STATEMENT: From Hon. Moses Kirkconnell Deputy Premier and Minister for Tourism

PwC Report Concludes Economic Benefits of Piers Exceed Environmental Costs
The Ministry of Tourism has received approval from Cabinet to release the Environmental Economic Appraisal prepared by PricewaterhouseCoopers (PwC) on the proposed cruise berthing facility. The report concludes that the estimated economic benefits to be derived from the piers exceed the environmental costs associated with the damage to the reef.

PwC were tasked by Government to provide an addendum to the Outline Business Case (OBC) updated with the findings of the Environmental Impact Assessment (EIA). Their assessment was based on the information collated by Baird, together with the economic and financial information analysed during the original OBC development. Additionally, since the EIA had identified damage to the coral reefs, the impact was also factored in to the cost-benefit analysis of the overall project.

Since preparing the addendum, the CIG received the 2014/2015 Business Research & Economic Advisors Report (BREA) which is typically prepared on behalf of the FCCA to analyse the economic impact of cruise tourism in Caribbean destinations. Given that the BREA report is based on factual, analytical data rather than assumptions, the Ministry commissioned the report and PwC were asked to include an evaluation of the latest BREA findings within their economic assessment.

The BREA report is both timely and significant because it provides data as recent as 2014 regarding cruise passenger volumes and their spending patterns in Grand Cayman. Conversely, the original OBC drafted in October 2013 and its Addendum drafted by PwC in July 2015 both used data from 2012 in their calculations, as that was the most current information available at the time. These latest statistics have enabled assumptions to be replaced with facts, allowing decisions to be taken based on accurate, credible data.

The BREA report noted that historical data on passenger arrivals showed that growth in Grand Cayman has lagged significantly behind those destinations with berthing piers. Analysis of the data showed that during the 2014/15 cruise year, 1.45 million passengers visited Grand Cayman spending an average of 4 hours ashore and generating total expenditures of US$160.9 million. This implies an average passenger spend of US$115.60 per passenger which is 23% higher than was assumed in the OBC, which used US$93.70, as was reported for 2012.

Given the magnitude of the berthing facility project and the potential environmental impact, Government has reviewed 10 comprehensive reports which provide scientific data and analysis on every conceivable aspect of the proposed port development. Since embarking on this journey, the Ministry of Tourism has maintained that any proposed development would be informed by the Outline Business Case [OBC] and the Environmental Impact Assessment [EIA]. The Ministry remains committed to that stance and will continue pursuing a careful and methodical approach as the project moves forward.

With the EIA confirming there will be no negative impact to Seven Mile Beach, Governments overarching objective is to arrive at an outcome that will deliver the maximum economic benefit to the people of the Cayman Islands with the least environmental impact to George Town Harbour. I am of the view that supporters and opposers to the project are in agreement on this point, as I am sure neither side wishes to see the environment impacted unnecessarily.

To safeguard any investment made by the Country into the port project, the OBC recommends securing passenger guarantees from the cruise lines. The Ministry of Tourism is having discussions with the cruise lines and I am confident that terms will be agreed that are acceptable to both sides.

Additionally, given the fact that the cruise lines have vast and varied experience in pier construction, Government intends to present all of the proposed berthing options and pier designs for their consideration. We will also be seeking their input and expertise in identifying the options that are more environmentally friendly and aligned with their needs.

It is widely understood that the tourism industry contributes approximately 24% of the Cayman Islands Gross Domestic Product (GDP) and contributions from both cruise and stayover visitation are vital to the Cayman Islands economy. Approximately 85% of visitors to the Cayman Islands arrive predominantly by cruise ship sustaining an industry that creates employment, generates revenue through sales and taxes and provides employment for many small operators such as taxi drivers, tour operators, attractions, retail establishments, among others.

From a regional perspective, all of the 22 cruise ports in the Caribbean and Central America have berthing facilities except the Cayman Islands. Feedback from the cruise lines affirms the inconvenient truth that the Cayman Islands will continue to lose market share unless a berthing facility is constructed to facilitate the fast, easy and safe movement of passengers to and from their ships.

