Two Years, Two Boats, Too Bad for New York

This Sunday the Maid of the Mist takes its last cruise of the season, signaling the end of summer for Niagara Falls residents and businesses. Tour boats are pulled from the lower Niagara River to be stored on dry docks.

At the Niagara Falls State Park, NY, it was another successful year for Maid of the Mist Steamship Co. owner James V. Glynn of Lewiston, NY. Of course it will never be as successful as the old days when Glynn held the boat tour concessions on both sides of the Niagara. That changed in 2012 when the Steamship Co. lost its contract after 165 years and a new operator, Hornblower Canada, was given a 30-year contract to operate tours from the Canadian side.

But thanks to the generous Gov. Andrew Cuomo, who gave Glynn in effect a $100 million discount in rent, Glynn should continue to make profits from his New York boat tour concession in the Niagara Falls State Park for years to come.

This year marks the second season that the two tour boat companies competed on opposite sides of the gorge, so we can now accurately compare. The Canadian side fared infinitely better for taxpayers while in New York a businessman fared superbly and taxpayers got shortchanged.

Ontario will get more than $14 million this year thanks to the competitive bidding for the right to operate the tour.  In New York, thanks to Gov. Cuomo’s arrangement with Glynn, only about $300,000 is picked up for the exact same tour concession.

According to Hornblower CEO Terry MacRae, his company pays about 40 percent of gross sales with a combination of base rent plus a percentage of gross sales.

MacRae said the higher rent paid to Ontario will translate to $14 million in rent paid to the Ontario Niagara Parks Commission by the time Hornblower boats come out of the water—about three weeks later than the Maid—on November 29.

The $14 million in rent was paid on sales to more than 1.8 million Hornblower passengers this year who paid $19.95 (Canadian/adult) for the standard 20 minute tour below the falls. 

Glynn, on the other hand, pays eight percent of gross sales on an estimated 1.1 million annual passengers who pay $17 (US/adult) for his 20 minute boat tour.

The gross rent Glynn pays comes in at about $1.5 million, (about 10 percent of what Hornblower pays) however Glynn’s lease has an additional sweetener that Hornblower doesn’t have: According to Glynn’s pro-forma, made part of his 56 page, 2003 lease, Glynn gets some $1.2 million in fees this year from people who visit the observation deck adjacent to his elevators which go down to his boats—since the state gifted him this concession as part of his 40 year lease.

When you subtract the $1.2 million Glynn collects from the elevator/observation deck fees, from the $1.5 million rent he pays, the net result is that Glynn will pay about $300,000 net this year for his Maid of the Mist boat concession.

The $13.7 million difference in rent paid for what is essentially the same boat tour has more to do with how Glynn and Hornblower were respectively awarded their leases than any appreciable difference in what they offer.

In Ontario, in 2012, Hornblower responded to an RFP and won the award against six other bidders including Maid of the Mist, after the Ontario Ministry of Tourism ordered the Niagara Parks Commission to open up the Niagara Falls boat tour concession to a tender for the first time in the park’s 125 year history.

Hornblower’s winning bid guarantees $500 million to the Ontario government over the 30-year lease and includes minimum annual base payments in addition to 22.5 percent on boat tour sales.

Hornblower is a San Francisco based company that also won competitive bidding to operate the boat ferries to the Statue of Liberty and Alcatraz Island.

In New York, however, the state did not put the boat tour out to bid.

New York Gov. Andrew Cuomo and Glynn decided privately on what the deal would be and lawyers worked out the reasons why there would be no competitive bidding. Then it was announced to the public.

In 2013, Hornblower sued New York State to have bidding opened up on the American side of the Falls, saying Hornblower would pay $100 million more than the Maid of the Mist would pay in New York over the life of the lease, but the trial judge, State Supreme Court Justice Catherine Nugent Panepinto, and the New York State Court of Appeals, ruled in favor of the Maid of the Mist, deferring to the governor’s position that state parks can decide not to put a concession out to bid and dismissed the lawsuit.

Christopher Glynn, the son of James Glynn, and current Maid of the Mist president, said after the ruling, “The courts were never swayed by baseless claims that the plaintiffs were prepared to pay more for the U.S.A. contract.”

But were they baseless?

Would competitive bidding in New York have done for New York what it did for Ontario?

In response to Hornblower’s offer to pay $100 million more, State Parks wrote that Glynn’s license agreement does not need to go out to bid and remains in effect until 2043.

Parks also wrote that they dismissed Hornblower’s $100 million higher offer as the act of a company “simply behaving as would be expected of a self-interested private corporation, seeking to eliminate its competitor and favorably position itself for future negotiations with State Parks for the resulting business opportunity.”

In addition to paying more in rent, it became evident this year that Hornblower offers amenities the Maid of the Mist does not.

Unlike the Maid of the Mist, Hornblower offers evening cruises, hosts private and corporate events and has within their boats offerings of snacks, drinks, bathrooms, handicap access and dry areas where passengers on cold days can view the falls without being drenched by the mist.

Maid, because their boats are all pre-1987, and are grandfathered in by the Coast Guard, offers none of these amenities and has only one standard daytime tour which runs successively with passengers boarding one of their two 600 passenger capacity boats.

The standard 20 minute daytime tour of the falls however operates differently on either side of the border.

Hornblower, which has two 700 passenger capacity catamarans and a 150 passenger steamship style boat, offers timed tickets which eliminate wait times for passengers. If you buy a ticket for 3pm you arrive shortly before and depart at 3pm.

Glynn’s Maid of the Mist does not offer timed tickets choosing to operate on first come, first serve basis which, during Saturdays and holidays in July and August, translates to hours-long waits for customers for its 20 minute tour.

On July 4, where attendance was more than 16,000 for the day, passenger wait time exceeded three hours for Maid of the Mist, according to several tour operators familiar with the attraction.

Now the summer has ended.

In Ontario, park commissioners reaped a windfall and were able to eliminate their years-long $4 million annual deficits and now pay for all the services in the park without burdening taxpayers.

The NPC even enjoys a surplus and has used the extra money to pay for long neglected maintenance.

The difference being the extra $14 million the NPC gets from Hornblower—the result of competitive bidding.

In New York, the taxpayers pay the freight and Glynn picks up a tidy profit.

It is not all profit however.

Glynn made contributions to the governor, the lieutenant governor, various elected officials, lobbyist Patricia Lynch and even made a $25,000 donation to the Democratic National Committee.

In New York, while the cost of doing business is often said to be high and that the business climate is, governmentally speaking, decidedly hostile, smart businessmen like Glynn prove abundantly that small investments can sometimes pay off.