gear. So the only dive site by boat is Balboa, mostly done only as a night dive once a week. Which is being replaced by Oro Verde and the new Kittiwake. The rest of the dive sites are either on 7 mile beach or around the island like during the summer time is the North Wall. So about 6 months of the year they’re trying to see the Northside of the island . Dive masters’ will get bored seeing the same thing over and over again. So they also push going to the other side North or South.
    So it’s not going to be more money being loss because of George Town.

  2. The reason there is so much of a difference is due a lot to the misjudgement by PWC originally of how much more Cayman will benefit from this project.

    The economic valuation provided by DOE in the Baird study is grossly flawed, but even with its inflated assumptions on the GT reef/water sports value the PWC final report still in the worst case scenario shows a huge economic benefit to Cayman.

    Taking a quote i recently saw

    "Some times the answer is a lot simpler than people make it. Arguing about whether a dock makes a difference is not the issue. How many docks have been built to improve the cruise industry all over the Caribbean and world? How many Millions of dollars have been invested in these docks to improve the situation? How many places have the cruise lines invested these millions themselves to improve the situation? Do you think that the cruise lines who operate ships daily, in hundreds of locations all around the world would keep building docks if it didn’t make sense? If we flip this around to cargo don’t you think there is a reason we don’t carry goods to shore on cat boats anymore?"

    The idea is try to move a head and improve upon the proposed layout.

    Try to make the environmental impact less.

    No one that wants this port wants to see environmental damage and especially not anymore than cannot be avoided.

    Government has publicly said that they will work with the proposed design and other alternatives to make sure the right decisions and least environmental impact happens.