Cruise lines are building larger ships with carrying capacities ranging between 4,000 and 6,000 passengers and some of the largest cruise ships to sail the seas are slated to make their maiden voyages in the near future.

For example, the Norwegian Escape with a carrying capacity of 4200 passengers is set to launch in October 2015. Royal Caribbean’s Ovation of the Seas carrying 4,180 passengers is also set to launch in April 2016. Carnival Cruise line will also be launching the largest ship in its fleet, the Carnival Vista in early spring 2016. Carnival has also ordered 8 new cruise ships for delivery over the period 2019 to 2022.

Without berthing facilities the Cayman Islands will not be in the consideration set when itineraries for these ships are being crafted and we will continue to be bypassed as is currently the case with the Oasis ships. As a consequence, our cruise industry will become severely impacted if Carnival Cruise Line and others reduce their calls in port because we cannot service the new ships in their fleet they are transitioning to.

The question for the Cayman Islands therefore becomes distilled to do we want to remain in the cruise tourism business? If we do, we must understand that doing so means we must provide berthing.

The OBC has estimated cost of constructing the piers to be CI$156 million which includes a CI$33 million contingency. 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. Benefits

If the Ministry is successful in securing a partnership with the cruise lines, we can realistically expect passenger volumes to be maintained or increased so that their investment can be recouped.

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 cruise industry is vital to our society and economy and Government remains committed to providing the necessary protections to ensure its continued growth and success.

ENDS

BREA GRAND CAYMAN CRUISE BERTHING FACILITY REPORT

Potential Impact on Cruise Passenger Onshore Visitation and Spending

Prepared for Ministry of District Administration, Tourism and Transport
September 2015

DISCLAIMER

This report is for the Ministry of District Administration, Tourism and Transport (“the Ministry’1, The information and analyses provided in this report are intended solely for its use and should not be relied upon for any other purpose or by any other person or entity. Neither this report nor any other presentation material, nor any reference to our Firm may be included or quoted in any offering circular or registration statement, prospectus, sales brochure, appraisal, loan or other agreement. Further, we have no responsibility to update our report for events and circumstances occurring after the report date.

Business Research & Economic Advisors (“BREA’) makes no representation or warranty as to the accuracy or completeness of the Information contained In this report, including estimates, and shall have no liability for any representations (expressed or Implied) contained in, or for any omissions from, this report.

We take no responsibility for the accuracy of the market and survey Information that has been provided to us by others. The information provided to us has not been audited or verified and is assumed to be accurate. Our analyses are based on estimates, assumptions and other information developed from our research, knowledge of the industry and other factors, including certain information provided by others. Accordingly, we express no opinion or other form of assurance on the market or financial feasibility of the cruise Industry or related industries in the Caribbean, or upon the financial and market Information contained in the report. Some assumptions may not materialize, and unanticipated events and circumstances may occur; therefore, actual results covered by this analysis may vary from those described In our report, and the variations may be material.

Recognizing that the Ministry may desire to reprint or distribute this report, the report must be reprinted and/or distributed in its entirety, including this disclaimer.

INTRODUCTION

Business Research and Economic Advisors (“BREA”) was engaged by the Ministry of District Ad­ ministration, Tourism and Transport (“the Ministry”) to conduct an analysis of the potential impact of the development of the proposed Cruise Berthing Facility (“CBF”) In George Town harbor on the attributes of cruise passenger onshore visits and spending.

Currently cruise ships calling at Grand Cayman are required to anchor at one of four offshore anchorages with passengers using tenders to transit between the ship and the tender jetty at the George Town Terminal. The proposed CBF consists of two piers that combined can accommodate four cruise ships. On those occasions when more than four ships call at Grand Cayman, the additional ships will be able to anchor at one of two offshore anchorages. Thus, cruise passengers on those ships that are able to berth at the CBF will be able to disembark at the pier and walk to the departure point for shore excursions and/or to the George Town shopping district.

During 2014, the Caribbean Tourism Organization reported that 1,609,555 cruise passengers arrived at Grand Cayman (see Table 1). This was a 17% increase over 2013 and placed Grand Cayman as the fifth highest cruise destination in the Caribbean. Of these five destinations three (Bahamas, St. Maarten and the U.S. Virgin Islands) are located in the Eastern Caribbean while Cozumel and Grand Cayman are located in the Western Caribbean.

