How Private Equity Lost the Mackinac Island Ferry Wars

Mackinac Island — You’re too poor to ride the ferry. You hear that? Maybe you weren’t 5 years ago, but you sure are now. You and your tragically thin wallet won’t be visiting Mackinac Island this summer. You’ve been priced out, you know why?

It’s because Arnold Transit Co. and Shepler’s Mackinac Island Ferry—the only ferry companies offering regular service to the island—are both owned by Hoffmann Marine, a subsidiary of a Florida-based private equity firm named the Hoffmann Family of Companies, and they want squeeze every red cent out of good Michiganders until there aren’t any pennies left.

I first learned about the Mackinac Island ferry wars last February when I was on the Island for three days. (Yes, you can visit Mackinac Island in the winter, and yes you should). I attended a city council meeting and listened as the year-round residents of Mackinac Island expressed extreme displeasure at rising parking costs and planned ticket increases to the attorney for Hoffmann Marine, who was present via Zoom.

I had the pleasure of first hearing about the ferry situation before most others from the mainland even knew it was a thing. It was then that I heard from the locals that they intended to pursue either a lawsuit, or push for anti-monopoly legislation which would ensure that they wouldn’t be at the mercy of a rapacious private equity firm from Florida. And no, that characterization is not an exaggeration.

John Damoose, a Republican state Senator for the 37th District, explained, “The price of getting to the island went from $34 to $36 to $38 plus a $3 convenience fee plus a $10 day parking, which went to $15 parking, so where it used to cost an individual $34 to get to the island for a day, now it's up to $56, which is over a 64% increase in one year.”

A 64% increase is absurd, and that’s just in a single year. Of course, Hoffmann Marine might try to obfuscate this fact by reminding people that a ticket has only increased by $2 (in some instances) while intentionally omitting the fact of the increased price of parking, baggage fees, and the convenience fee for booking online—perhaps the most egregious way to crank the price without appearing to do so.

So now, more than a year after that city council meeting, the legislation aimed at reeling in prices has come to fruition. On May 21 the Michigan House of Representatives voted 91-16 in favor of Senate Bill 304, giving Mackinac Island the ability to approve or deny ferry rates from Hoffmann Marine.

The Mackinac Island ferry wars are a great example of a seemingly niche issue that gets to a bigger or more philosophical point. There is an (understandable) tendency for those who don’t use the ferry too much to dismiss the concerns as being overblown, but the price of the ferry is a chokepoint that impacts a ton of stuff downstream.

If tourism to the island drops even 3%, that’s a lot. A lot a lot. Businesses feel that. Workers feel that. The entire economy of the island is contingent on regular and reasonably priced travel to and from the island. Not to mention the impact on the locals from February. It’s one thing to complain about the price the one time in August you take your kids across the straits to get fudge. It’s quite another if you take the ferry all the time. Those little increases and fees aren’t just annoying, they are critical. Unless you work in shipping, those of us who live on the mainland don’t even think about this kind of stuff.

We have the luxury of not really considering all the little gears that make the modern world work and how when one of those gears isn’t greased properly things start to break down.

The ferry route to Mackinac Island is unique in the sense that the service is private, though due to the monopoly and necessary reason for the boats, it becomes nearly a public service with public interest in mind. If you control the only mass transit way to the island you are essentially controlling a toll road, and to charge unreasonable tolls becomes a problem.

It’s impossible to ignore who is benefitting from these increases. I’m a capitalist and entrepreneur, but there is something a little personally sickening about a private equity firm from Florida turning the screws on the people trying to get to the island on ferries.

The specter of private equity looms large over the island these days. For the past few years, I’ve heard a constant din of complaints about private equity “ruining the island” whenever I am there. Tourists aren’t so aware of these things because they only dip in and out. But anyone who lives here is more keenly aware of how things change and what is bringing about the change.

Though Mackinac Island is very special, this story isn’t particularly special. Whenever I’m talking with friends more financially connected than I about the sale of some beloved business or treasured place they all respond with, “God, I hope it’s not PE now.”

The world is big now. It’s not 1878—the year Arnold Transit Co. first started running ferries to the island. Businesses are bought and sold by people who aren’t necessarily from the place where the business was originally built. That’s okay, it’s not inherently wrong. It’s how the modern world works.

But how one does business matters whether it’s local or not. I don’t think anyone would have a problem with Hoffmann Marine from Florida owning the ferries if there wasn’t the belief that they were gouging people they don’t care about.

The Hoffmann Family of Companies by way of Hoffmann Marine could’ve bought the ferries and kept the prices reasonable. They could’ve worked more cordially with the people of the island. They could’ve been a good steward of these legacy ferry companies. They could’ve really cared about the economic situation on the most beautiful island in Michigan. They could’ve behaved like they are from here even though they aren’t.

But they didn’t, and now people are mad, and no one has anything nice to say about them, and they are about to be forced to submit to the will of the locals they were previously gouging.

Now they’re the ones with a problem.