By Owen Tucker-Smith

Royal Caribbean wants to develop a private resort for its cruisegoers near a Mexican seaside village, complete with the world's longest lazy river and largest swim-up bar.

The new destination in Mahahual is expected to make the cruise line millions. The Mexican government is pushing to collect its fair share from the project and others like it, too.

Miami-based Royal Caribbean and its peers have been tussling for months with officials in Mexico City over taxation, hiring and local investment rules. Cruise operators have fought against government plans to introduce new levies on the industry, including a fee on passengers who visit the country's ports.

Starting Tuesday, cruise passengers will be assessed a $5 fee when their ship stops at a Mexican port. That rate will eventually rise to $21 per passenger, though the industry thinks that is too high.

Cruise lines like Royal Caribbean are spending a lot more money on Mexico. It has started publicizing the development known as Perfect Day Mexico, a 200-acre resort along the Caribbean coast that it wants to open in 2027. Roughly 15,000 people a day could eventually visit the destination, according to analysts from Stifel.

Cruise operators agreed to assess the tax on passengers while talks continue with the government on the role the industry should play in Mexico's economic development goals, according to Michele Paige, chief executive of the Florida-Caribbean Cruise Association. Government officials had previously asked the industry to commit to hiring more Mexican workers and using more Mexican products in their supply chains, according to a proposal viewed by The Wall Street Journal.

Relations between the parties have been rocky. At one point, company executives were disinvited from a meeting with Mexican officials, and hopes of announcing a deal at an April industry conference fell through.

Now, Paige said, the industry and the government are trying to "get our relationship back on track." The trade group is seeking an in-person meeting between major cruise line CEOs and President Claudia Sheinbaum.

The Perfect Day Mexico project will create more than 1,000 construction jobs and employ more than 2,000 people throughout the region, a Royal Caribbean representative said. The company also plans to make other local investments.

The Mexican Secretariat of Tourism declined to comment.

Beach bound

The $30 billion cruise industry is based on sailing the seas, but cruise lines are racing to buy private land to build their own vacation destinations. Many see Mexico as an underpenetrated vacation market. Besides Perfect Day Mexico, Royal Caribbean is also set to open next year a private beach club in Cozumel.

Still, some lawmakers and government officials say the biggest players aren't paying the tax they should.

"The Mexican government's perspective is: 'OK, fine, you bring prosperity. But you need to pay accordingly, like other tourists pay when they come via an airplane,' " said Rubén Olmos Rodríguez, who has been involved in the tax talks and runs an advisory firm called Global Nexus.

And Mexico isn't the only country raising issues with cruise lines.

U.S. Commerce Secretary Howard Lutnick in February lambasted cruise lines, accusing them of not paying enough in taxes. Barcelona, Norway and the Greek island of Mykonos have recently announced or raised taxes on cruise-ship passengers.

The cruise industry has said that it helps stimulate coastal economies by bringing passengers who frequent local businesses.

Royal Caribbean has estimated that buying land for Perfect Day Mexico in the state of Quintana Roo will cost around $292 million, according to securities filings, and it expects to close a land purchase deal this year. The resort is envisioned to be decked out with swim-up bars, a party cabana and a sombrero-themed slide.

Mexico's new cruise passenger tax is expected to weigh on the company's earnings. Still, Perfect Day Mexico could add more than $125 million annually to earnings before interest, taxes and other items, according to Stifel analysts.

Island hopping

Royal Caribbean kicked off the real-estate craze in 2019 when it opened Perfect Day at Coco Cay, a destination in the Bahamas.

The industry was originally skeptical about the strategy, according to UBS analyst Robin Farley, but Coco Cay has been a financial winner. Soon other major cruise companies followed suit. Carnival is planning its own private Bahamas island resort, set to open this summer.

But shortly after Royal unveiled Perfect Day Mexico, lawmakers in Mexico City introduced plans to change the industry's tax structure.

When Sheinbaum took office as president, she faced the dual mandate of cutting the budget deficit while also maintaining key social programs. Introducing a tax on cruise passengers became an option as government officials sought to increase revenue.

Originally, the government said it would impose a $42 fee, a figure which has been slashed in discussions with cruise industry officials. Cruisegoers visiting Quintana Roo also pay an extra $5 each, which goes to a local tourism development fund.

The new tax is in addition to port fees that cruise lines have paid for years; in Cozumel, those fees average roughly $28.85 per passenger, according to an analysis from the Florida-Caribbean Cruise Association.

Carmen Joaquín, who owns a duty-free shop and is president of Cozumel's business coordinating council, said news of the tax also rattled local business owners, who depend on the cruise industry for business.

"We, as business owners, were very concerned, because Cozumel lives on cruise tourism," said Joaquín.

Business owners in Mahahual have their own fear: that Royal Caribbean's Disneyland-esque offering will prevent cruisegoers from spending money at their shops and restaurants. Mahahual was once a quaint fishing town, known for its coral reefs and lagoons.

"It sounds like they want to keep all the cake for themselves," said Amelie Gautier, a restaurant owner in the area.

Write to Owen Tucker-Smith at Owen.Tucker-Smith@wsj.com

(END) Dow Jones Newswires

June 29, 2025 05:30 ET (09:30 GMT)

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