With the exception of the Bahamas, cruise ships calling at these destinations are sailing on cruise itineraries of 5 or more days, with the typical cruise being seven days. These ships will generally call at three or four destinations during the Itinerary. In fact, Cozumel and Grand Cayman will host cruise ships on most Western Caribbean Itineraries while St. Maarten and the U.S. Virgin Islands are both included In most Eastern Caribbean itineraries. The islands of the Bahamas are distinctly different. Most cruises to the Bahamas are three or four days in length with most itineraries including calls at either Nassau or Freeport and one of the private islands owned by the cruise lines. Thus, the significantly higher volume of passenger arrivals In the Bahamas is due to the larger number of calls associated with the shorter cruise length.

A major distinction between Grand Cayman and the other four destinations Is that Grand Cayman Is the only destination without a berthing pier. In fact, over the past 5 to 10 years the other four destinations have expanded their berthing facilities. This difference shows up In the five and 10 year growth statistics for the

five destinations. As shown in Table 2, the growth in passenger arrivals In Grand Cayman has lagged significantly behind the other four destinations. In fact, Grand Cayman cruise passenger arrivals in 2014 were 5% lower than reported for 2004. The lower growth rates for the ten-year period are, in part, the consequence of recessionary conditions during the 2004-2009 period.

CRUISE VISIT ATTRIBUTES- 2014/15 CRUISE YEAR

BREA has prepared analyses of the economic impact of cruise tourism throughout the Caribbean on behalf of the Florida Caribbean Cruise Association (“FCCA”). These studies have analyzed passenger visits, expenditures by the cruise lines and their passengers and crew and their subsequent economic impact on each participating destination. These studies have been released In 2006,
2009 and 2012. The current study for the 2014/2015 cruise year 1 will be released in October of this year.2 The FCCA has granted BREA permission to utilize the data from this study for the purpose of assessing the potential impact of the CBF on cruise passenger onshore visits and expenditures.

Data on cruise passenger arrivals for the 2014/2015 cruise year were provided by the participating ports. These data were supplemented with data on destination-specific passenger disembarkation rates provided by the FCCA member cruise lines and data on passenger average hours ashore that were derived from passenger surveys in each of the destinations.

As shown in Table 3, passenger disembarkation rates among the four destinations fell within a fairly narrow range between 85.4% in Cozumel to 90.4% in St. Maarten. However, one distinction is evident, the disembarkation rate in the two Western Caribbean destinations are under 90% while the rates are just over 90% in the two Eastern Caribbean destinations. Also the disembar­ kation rate In Cozumel is significantly lower than in the other three destinations. Multiplying the passenger arrivals by the disembarkation rates, we have the passenger onshore visits. It is these visits that generate the onshore spending that impacts the local economies.

Surveys were placed in all passenger cabins during the day of selected calls at each participating destinations. Among the information requested were the number of hours passengers spent ashore. As Indicated in Table 3, visiting passengers reported a significantly lower average In Grand Cayman than in the other three. The average of four hours reported for Grand Cayman was 13% lower than the 4.6 hours average for the other three destinations and 16% lower than average for Cozumel. Again, Grand Cayman is the only destination of the four that requires the tendering of cruise passengers. In fact, the difference of 6-tenths of an hour (36 minutes) is consistent with the time it takes to tender back and forth between the ship and the tender pier under the best of conditions.

As shown in Table 4, the average spend per passenger in Grand Cayman Is lower than any of three other destinations. It is 23% lower than the three destination average and 40% lower than the highest rate of $191.26 in St. Maarten. When adjusted for hours ashore the difference Is somewhat smaller. Still, the average hourly spend of $28.90 In Grand Cayman is 11% lower than the three destination average of $32.55 and 29% lower than the hourly average of $40.87 in St. Maarten.

These data on the attributes of cruise passenger visits and expenditures clearly show that the lack of a berthing pier In Grand Cayman has had several negative impacts:

1. Over the past 5- and 10-year periods, the growth in cruise passenger arrivals in Grand Cayman has significantly lagged the growth in the three destinations with berthing piers.

2. Cruise passengers spend less time ashore in Grand Cayman than in any of the other three destinations.

3. Cruise passengers visiting Grand Cayman spend less per passenger and per hour while ashore than in any of the three destinations with piers.

Thus, it is reasonable to assume that following the development of the CBF cruise passengers will be able to 1) spend more time ashore since the need to tender will be eliminated and 2) average and total spend during the visit will increase and be more in line with spending rates in the other three destinations.

IMPACT ANALYSIS ON CRUISE PASSENGER VISITS AND SPEND

To analyze the potential impact on passenger visits and expenditures three impact scenarios were developed as follows.

1. Low Impact Scenario: At a minimum the average hours that cruise passengers will be able to spend in Grand Cayman will increase following the development of the CBF. Thus, in this scenario it Is assumed that the average hours spent ashore in Grand Cayman increase to 4.61 hours (the three destination average) but total spend per hour remains unchanged at $28.90 per hour.

2. Medium Impact Scenario: In addition to an increase In average hours ashore, the medium Impact assumes that average spend per hour Increases to the three desti­ nation average of $32.55. Thus, in this scenario passenger visit spend attributes increase to the average attributes for the three destinations with berthing piers.

3. High Impact Scenario: In this scenario it is assumed that the average hours ashore and average spend per hour in Grand Cayman increase to the average for St. Maarten, 4.68 hours ashore and an average spend of $40.87 per hour.

Table 5 shows the impact on cruise passenger visits and expenditures for the three scenarios. The Impacts are compared to passenger attributes developed for the FCCA impact study. The analysis of the data to be included in the FCCA study showed that 1.45 million passenger visited Grand Cayman during the 2014/2015 cruise year. They spent an average of 4.0 hours ashore and generated total expenditures of US$160.9 million during the cruise year. This implied an average passenger spend of $115.60 per passenger visit and $28.90 per passenger visit hour.

Compared to this base,under the most conservative assumption of an increase in average hours ashore to 4.61 hours only, total passenger expenditures would increase to US$192.7 million, 15% above the base and an increase of US$25.5 million. A more likely outcome is that in addition to hours increasing to the average for the three destinations with berthing piers, the average spend per passenger visit hour would also Increase to the three destination average of $32.55 per hour. In this scenario, total passenger expenditure would rise to US$217.0 million, 30% above the base and representing an increase of US$49.8 million. Finally under the most optimistic assumptions that brings average hours ashore and average spend per hour to the aver­ ages for St. Maarten, total passenger expenditures would increase to US$276.6 million, 65% higher than the base and an Increase of US$109.4 million.

It should be noted that in none of these scenarios have passenger visits been increased. As noted previously, the historical data on passenger arrivals show that the growth in Grand Cay­ man has lagged significantly behind those destinations with berthing piers. Thus, it is also likely that cruise passenger visits will also Increase to some extent as additional cruise ship calls are scheduled in response to the ability to berth at the cruise pier. Table 6 shows the additional Impact for the three scenarios if passenger visits were also increased by 5%, or 72,300 addi­ tional annual passenger visits.

With the 5% Increase In visits In each scenario, total passenger expenditures would Increase by at least 6% in the low and medium impact scenarios and by 9% in the high impact scenario.

BREA specializes in custom market analyses for clients throughout the private and public sectors. These unique market analyses integrate economic, financial, and demographic trends with primary market research, proprietary client data, and advanced statistical and modeling techniques. This approach results in comprehensive and actionable analysis, databases and models, designed to support planning, sales and marketing, and education within client organizations.

Dr. Moody, President of BREA, has more than twenty-five years of experience in consulting and forecasting with a wide range of international product and service companies, including consumer products, leisure, retailing, gaming, business services, telecommunications, and utility and finan­ cial services. Typical consulting assignments provide critical analysis and insight into market dy­ namics, product demand, economic trends, consumer behavior and public policy.

BREA has provided specialized consulting support, including market research, economic impact studies and demand analyses, to the cruise lines, port service providers and industry associations. Among BREA’s recent clients are: Port of Philadelphia and Camden, Tampa Port Authority, Port of San Diego, Royal Caribbean Cruises Ltd., Carnival Corp., P&O Ports of North America, and the International Council of Cruise Lines. Since studies are designed to meet the specific needs of each client, they can incorporate many dimensions of the market and include a variety of ancillary services.

BREA provides the following services:

Market Research: design and implementation of primary market research instruments using telephone, mall, and intercept surveys. Test instruments are designed to collect information on product demand, attributes of consumers and users, perceived product attributes, and customer satisfaction.

Economic Impact Studies: thorough analysis of industries and consumption behavior and their contribution to or impact on national and regional (state, metropolitan areas, counties, etc.) economies.

Statistical and Econometric Modeling: developing quantitative models relating market and product demand to key economic factors and demographic market/consumer attributes. Models can be used for forecasting, trend analysis and divergence/convergence analysis.

Market Studies and Trend Analyses: detailed descriptions of markets (defined as products, regions, industries, consumer segments, etc.) and comprehensive analyses of underlying market forces (such as economic and financial conditions, competitive environment, technology, etc.).

END

THE FOLLOWING HAS BEEN ABBREVIATED FOR CONTENT
Grand Cayman CBF
Addendum to the Outline Business Case: Environmental Economic Appraisal
DRAFT FOR DISCUSSION PURPOSES ONLY PwC

Important notice

Basis of preparation
This addendum to the Outline Business Case (“ OBC” ) for the Grand Cayman cruise berthing project (“CBF” ) has been prepared solely for the Cayman Islands Government (“CIG” or “Government” ), as required under the contract for
consultancy services dated 2 July, 2013, between PwC Corporate Finance &
Recovery (Cayman) Limited (“PwC”) and the CIG. PwC Corporate Finance &
Recovery (Cayman) Limited is a member firm of PricewaterhouseCoopers
International Limited, each member firm of which is a separate legal entity.

All currency amounts in this document are ex pressed in US dollars unless other wise noted.

Estimated economic value of George Town Harbour reefs

We start by reviewing the approach taken in the EIA to estimating the economic value of the GTH reefs. This is the initial step in estimating the economic value of the environmental impacts associated with development of the CBF. The EIA considers the value provided by each of the ecosystem services in turn.

Cultural services
The cultural services provided by the GTH reefs have both a use value and a non-use value. T he EIA focuses on the former .

Use value
The GTH reefs bring use value to Cayman because they provide a “product” which is attractive to visitor s. Due to their proximity to the shoreline, the sites are
attractive locations for diving and snorkelling as well as other water-based activities. Unlike other reefs in the Cayman Islands (e.g. those a long 7 Mile Beach and Armchair Reef) which require boat transportation for diving and snorkelling, the reefs in GTH are accessible from the shore and, hence, they are popular among cruise passengers and overnight (air) visitors. In addition, boat and submersible tours are also available in GTH.

The use value of the GTH reefs can be estimated by assessing the (economic) value added in the Cayman Islands as a result of the spending by cruise passengers and overnight (air) visitor s on activities directly linked to the reef (i.e. water-based activities such as diving and snorkelling). Each group needs to be considered separately – as the EIA does – using official statistics and the results of a sur vey of GTH dive shops. Below, we summarise and review the two appr oaches used in the EIA for each passenger group. We comment on their potential limitations and their implications for the resulting estimates of the u se value of the GTH reefs.

Conclusions
This addendum to the OBC, has been prepared in order to incorporate the findings of the EIA conducted by Baird into the economic appraisal of the project undertaken as part of the OBC. In particular, the EIA identified a significant level of potential damage to the reefs in GTH, which must be considered when assessing the overall
cost-benefit of the project.

As requested by CIG, the analysis in this addendum is based solely on the information collated by Baird in its EIA, together with the economic and financial information analysed during the original OBC development. The focus has been on expressing the estimated impacts in economic terms using measures of economic output, as measured by GVA, and economic welfare. As such, the approach is consistent with guidance on economic appraisal as outlined in the Green Book.
In order to make Baird’s work comparable with the OBC, it has been necessary to extend the analysis, principally through the following modifications:
1. We have adjusted for the potential diversion or displacement of economic activity associated with the GTH reefs (i.e. water-based activities such as diving) either to other locations in the Cayman Islands (as visitors opt to “dive” elsewhere in Cayman) and/or to other activities (including attractions in George Town and around Grand Cayman Island): the EIA only considers the impact in George Town;
2. We have adjusted the estimated economic losses from changes in spending to reflect the impact on Gross Value Added (GVA) in the Cayman Islands, not the level of spending: GVA is the measure of the contribution to national economic output used in economic appraisal;
3. We have included an adjustment to incorporate the multiplier effects arising from the impacts in the Cayman supply chains which meet the needs of visitors’ spending and their employees; and
4. We have avoided potential double counting of impacts already included in the economic impact assessment (e.g. the adverse impact on tendering services).
As illustrated in Table 20, the estimated economic costs associated with the damage to the reef vary significantly depending on which of the three scenarios examined is being considered. 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 GTH. The most important variables are:
1. How many visitors to GTH participate in “diving”?
2. Will they choose to “dive” elsewhere in Grand Cayman? Or,
3. Will they engage in other activities, such as shopping, which will partly compensate for lost spend on “diving”? Or,
4. 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)?
These questions are fundamental to the economic rationale of the CBF.

As illustrated by Table 22, under the lowest impact scenario for ecosystem services (Scenario 1), the economic impact of the damage to the reefs has only a minimal impact on the overall net economic benefit, which is estimated at $204 million after taking into account the expected losses associated with damage to the reefs.
However, under the highest impact scenario for ecosystem services (Scenario 3), the economic impact of the damage to the reefs more than outweighs the economic benefits of the CBF in the base case.
Accordingly, in Scenario 3, if “divers” are on the scale envisaged and respond in the ways outlined to the loss of parts of the reef, then the costs of the CBF would exceed its economic benefits.
We note, however, that the assumptions about the rate of growth of cruise passenger volumes which underpin the base case in the OBC are relatively conservative. As outlined in the sensitivity analysis summarised above in
Table 24, if the rate of growth of cruise passengers increases to 3% per annum with the CBF, then the economic benefits would more than outweigh the economic impact of the loss of the reef. However, 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 CBF.
As such, the current data which underpin the economic and environmental impacts, including the marine resource valuation, are inconclusive and do not provide the basis for drawing a definitive conclusion about whether or not to proceed with the CBF.
Prior to continuing with the CBF project it would, therefore, be valuable to develop a more detailed understanding of the scale of the impacts put at risk by the CBF and the anticipated behaviour of “divers” in response to loss of parts of the GTH 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 will also be important to consider the ways in which the potential adverse impacts can be mitigated.

Supplement
Introduction
Since the original draft of the Addendum was prepared, the Ministry of District Administration, Tourism and Transport commissioned BREA to analyse the potential impact of the development of the proposed CBF in George Town harbour on the pattern of cruise passenger onshore visits and spending26.
BREA’s report in September 2015 contains data and analysis which are more up to date than those available at
the time of the preparation of the OBC in October 2015 and the Addendum to the OBC which assessed the economic implications of the environmental impacts in June – July 2015, building on the earlier EIA.
The purpose of this part of the Addendum is to summarise the key conclusions of the BREA analysis and explain their implications for the findings of the OBC and the Addendum.
Implications of BREA analysis for OBC
The BREA report provides:
 Updated data on the volumes of cruise passengers and their spending in Grand Cayman – the data relate to 2014, whereas the OBC and the Addendum draw on earlier data from 2012;
 A comparison of trends in cruise passenger arrivals in Grand Cayman with four other cruise destinations in the Caribbean (the Bahamas, Cozumel, the US Virgin Islands and St Maarten); and
 A set of three scenarios which project the potential future pattern of cruise passenger spending in Grand Cayman.
The report’s findings show that:
 The baseline level of cruise passengers in Grand Cayman in 2014 was 1.61 million with nearly 90% of passengers coming ashore on visits: this is lower than assumed in the baseline for the OBC (1.82 million in 2014) but more than in the EIA (1.38million in 2013).
 The average spend per passenger coming ashore in 2014/2015 – the date of the BREA’s latest survey – is $115.6o, which is 23%more than was assumed in the OBC (which used $93.70, as reported for 2012).
Together, these findings mean that the total cruise passenger spend is now estimated to be:
 Around 10% higher than in the baseline for the OBC ($167.5 million in 2014/2015 – assuming 90% of passengers come ashore – compared to $153.5 million in 2014).
 Nearly 30% higher than in the baseline for the EIA ($167.5 million in 2014/2015 compared to $129.3 million in 2012/2013).
For the purposes of our analysis, we focus on incorporating only the difference in the average spend per passenger since the estimate in the BREA report is a direct update of the data originally used in the economic impact assessment as part of the OBC and the Addendum. The position with respect to passenger volumes is
more complex.
The BREA report also provides some analysis of the key differences in the pattern of cruise passengers (and their behaviour) in Grand Cayman compared to the four other smaller cruise destinations in the Caribbean. It shows that over the last 5-10 years, the growth in cruise passenger arrivals in Grand Cayman has significantly
lagged the growth in the three destinations with berthing piers (i.e. excluding the Bahamas). In addition, cruise passengers spend less time ashore in Grand Cayman than in any of the three destinations with berthing piers.
Linked to this, cruise passengers visiting Grand Cayman spend less on average per passenger and per hour while ashore than in any of the three destinations with piers.
On this basis, BREA conclude that it is reasonable to assume that, following the development of the CBF, cruise passengers will be able to spend more time ashore since the need to tender will be eliminated. As a result, average and total spend during the visit will increase and be more in line with spending rates in the other three destinations with berthing piers.
The research also provides stronger evidence to support an assumption that the CBF would boost cruise passenger volumes in the Cayman Islands as it regains lost market share. Overall, the analysis points to the Cayman Islands being able to grow the volume of cruise passengers it receives faster than the conservative
assumption made in the OBC (1% growth with the CBF compared with 1% decline without the CBF).
Reflecting these findings, the BREA report develops and assesses the implications of six different scenarios for cruise passenger spending in the Cayman with the CBF. One set of three options assumes different uplifts in passenger spending. The other three also allow for a 5% uplift in cruise passenger volumes. The impact on total
spending is summarised in Table 25. It shows that the BREA report anticipates that cruise passenger spending could rise by 15-74% over the higher baseline level of spending.
Effect of additional data on key results
The final part of this note analyses the implications of incorporating the BREA data and analysis into both the
economic and environmental impact assessments to gauge the net economic impact of the CBF.
The results of the original economic analysis are presented in Table 26 which compares the two scenarios with and without the CBF. The incremental economic benefit of the CBF was originally estimated to be an increase in value added of $245 million when expressed in NPV terms over the lifetime of the investment (20 years post construction). Table 26 also shows the updated results which draw on the new evidence in the BREA report.
Specifically, we show the impact of adjusting the estimated economic impact for the higher average passenger spend shown in the BREA report (but keeping the estimated passenger volumes the same as in the OBC). This change increases the wider economic impact with and without the CBF. Given the BREA report provides no assumptions for long term volume of passengers, no adjustment in this respect has been possible and the baseline OBC assumptions have been retained.
The net impact is now estimated to be higher: $487 million following the spend change. The majority of the change is attributable to the effect on the wider economic impact.

Conclusions
This supplement to the Addendum to the OBC has been prepared in order to incorporate the findings of the BREA report into the economic appraisal of the project undertaken as part of the OBC (including the environmental impacts identified through the EIA).
As requested by CIG, the analysis is based solely on the information provided in the BREA report together with the economic and financial information analysed during the original OBC development and the information from the EIA used in the Addendum. As before, the focus is on expressing the estimated impacts in economic
terms using measures of economic output, as measured by GVA, and economic welfare. This approach is consistent with guidance on economic appraisal as outlined in the Green Book.
Table 28 shows that the estimated economic benefits of the CBF now exceed the environmental costs associated with the damage to the reef under the ‘low’ and ‘high’ environmental impact scenarios. Further, if BREA’s scenarios for increased spend per passenger with the CBF are taken into account, the net benefits increase substantially.
The impact of the CBF is still 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 GTH. These questions are fundamental to the economic rationale of the CBF.